Top Crypto Scams Of All Time and How They Worked
Cryptocurrency scams have been around since the invention of Bitcoin, and they are still a problem today. Unfortunately, some of these scams have gone down in history as some of the most successful and infamous ones of all time. In this article we will look at the top crypto scams of all time and how they worked. From DAO Hack schemes to Centra Tech, these scams have taken millions of dollars from unsuspecting victims. Read on to learn more about the top crypto scams and how to protect yourself from them.
1) DAO Hack
The DAO (Decentralized Autonomous Organization) was created in 2016, and it was the world’s first attempt to create a decentralized venture capital fund. The project quickly raised over $150 million worth of Ether in a matter of weeks. However, shortly after the ICO launch, the hackers exploited an error in the code that allowed them to withdraw 3.6 million Ether, which was then worth around $70 million.
The DAO hack highlighted several problems with blockchain security. Namely, that smart contracts need to be carefully audited and tested before they are launched in order to avoid such vulnerabilities. Despite the DAO hack being one of the most famous crypto scams of all time, the Ethereum community managed to recover from the incident by forking the chain and undoing the damage caused by the hack.
2) Bitconnect
Bitconnect, which was founded in 2016, promised to give investors a whopping 40% return on their money, along with the opportunity to trade and invest in their own cryptocurrency. In reality, the platform was nothing more than a massive Ponzi scheme. It was shut down by authorities in January of 2018.
The Bitconnect platform operated like a pyramid scheme in which people were encouraged to recruit new members. This allowed them to gain referral commissions, while also increasing the value of Bitconnect coins. People who invested in Bitconnect would receive payouts in BTC or BCC based on how much they had invested and the amount of referrals they had.
The scheme unraveled when users began to notice that the payouts stopped coming in. This led to a sudden crash in the price of BCC and a class action lawsuit against Bitconnect for fraud. Since its closure, many people have lost a great deal of money due to their involvement with the project.
This scam serves as a reminder that people need to do their research and be wary of any investment scheme that promises too much for too little.
3) Bitgrail
The infamous Bitgrail hack happened in February 2018 and involved the theft of roughly 17 million Nano coins from the cryptocurrency exchange. The founder, Francesco Firano, claimed the coins were stolen due to a software bug in Nano’s code but was later found guilty of fraud by the Italian court.
Bitgrail was launched in 2015 and was primarily used by European traders. In 2018, it became one of the world’s most popular exchanges for trading Nano coins, with a daily volume of over $2 million.
Unfortunately, in February 2018, the exchange reported a major security breach, resulting in the loss of 17 million Nano coins. After an initial investigation by Italian police, Firano was arrested on suspicion of fraud. He was eventually found guilty of fraud and embezzlement in July 2019, after a lengthy trial.
Following the hack, Bitgrail declared bankruptcy and ceased operations. Although its users were able to get some compensation from a class-action lawsuit against the exchange, many remain out of pocket. The hack also triggered a price collapse of Nano coins, which lost almost 90% of their value after the event.
As such, this remains one of the most notorious crypto scams in history and serves as an important reminder to be wary when trading online. It also highlights the need for robust security measures to be implemented and maintained at all times.
4) Mt. Gox
Mt. Gox was once the biggest and most popular bitcoin exchange in the world. Founded in 2010, Mt. Gox grew quickly and handled 70% of all bitcoin transactions in 2013. Unfortunately, it also became the victim of one of the biggest crypto scams of all time.
In February 2014, Mt. Gox suddenly suspended all trading and filed for bankruptcy after announcing that it had lost 750,000 customer bitcoins, as well as an additional 100,000 of its own. It was later discovered that hackers had been using a vulnerability in the transaction system to steal user funds for years. In total, Mt. Gox lost $450 million worth of customer and company funds.
The incident caused a lot of fear and skepticism about the security of cryptocurrency exchanges, and many investors lost money as a result of the hack. However, Mt. Gox was eventually able to repay most of its creditors and its former CEO Mark Karpeles is currently awaiting trial on charges related to the scam.
5) Coincheck
Coincheck is a Japanese cryptocurrency exchange that suffered a devastating hack in January 2018, resulting in the theft of more than $500 million worth of NEM tokens. Coincheck was not the most secure exchange, having failed to implement the security protocols used by other exchanges at the time, such as two-factor authentication and cold storage. As a result, hackers were able to access Coincheck’s hot wallets containing NEM tokens, which were then transferred to another wallet. Coincheck responded by suspending trading and later refunding customers for their losses. This incident led to increased scrutiny from Japan’s Financial Services Agency, resulting in tighter regulations for cryptocurrency exchanges in Japan.
6) Centra Tech
Centra Tech was a company founded in 2017 that purported to offer a “decentralized banking” service. They promised to offer a variety of services such as a multi-blockchain debit card, digital wallet and exchange. The company was headed by CEO Sam Sharma and COO Raymond Trapani.
Unfortunately, Centra Tech was nothing more than an elaborate scam. The team behind the project used marketing materials and website copy designed to fool investors into believing they were investing in a legitimate business. In reality, Centra Tech did not have any real products or services, nor did they have any established partnerships with legitimate financial institutions.
The founders of Centra Tech also misled investors by selling unregistered securities in the form of tokens. This was done through the company’s Initial Coin Offering (ICO). The ICO raised more than $25 million before it was shut down by the US Securities and Exchange Commission (SEC).
In addition to their fraudulent activities, the founders of Centra Tech were also charged with money laundering. The SEC alleged that they had misappropriated funds from investors in order to finance a lavish lifestyle. As a result of their actions, the SEC imposed heavy fines on the founders of Centra Tech, and both Sharma and Trapani were sentenced to prison.