The world’s most famous crypto financial pyramids
Cryptocurrencies have only been around for a decade, but important Ponzi schemes have already been seen. Here we present three of them.
In addition to the obvious advantages of anonymity, access, ease of use, and low cost of transactions, cryptocurrencies have some serious drawbacks that prevent their adoption worldwide. The main one is the connection between cryptocurrency and crime. Everyone who has studied this topic, even superficially, knows that Bitcoin (BTC) remains a popular payment method among scammers and criminals on the darknet. Cryptocurrencies are very convenient tools for money laundering, tax evasion, and investor deception.
Today I’m going to talk about the most famous cryptocurrency pyramids, from those whose millions of investors suffered to those whose activities accounted for billions of dollars in losses. These companies worked in Ponzi schemes, named after an Italian scammer from the early 1900s. These pyramids do not produce goods or provide services, all they do is network marketing, where each member of the pyramid invites several new ones who invite the following and so on.
The only people involved who manage to win in this system are the organizers and some of the first investors who manage to withdraw their money on time. The rest of the pyramid participants run out of money, in debt, or in the case of crypto pyramids, without valuable tokens.
OneCoin is regarded as one of the largest cryptocurrency pyramids, which operated between 2014 and 2017, deceiving some three million people and defrauding investors totaling about $ 5 billion. The founder of One Coin is the Bulgarian scammer Ruzha Ignatova. The pyramid worked according to the classic Ponzi scheme, in which participants receive a reward for each new person invited.
The scammer convinced her audience that OneCoin would soon become the world’s most influential cryptocurrency. There were even promises to “kill Bitcoin”. It should be noted that their currency did not even have its own blockchain and was only accepted on sites associated with the pyramid.
For the first time, the Bulgarian government discussed the threat of scammers by posting a message about the risks of participating in OneCoin, as the project was not a financial instrument and was not controlled by regulators. This caused the pyramid to “leave” the country and refuse to work with the Bulgarian banks.
Later came criticism and warnings about participation in the plan from the UK, Austria and Thailand. Italy and Germany went on to ban OneCoin’s activities in those countries and blocked their accounts. Ignatova simply did not attend the next announced investor meeting in Lisbon, and was never seen again. There is no information on her whereabouts.
The United States government has accused Ruzha Ignatova of fraud and money laundering. Although she faces 25 years in prison, law enforcement officers have managed to detain some of her accomplices, including her lawyer, brother, and former business partner.
Another great crypto pyramid worked from 2016 to 2018: BitConnect. It was created by unknown developers and directed by a man named Satao Nakamoto. Participants had to buy BCC tokens and save them on a special platform, and the trading bot automatically made a profit. Pyramid members were promised 40% profit per month. According to BitConnect organizers, starting with an initial investment of $ 1,000, investors could expect to withdraw $ 50 million in three years.
The first critic of the pyramid was Vitalik Buterin, who drew attention to the fact that the promise of 1% profit per day is a classic Ponzi scheme. After some time, Mike Novogratz and Charlie Lee, the creator of Litecoin (LTC), agreed with the opinion of the founder of Ethereum. At the same time, questions for BitConnect organizers came from the UK government, which demanded that the company disclose its business model. However, this did not prevent scammers from participating in crypto events and attracting new investors.
Authorities in the United States helped end this story, calling BitConnect a financial pyramid and demanding that it cease to function. After that, the BCC token fell by 90%, investors were left with a total loss of $ 3.5 billion, and one of the organizers of the pyramid went to jail. However, Divayesh Darji, the head of BitConnect’s Indian branch, was released on bail in 2019.
The newest and largest financial pyramid in recent years. Founded in 2018, the pyramid was announced on Chinese WeChat with promises of 10% -30% ROI per month. Around four million people became participants in the PlusToken ponzi scheme. The scammers allegedly advocated for financial education and trained people to use cryptocurrencies, but were ultimately aiming to turn them into Plus tokens.
In this case, the courts outnumbered the plan’s organizers, and a year ago, six of them were arrested at the request of the Chinese authorities. However, the $ 3 billion lost by investors could not be returned, and they remain with PlusToken team members. Most recently, on June 22, the entire amount of EOS was removed from the pyramid wallets, and very soon, the same was done with all ETH tokens.
Despite the fact that these pyramids have practically ceased their activity, their various “reincarnations” constantly appear, attracting inexperienced investors. The government cannot protect citizens from these schemes forever, since their prohibition requires proof of a crime. In this case, the best defense is knowledge. If everyone could recognize the huge profit margins promised by companies in return for investment as a warning sign rather than a gold mine, there would be far fewer scammers.
Disclaimer: This press release is for informational purposes information does not constitute investment advice or an offer to invest. The views expressed in this article are those of the author and do not necessarily represent the views of infocoin, and should not be attributed to, Infocoin.