What’s the damage: major Bitcoin scams over 5 years

Today, we present the most outrageous Bitcoin scams for the last 5 years


What’s the damage: major Bitcoin scams over 5 years. Source: pexels.com

Bitcoin is often criticised by crypto opponents as a gateway for illegal financial transactions. Truly, Bitcoin mixing services can help criminals to hide the origin of crime proceeds, and launder money relatively safely. At the same time, many people who are lured to the most popular crypto ever have little understanding of both the underlying blockchain mechanism and trading. All those factors give scammers a unique opportunity to use Bitcoin in their shady activities.

1. BitClub Network

From April 2014 through to December 2019, BitClub Network was a fraudulent scheme that tricked investors out of their money in exchange for shares of purported cryptocurrency mining pools. The BitClub Network told investors that they could invest in three different Bitcoin mining pools. The BCN videos and pictures of mining equipment belonged to another mining farm, as it appeared later. In traditions of a classic Ponzi scheme, the company also generously rewarded investors for recruitment. In addition, its founders conspired to sell BitClub Network shares, notwithstanding that BitClub Network did not register any securities with the U.S. Securities and Exchange Commission (SEC). The total gains of the scammers were about $722 million worth of Bitcoin.

2. AfriCrypt

A cryptocurrency investment firm based in South Africa swindled investors of about 69,000 Bitcoin, approximately worth $3.1 billion in current price. At the point of the scam discovery, the worth was even bigger – $3.6 billion. The company was founded by two brothers, one of whom acted as CEO. The company was founded in 2019. On its now inactive website, the shady business described itself as “one of Africa’s largest and most successful AI trading companies”. It took the Cajee brothers over a year to lure a significant number of investors. Then, out of the blue, AfriCrypt informed investors of a data hack in mid-April. At the time, the company asked customers not to report the matter to authorities, claiming that any investigation would slow down the recovery process. Some of the investors who lost access to their money are represented by law firm Hanekom Attorneys. The law firm said its analysis led it to believe that describing this as a hack was “misplaced”. Moreover, Hanekom Attorneys discovered that the backend access for AfriCrypt was taken away from the company’s employees seven days before the alleged hack. Lawyer John Oosthuizen, who represents the Cajee family, told that brothers “categorically denied” they had been involved in a “heist” or had absconded with funds. They still claim it was a hack, and they were robbed of crypto assets themselves. The investigation is still ongoing.

3. PlusToken

Crypto investors in China and South Korea suffered from another Ponzi scheme known as PlusToken in 2018-2019. The platform offered a crypto wallet for BTC, ETH and other major altcoins. Customers were promised rewards for using the wallet for crypto storage. The PlusToken scam allegedly involved cryptocurrency mining. In reality, investments from new PlusToken clients went toward paying dividends owed to existing clients. There were no real products. The scheme was massive, with at least 28 people involved as masterminds and ample advertising. The Ponzi was said to have grown to over 3,000 layers at the time, having tricked more than 2 million investors. After the inflow of new investors thinned and people started having problems withdrawing their assets, the organizers disappeared and posted the cryptic message, “We have run.” In late November 2020, law enforcement confiscated some crypto from the scam operators. Its amount was estimated at $4 billion at that time.

4. Quadriga

Canadian exchange QuadrigaCX collapsed along with the death of its founder Gerald Cotten. The death cut off access to the “cold wallets” holding $215 million in customer tokens. The Ontario Securities Commission (OSC) found that the exchange was based on fraudulent activities. Cotten opened accounts under aliases and credited himself with fictitious currency and crypto asset balances, which he traded with unsuspecting clients. OSC discovered that the late founder soon ran into a shortfall in assets available to satisfy client withdrawals when the price of the crypto assets changed. He started running a Ponzi scheme that covered the shortfall with other clients’ deposits. Cotten also used client assets on three external crypto-asset trading platforms without authorisation or disclosure. Many investors don’t believe he truly died, and some are still calling for his body to be exhumed to have some proof.

5. USI Tech

USI Tech (United Software Intelligence Technology) claimed to develop the world’s first automated trading platform for Bitcoin (BTC). The scheme launched in May 2017. It sold BTC packages to traders and miners who wanted to automate these activities. The prices started out at around 50 Euros. USI automated software was supposed to provide passive income to its users. The promised returns were 1% daily. 140% returns in 140 days sounds too good to be true, and it truly was a red flag. In addition, the fraudsters operated as a multilevel network marketing company which facilitated a pyramid scheme. The commission for referrals was extremely high – 35%. After various regulators labelled the company as a scam, they shut down the website and rebranded a few times. There’s no data on the exact amount of money lost by investors, but the count surely goes by millions. The scheme worked on an international level and had victims across the US, UK, Canada, and other countries.