Biggest ICO Scams of 2018
Here are the various types of ICO scams that users should watch out for:
Now that we know about the types of ICO scams, Let’s take a look at some of the biggest cryptocurrency and ICO scams in recent times:
OneCoin was one of the worst scams to have surfaced in the market. The whole idea turned out to be a classic Ponzi scheme. The details on its coin are sketchy, many people believe that the coin was never created. There was no working prototype and several of the team members had been part of previous ICO scams. The founder and COO of the company, Dr. Ruja Ignatov is supected of posting false qualifications on the official site.
The website was poorly designed with plenty of typos in place. It also faced technical problems on a regular basis. Even after repeated warnings from several governments, people still invested their money into the project. In fact, OneCoin scammed investors by a whopping amount of $350 million. Back in April, the Indian authorities had raided a OneCoin meeting, arresting 18 people.
No one suspected Centratech to be a scam. Especially because it was being endorsed by celebrities DJ Khaled and Floyd Mayweather. The move attracted substantial attention from investors and users. The company also proposed a service that would allow users to spend cryptocurrencies as fiat money. The company had said that it is looking to partner with Visa or Mastercard but none of this happened.
Once the company raised $32 million during the ICO sale, the founders were arrested by the SEC and put in jail. The SEC said that the founders took extreme measures to make sure that their truth would not be discovered. The company even went as far as creating make-believe biography of their team. The celebrity endorsements was simply a way to bring investor confidence while protecting the reality of the situation.
One of the few instances where the fraud was caught on time and the amount was returned to the investors with interest. The founders were also barred from participating as directors or officers in future security offerings.
One of the more recent scams in the crypto space, in fact, there is a lot of anger related to this particular ICO among investors and the general population. Their initial ICO was monumentally successful. The ICO raised $660 million dollars from 32,000 investors. The company further honored their promise of returns and cash rewards. This motivated the exiting users to bring in their friends and family to put in more funds into the project.
Folling the success of the ICO, Pincoin announced that a token called iFan would be developed. This token would be used to compensate the investors. But as soon as the token was issued, the Pincoin team disappeared from the office leaving a less-than-useful website and a lengthy whitepaper behind.
Had the investors taken time to research the project, they would have found that none of the information about the team or the company was verified. This scam serves as a reminder to investors to always research thoroughly before making a decision.
Bitconnect ICO Scams
The company was accused of a Ponzi scheme for a very long time. Bitconnect officially stopped all its operations in January. This move was as a result of a cease and desist order from American financial regulators.
The company also started a lending feature that allowed users to lend BCC to other users and earn interest as a result. It further publicized this feature in a typical Ponzi-scheme fashion. Since the company shut down its operations, multiple users have filed a class-action lawsuit against Bitconnect. The claims amount up to $700,000.
This company was shut down in December 2017 by the US Securities and Exchange Commission (SEC) after being discovered as an elaborate Return on Investment (ROI) Ponzi scheme. Plexcoin had offered its users and investors more than 1300 percent return. According to the SEC, the company was able to raise $15 million from thousands of investors before the government agency intervened.
As the aftermath of the SEC ruling, all funds of the company were frozen and the founder of Plexcoin Dominic Lacroix was put behind bars.
This was the first incident in which SEC diligently took action against an ICO via the Cyber Crime Unit. Since the Plexcoin’s services were classified as a security, SEC was well under its rights to press charges.