Currency scams and illegal business dealings give Bitcoin a bad name. And while Bitcoin Australia likes to show our audience the potential and awesomeness of cryptocurrencies, it is important to remember that this is not always the case. To raise awareness, we’ve rounded up the top four scams in the industry.
This currency is marketed as a cryptocurrency exchange with its own secure and private blockchain network. In fact, OneCoin has become known as one of the biggest scams in the industry.
The coin is promoted by two offshore companies in Belize and Dubai, both owned by Bulgarian magnate Ruja Ignatova, and a quick scan of OneCoin’s website doesn’t raise red flags.
Self-described as “the first transparent global cryptocurrency for everyone,” the company presents a sleek and polished look to the public. It claims to provide affordable educational materials to traders, ranging in price from $200 to more than $300,000.
However, behind this veneer lies a more sinister reality.
OneCoin has been widely exposed as a ponzi scheme bent on stripping unsuspecting investors of their savings. When a customer buys the ‘educational material’, their money is transferred to a pre-existing client under the guise of an investment return.
This cycle continues until the number of pre-existing customers exceeds the amount of money being raised by first-time buyers.
OneCoin and its recruiters defend their brand. They maintain that OneCoin is a legitimate business. However, reports are constantly emerging of investors being taken advantage of.
As far as we’re concerned, just stay clear.
While its founders are now under arrest and charged with fraud, CentraTech rose to popularity in 2017 when it raised $32 million in an initial coin offering.
The company presented itself as a cryptocurrency exchange in partnership with Visa and Mastercard. This couldn’t be further from the truth. In fact, the credit card companies had never heard of Centratech, let alone agreed to back it.
But this was just the beginning.
Centratech’s board of directors was a lie, assembled using stock images of random people or photos stolen from Facebook. Nathaniel Popper, a writer with The New York Times, tweeted this reaction to his followers:
Nathaniel Popper“An inside look at how a company doing an initial coin offering can use the money they raise to buy the coin they are selling to push the price up, thereby attracting more buyers and giving themselves more wealth (at least on paper)”
In a media release following the Centratech trials, deputy U.S. Attorney Robert Khuzami does not mince his words.
“As alleged, Raymond Trapani conspired with his co-defendants to lure investors with false claims about their product and about relationships they had with credible financial institutions. While investing in virtual currencies is legal, lying to deceive investors is not.”
Boxer Floyd Mayweather and rapper DJ Khaled, alongside a number of celebrities, promoted Centratech.
News emerged in August that a Finnish investor lost nearly $24 million in bitcoin thanks to the shady dealings of Dragon Coin. The Thai cryptocurrency markets itself as the currency for the entertainment industry. In reality, it’s a currency for scammers.
An investigation by Thailand’s Crime Suppression Division (CSD) reveals Finnish businessman Aarni Otava Saarimaa was fleeced by a gang targeting cryptocurrency investors.
The fraudsters pitched a plan to build a casino and linked digital currency, but after amassing investment funds from their targets, the Thai gang immediately cashed out. The earnings total nearly 797 million Thai Baht.
According to the Asia Times, “about one quarter of this was said to have been used to buy 14 plots of land, with the rest being deposited into bank accounts of three suspects, all siblings.”
The suspects include Thai actor Jiratpisit Jaravijit and his family.
Based out of Surat in western India, NCR Coin is the latest cryptocurrency Ponzi scheme to make headlines.
In June 2018, news emerged of a company selling fake currency with no investment returns. Instead, people found themselves stripped of their savings with no recourse According to BitcoinExchangeGuide.com, the scheme has 30 victims and counting.
The Hindustan Times reported that this is not the first scam like this in India. According to a correspondent in Lucknow:
“[The fraudsters] created a user ID on different virtual currency exchange websites and put bitcoins on sale. They first lured traders to purchase the bitcoins at low prices and even transferred some into their e-wallets to win their trust.”
After establishing trust, the NCR Coin scammers transferred the original currency to their bank accounts and proceeded to vanish.
The Indian police have since arrested six people with connections to the scam.
While the stories above are worse-case scenarios, anyone anywhere can be caught up in a cryptocurrency scam. In such a young industry, criminals see opportunities to defraud and steal from inexperienced investors.