Scammers, cheaters and fraudsters are always on the lookout for ways to make easy money. Once cryptocurrency made its appearance, both scammers and investors were presented with golden opportunities for profit. The notion of scams is certainly not a new one; they have existed for a long time, but they have certainly acquired a new meaning in the world of cryptocurrencies. In the crypto community, this term applies to dubious initial coin offerings (ICOs), startups, exchanges, apps and other similar tactics.
There are two categories of cryptocurrency scams that have existed; ones that gave some profit to the investors before they stopped existing and those that took money from investors and then vanished.As crypto has gained traction, the number of scams has also increased as scammers are getting new opportunities to exploit people. The year 2019 was no different as there were numerous crypto scams that took place. Xtrgate is here to explain some of the top cryptocurrency scams in 2019 are outlined below:
- Illegal trading operation based in Sofia
The first of the cryptocurrency scams in 2019, and the biggest, cost investors approximately $114 million. A criminal group was revealed by the police of several European countries, especially Austria and Germany. They were operating fake crypto exchanges and binary options in Bulgaria and the Czech Republic. Some of these included SafeMarkets, Cryptopoint, XTraderFX, Optionstars, Goldenmarkets and OptionstarsGlobal. They used alluring rates to attract clients and scammed them. They were controlling different offshoot organizations, which included program suppliers and a contact center.
4 homes and 21 organizations were struck by the police in Sofia before they were able to catch up with all elements of the scam. In the aftermath, the mastermind behind the entire scam was captured and they sequestrated terabytes of information alongside six-figure entireties.
- Indian ICO fraud
The fourth capture pertaining to the Mumbai trick case was made in the beginning of 2019, which had resulted in a scam of $71.6 million. A fake ICO was run by the proprietor of MTC (Money Trade Coin), Amit Lakhanpal. Even though it hadn’t been seen on any known exchange, it didn’t stop investors from investing their money because the profits being offered were too alluring. Amit Lakhanpalwas associated with inflating the price of his tokens misleadingly for pulling in investors, which led to a loss of millions for these people. The crypto scammer made people believe that the project had the support of the royal family of Dubai.
- Taiwanese Ponzi Scheme
Seven men in Taipei were accused of cheating more than 1,000 people and getting away with approximately $51 million. Investors gave them their assets as they were hoping to make yearly returns of 335%. The returns ceased soon enough and the investors ended up losing their money. There is no doubt that these men will be detained due to this case. Moreover, it also prompted the Taiwanese Cabinet to make corrections in the Terrorism Financing Prevention Act and the Money Laundering Control Act for controlling direct crypto activities.
- Binance hack
This cryptocurrency scams in 2019 list wouldn’t be complete if it didn’t include the mention of this notorious scam. One of the biggest digital money exchanges in the world, Binancewas hacked and Bitcoin worth $40 million was stolen in May. It is undoubtedly surprising to see a platform like Binance get compromised, the hackers not only managed to steal 7,000 BTC, but also disclosed API tokens and two-factor authentication codes. Likewise, Binance eventually discovered that the programmers had had the option of compromising accounts of exceptionally high net-worth.
While the cybercriminals did get away with $40 million worth of Bitcoin from Binance, it didn’t have an extraordinary effect on the exchange because it made up just 2% of the exchange’s general volume.
- Canadian ICO fraud
The B.C. Common Forfeiture Office in Canada has accused a couple from Canada of raising $30 million through an ICO fraud. L.A. Cheng and K.P. Hobbs propelled one of the most notorious crypto scam coins, which is called FUEL token. They convinced investors that this coin would develop in price and utility and would be used for future items. The scam came to a close with the investors’ assets being used for individual use, which included luxury expenses like acquiring two Range Rover SUVs, buying a townhouse in Coal Harbor and also a gambling spree worth multi-million dollars.
- European ‘typosquatting’ trick
Six people were captured in the Netherlands and United Kingdom for stealing $27 million through ‘typosquatting’ trick. These six people had stolen Bitcoin coins of almost 4,000 individuals. These individuals who pulled the trick worth $27 million had been taken into custody in June, according to a Europol official statement. After a several month long joint examination, five men and one women were captured by specialists at their homes in the Dutch urban communities of Rotterdam and Amsterdam and southwest England. More than 4,000 had been influenced and exploited in the robbery and these people were spread out in almost 12 different nations.
According to Europol, the scam had revolved around ‘typosquatting’, a strategy that involves creating a fake digital currency exchange for accessing the Bitcoin wallets of users. The examination was conducted as a joint activity by the Dutch police, the UK’s National Crime Agency (NCA) and the UK South West Regional Cyber Crime Unit (SW RCCU).
- South Korean Ponzi Scheme
AI components were applied by specialists in South Korea for revealing a Ponzi scheme worth millions of dollars that ended up scamming more than 56,000 financial specialists. These investors had just made their foray into the crypto space and the concept of crypto exchanges was new to them, as most of them were in their 70s. The scammers baited the users through the M-token, which was guaranteed to provide a return of 600%.
This case was an excellent example of the usefulness of AI for crypto agents. The calculations had been developed to recognize watchwords identified with individuals’ motivating force plans and unreasonable profits and guarantees. The former are the usual staggered showcasing and nothing more. This particular innovation can potentially be used for more applications.
- Gatehub compromised
Programmers found the opportunity of compromising GateHub and they made away with $10 million in the form of XRP in June in 2019. GateHub disclosed the matter to its clients on June 6th by making a statement. It revealed that the cybercriminals had the opportunity of stealing money from more than 100 XRP Ledger wallets. The organization didn’t reveal as to how the hack had occurred in the first place. However, they did get in touch with all wallet holders and managed to recover 500,000, which had a value of about $200,000.
- Israeli fraudsters
CipherTrace revealed that two siblings had been captured for an alleged phishing trick in Israel on June 21st, which had been ongoing for a long time. During this time, the Gigi brothers, 21 year old Assaf and 31 year old Eli were accused to stealing more than $100 million in stolen money. It was stated that the crypto scammers had baited investors through crypto trading forums. They had used forums like Reddit for leading people to websites that looked a lot like prominent crypto exchanges in the market.
- Kraken flash crash scandal
A noteworthy exchanging stage for Bitcoin, Kraken had to deal with a flash crash that caused the price of digital money to go from $8,400 to $75. It didn’t take very long for the cost to settle due to which a lot of people didn’t even notice. Initially, people believed that it had just been a glitch in the framework. Regardless, an investigation was conducted, which showed that the accident occurred because of a hack. According to the examination results, the account of a client containing a lot of cryptocurrency had been compromised. The hacker had stolen 1200 BTC, which had a value of about $10 million at that time.
Why Do Scams Occur?
There are a number of reasons why crypto scams occur in the first place. Some projects are meant to be scams from the beginning like Ponzi schemes that are run on the expense of new investors. They collapse when there are no more new investors. Other times, the projects are fake and scammers are just interested in collecting a huge sum of money. Some don’t start out as scams, but end up failing and don’t return investors’ money. Sometimes, the panic caused by investors can also result in scams because they can affect the price of the cryptocurrency.
Technical errors are also known to happen in the blockchainand sometimes there is a lack of cooperation between the team members behind a project that results in a scam.
Even though cryptocurrency and blockchain is a relatively secure technology, cybercriminals have successfully found loopholes and breaches that they can use for breaking into websites and compromise digital funds and wallets. Since cryptocurrency is still unregulated in most parts of the world, it goes without saying that laws protecting crypto investors and traders need some work. As they are not that strong, it is very easy for these cybercriminals to commit crypto scams and then actually get away with it. A massive number of these crypto scams thrived because investors ended up trusting teams that sprang out of nowhere and promised to provide huge profits.
When you are planning to invest in cryptocurrency, you should do research and ensure you are dealing with a legitimate project and a reliable team. There is high risk associated with crypto trading and you don’t want to lose your investment.