The success of Bitcoin and a number of Altcoins starting an industry based on Blockchain technology should be appreciated. However, about 90% of Altcoin has sunk before entering the market globally. This is because the act of criminals who practice fraud related to crypto money. Along with the emergence of innovative startups that are developing in the crypto world and can last until now, the emergence of malicious startups that take advantage of this opportunity to deceive investors is also inevitable.
ICO Grows Cases of Crypto Money Fraud
Since Bitcoin was released in 2009, people have become increasingly captivated by Blockchain technology. Over time, more and more developers want to innovate with decentralized ledger technology. This leads to the development of Ethereum and other virtual currencies. Then, the 'Initial Coin Offering (ICO)' blast takes place in 2017 and causes the rise of fraud to hundreds of billions of dollars.
Initial Coin Offering (ICO) is a concept that has recently emerged with the goal of "Crowd Funding", or public fundraising of the crypto and blockchain industry. Investors buy tokens in the hope that the company will launch its product and the token value will grow. Basically, ICO adopted the concept of Initial Public Offering (IPO), that is when conventional companies provide their shares to be bought by the general public.
Although there is no certainty and the guarantee of ICO will have good prospects, some investors are very confident in giving their money to certain startups. No doubt there are massive and organized scams. In fact, more than 30% of ICOs that appear during 2017 to early 2018 are fraudulent. Well, of the many controversies that occur, here are 5 cases of the most sensational crypto deception.
1 Pincoin And iFan
One of the biggest ICO scandals occurred in April. This stems from the emergence of ICO Pincoin and iFan, run by the company Modern Tech. Modern Tech, based in Ho Chi Minh, is believed to have tricked some 32,000 investors with a total loss of 660 million US dollars.
Both ICOs have been classified as multi-level marketing (MLM) fraud. Pincoin promised a 40 percent monthly return on investment, while iFan took advantage of social media and took celebrities to promote their content. The project is claimed to aim to build an online platform that includes ad network portals, auctions, investments, and peer-to-peer markets built on Blockchain technology.
Thousands of investors cast protests after the company refused to process cash withdrawals. The city authorities have ordered police to investigate the fraud.
2 OneCoin
OneCoin has been the target of an investigation for 18 months, before finally labeled as Ponzi scheme in India. Two months later, the startup was fined € 2.5 million by Italian authorities.
Many online media have warned internet users to distance themselves from OneCoin, because the company does not even operate a legitimate decentralized crypto currency. In addition, they have no DLT (general ledger), and its Bulgarian office has been raided. OneCoin server was confiscated by the authorities as evidence in a joint operation between countries.
In 2016, more than 30 million USD of assets were seized by Chinese authorities investigating OneCoin's operations in the country. OneCoin's black note grew when they claimed to have an official license from Vietnam, but was later denied by the government of the country.
Not only that, More than five countries have warned investors about the risks of investing in these abalipal companies, including Thailand, Croatia, Bulgaria, Finland and Norway. The OneCoin scandal that occurred in various countries raises the fact that OneCoin is indeed one of the biggest crypto deceivers.
3 Bitconnect
In January 2017, the Bitconnect crypto exchange launched Bitconnect Coin (BCC) promising high returns to investors. In addition, the company runs a flowering loan program, depending on how many BCCs they are operating on the exchange platform.
Some users have launched a class action lawsuit against Bitconnect for a loss of 700,000 USD. After long suspected of running a business with a Ponzi scheme, Bitconnect ceased operations in January 2018, following warnings from two American financial regulators located in Texas and North Carolina.
4 Plexcoin
This exclusive ICO has been suspected since early December 2017, and has an investment label with a Ponzi scheme. Plexcorp promised investors more than 1,300 per cent of its investment returns per month, before the US Securities and Exchange Commission (SEC) ordered the company to halt its operations.
More than 15 million USD has accumulated during ICO Plexcoin runs. Fortunately, all funds were frozen by the SEC and Plexcoin's founder, Dominic Lacroix, was thrown into jail. Interestingly, Plexcoin's deception became the first case to be eradicated by the Cyber Crime SEC division.
5 Centratech
Centratech has gained the support of famous people like boxer superstar Floyd Mayweather and DJ Khaled. Centratech is instantly in the spotlight as it leverages Visa and MasterCard debit card services, allowing users to instantly convert crypto money to Fiat.
Reporting from Ars Technica, Centratech's two founders Sohrab Sharma and Robert Farkas, have been arrested on fraudulent charges related to ICO. They embezzled about 32 million USD.
The SEC also issued the following official statement:
"Sharma and Farkas create fictitious management with impressive biographies, upload fake misleading marketing materials to Centra's website, and pay celebrities to promote their ICO in social media."
The US regulator finally freezes the startup permanently. Sharma and Farkas were forced to return the funds (plus interest) they took away from investors. They will also be prohibited from working as company officials or directors, and are prohibited from participating in other securities offers.
Crypto Investors Need to Be Cautious
Looking at the various crypto currency scams above, it can be concluded that the vigilance of investors in putting their money must be increased. Prior to investing, in-depth research and analysis of the prospect of companies issuing the ICO should be put into practice. Not only that, the crypto community also needs to promote education about safe investments, in order to avoid the investors from big losses.
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