10 Biggest Crypto Scams and Frauds of All Time
Posted On July 24, 2023
At its core, crypto aims to be decentralized and anonymous, inevitably making it less regulated than our traditional financial infrastructure. The biggest crypto scams exploited this very fact, in addition to people’s fear of missing out and lack of understanding about the technology.
From rug pulls, Ponzi schemes and fake ICOs to the biggest NFT scams, we will explore the biggest crypto scams and frauds of all time in this article.
We will analyze some of the most notorious scams ever pulled, the most common crypto scam techniques and key takeaways that will help you protect your digital assets from these cunning fraudsters.
Dr. Ruja Ignatova, an Oxford Law graduate and founder of OneCoin, was a charismatic personality who managed to dupe thousands of investors into her global multi-billion-dollar Ponzi scheme.
Along with her brother Konstantin Ignatov and co-founder Sebastian Greenwood, a seasoned scammer with an existing MLM scam called Unaico under his belt, the trio defrauded users of between $4 and $15 billion from 2014 to 2016, probably the biggest crypto scam of all time.
OneCoin was founded in late 2014 and positioned as the next big cryptocurrency, capitalizing on investor guilt of missing out on Bitcoin’s meteoric rise, which at the time was trading at around $500 (little did they know how far along it would come).
Despite the claim of becoming the next giant in the crypto market, OneCoin never actually had any blockchain and users could not trade their mined coins outside its website. So, OneCoin never really was a cryptocurrency.
But then, how did they make money?
Well, OneCoin made money selling educational materials while using its “cryptocurrency” as a marketing gimmick. The educational packages were mostly plagiarized and ridiculously overpriced.
Ruja Ignatova disappeared in 2017 before their headquarters were raided by Bulgarian police and has been lost without a trace since. Greenwood is being held in a New York prison for trial, while Ignatov pleaded guilty.
OneCoin was shut down in 2019, although lawsuits and investigations still continue.
The Missing Cryptoqueen podcast uncovered rumors about Dr. Ignatova’s whereabouts, including having Russian and Ukrainian passports and undergoing plastic surgery.
In 2017, two young South African brothers, Ameer and Raees Cajee, aged 18 and 21, launched Africrypt, a crypto trading platform targeting high-net-worth investors and celebrities in South Africa.
The brothers promised high returns and urged users to keep the platform a secret, which only fueled its popularity.
However, in April 2021, things took a turn when suddenly, users couldn’t access their funds anymore. The Cajee brothers initially claimed that Africrypt had been hacked before disappearing into thin air. Cybersecurity experts later traced the “hackers” wallet addresses back to the Cajee brothers themselves, leading many to suspect that they had orchestrated the scam from the very start.
The brother allegedly stole more than $3.6 billion, but the exact size of the crime has not been officially valued yet.
Fast forward to January 2022, some investors filed a complaint against the two brothers, seeking their arrest after receiving some of their lost funds from a mysterious investment firm in Dubai, Pennython Project Management LLC.
The investigation is still ongoing and led by the South African Police Services’ Directorate for Priority Crime Investigation, known as Hawks.
Thodex quickly became Turkey’s biggest crypto exchange thanks to its flashy marketing campaigns and advertisements featuring famous Turkish models on luxury. Unfortunately, Thodex turned out to be nothing more than an exit scam.
In April 2021, Thodex froze around $2 billion worth of cryptocurrencies belonging to over 400,000 users, leaving them in a state of panic.
Things went from bad to worse when Thodex founder Faruk Fatih Özer left the country for Albania on April 20, 2021, just three days before Turkish authorities raided Thodex’s offices in Istanbul and arrested over 60 people.
Faruk remained elusive for over a year until his arrest in Albania on August 30, 2022. While Turkey seeks over 40,000 years in jail for Faruk, no updates on this case have come out since November, when the Albanian court ordered his extradition to Turkey.
The FTX Scandal
In November 2022, the crypto world witnessed the biggest scandal of all time. What happened? Over the course of ten days, more than $8 billion in investor funds were lost, and the entire crypto market crashed.
It all started with a CoinDesk report published on November 2, which revealed that Alameda Research, a trading company owned by SBF (Sam Bankman-Fried), had $14.6 billion of assets, much of which was FTT, the token created by its sister company, FTX.
He allegedly used FTX user funds to bail out Alameda Research after it suffered huge losses and couldn’t repay investors.
Things got out of hand when following these revelations, Binance liquidated all of the FTT tokens (worth $530 million) it held on November 6, causing panic selling and a liquidation crisis for FTT. Within 72 hours, FTX received $6 billion in combined withdrawal requests from its users, which it couldn’t meet, leading to FTX halting all withdrawals.
After several interesting twists and turns, FTX filed for Chapter 11 Bankruptcy on November 11, estimating $10B to $50B in liabilities and over 100,000 creditors.
Sam Bankman-Fried was arrested from the Bahamas on December 12, 2022, and charged with more than ten counts of fraud, money laundering, and other charges, although the investigation is ongoing.
We’ve covered the FTX Scandal in depth here.
iEarn Bot, an AI crypto trading bot heavily advertised in developing countries such as Nigeria, Vietnam, Cambodia, Indonesia, Romania, and Latin America, is the latest in this list of the biggest crypto scams and frauds of all time.
The app allegedly invested Tether USDT or USD coins of victims to get them “substantial gains” (already a red flag). However, it recently hiked up its commission on withdrawals and eventually stopped processing them altogether, a classic sign of a rug pull.
The company website had numerous red flags, including false claims of partnerships with reputable institutions like MIT, Huawei, and Qualcomm. Later, these entities confirmed that they had no affiliation with iEarn Bot. And get this – the listed founder of the company is someone who never heard of the app and filed a complaint against them to the authorities.
According to Elliptic’s investigation, iEarn Bot stole an estimated $6 million. While it’s not the biggest crypto scam to date, as many news outlets would claim, scams like iEarn Bot continue to be promoted on social media by crypto “influencers” and YouTubers, posing a threat to inexperienced investors, particularly in developing countries.
At the peak of NFT in 2021, while some artists were making groundbreaking creations, others were just in it to scam people out of their hard-earned money. Le Anh Traun, the creator of Baller Apes, was one of them.
Traun lured in NFT collectors by promising exciting benefits and utilities. But after amassing a whopping $2.6 million, he ghosted the project and deleted its website, leaving his community high and dry.
Trying to cover his tracks, Traun laundered the funds by converting them into different cryptocurrencies and moving them across multiple blockchains, a common strategy employed in crypto hacks and scams called “chain-hopping”.
On July 1, 2022, the Department of Justice charged Traun with conspiracy to commit wire fraud and international money laundering. This was the second time the DOJ had stepped in to take action against NFT rug pullers, with the first being the creators of the infamous Frostries scam.
While this may not be the biggest crypto scam of all time, it’s definitely one of the biggest NFT scams of all time.
You can’t make a list of the biggest crypto scams and frauds of all time without mentioning Bitconnect.
Launched in 2016 as a lending platform for users to trade Bitcoin for Bitconnect Coin, it promised massive interest payments and daily bonuses of around 60%. It sounded too good to be true, and as it turns out, it was.
Bitconnect was a highly popular cryptocurrency of its time. YouTubers, influencers, celebrities, everyone was investing and vouching for it, causing it to go from $0.17 to an all-time high of $463 in the span of a couple of months.
However, on November 7, 2017, the UK government gave Bitconnect two months to prove its legitimacy. On January 3, 2018, the Texas State Securities Board issued a cease and desist order to Bitconnect, calling it a Ponzi scheme. Despite this, Bitconnect continued to operate until January 17, 2018, when it finally shut down, wiping away all user funds.
On February 25, 2022, the founder of Bitconnect, Satish Kumbhani, was indicted by a US grand jury for orchestrating a global Ponzi scheme that raised a whopping $2.4 billion from investors.
Kumbhani misled investors about the technology behind BitConnect, which promised returns based on phony “volatility software”. In reality, the cryptocurrency used new investor funds to pay interest to existing users. Authorities later discovered that the company never actually existed.
Finiko was one of the biggest crypto scams of 2021. The scam received over $1.5 billion worth of Bitcoin in 800,000 separate deposits between December 2019 and August 2021.
But let’s go back to the beginning. As most scams start, Finiko promised pretty outrageous returns of 20%-30% AYP to its investors if they deposit their Bitcoins and Tether to crypto wallets controlled by Finiko. Plus, they had a referral program that turned out to be more of a Ponzi scheme than anything else.
Fast forward to June 2021, Finiko suddenly stopped paying promised dividends and halted all withdrawals, leaving users panicked. Soon, people realized it was all a big scam. Authorities later discovered that Finiko wasn’t even registered as a legal entity in Russia and had made no investments on behalf of its clients.
Over 5,000 people filed complaints that are now part of a criminal case. These victims come from Russia, Ukraine, former Soviet republics, several EU member states, and the U.S.
As per the latest update, Finiko’s top figures, including the founder and mastermind Kirill Doronin – once a famous Instagram influencer, two vice presidents, Ilgiz Shakirov and Dina Gabdullina, and Lilia Nurieva, were arrested in 2022.
On January 23, 2021, the Blockverse project launched as an on-chain Ethereum NFT, touting a unique P2E Minecraft experience. And it was an instant hit!
The project sold out 10,000 NFTs and generated an estimated $1.2 million in less than 10 minutes. While private Minecraft servers were not new or unique, the combination of two popular concepts and fanbase is what created all the hype – NFTs and Minecraft.
However, just a few days after the launch, the creators deleted the project website, the game server and the official Discord and disappeared without any explanation. This naturally led to the entire NFT community and several news outlets labeling the project a scam and a rug pull.
But then again, a few days later, the creators resurfaced on Twitter to explain their actions.
According to their since-deleted Tweet, they “panicked” and disappeared due to all the “harassment, threats, and doxxing” they received from users complaining about bugs and errors in the game. They claimed they felt obligated to keep the game online for the buyers of their NFTs, but they would be leaving the project with their $1.2 million.
Most people didn’t buy their story and suspected that the creators came around only due to fears of legal trouble.
The Pincoin scam was one of the biggest crypto scams of all time.
The Pincoin was a fraudulent ICO project luring investors with the promises of constant high returns, a 48% monthly profit, and a total return of their investment in just four months. In addition, they were offered an 8% commission for each new member they referred (pyramid scheme alert?).
Initially, investors received cash for their investments. However, the team soon started paying out returns in iFans tokens, a social network token for celebrities also created by the same founders (red flag).
The Pincoin ICO project raised over $660 million from approximately 32,000 investors in earnings. But in April 2018, the founder of Pincoin, Ho Xuan Van, along with Le Minh Tam and five other Vietnamese nationals, fled the country and disappeared without a trace.
The furious scammed investors massed outside Modern Tech’s headquarters, the company behind Pincoin and iFan, only to find that the seven Vietnamese nationals, including the two founders, were the masterminds behind the scam all along.
This event served as a valuable lesson for investors to exercise added vigilance in the crypto ICO market, which at the time was highly unregulated and a perfect playing field for scammers and fraudsters to rip off investors of their hard-earned money.
The crypto space has seen its fair share of scams and frauds in the last decade. But by understanding the techniques used by scammers and learning from past incidents, we can better protect our digital assets.
Always remember, don’t click on sketchy links and websites, don’t fall for pyramid schemes, and lastly, if it’s too good to be true, it probably is.