Did you know that the biggest crypto pyramid schemes generated more funds than most altcoins? Surprised? Don’t be. Welcome to the crypto world where Initial Coin Offerings (ICOs) can raise millions within a couple of seconds.
Unfortunately, pyramid schemes are a huge and inevitable part of the crypto asset market as well. In fact, in 2018, losses from cryptocurrency-related crimes reached $1.7 billion.
So, let’s define a pyramid scheme.
According to the Securities and Exchange Commission (SEC), a pyramid scheme is an investment scam that includes payment to existing investors from the funds of the new investors. And over the years crypto pyramid schemes became sophisticated and hard to recognize.
Some of the scams are too obvious to lure investors, while others are big. In fact, we’re talking about millions of dollars. So, without further ado, let’s take a look at the biggest pyramid schemes in the cryptosphere.
OneCoin – the gold standard of crypto pyramid schemes
According to the US prosecutors, the OneCoin pyramid scheme has brought in around $4 billion worldwide. The story behind this scam is quite simple. OneCoin was a fake cryptocurrency, without underlying blockchain technology and utility. It could be traded on the OneCoin website, and the only way to exchange coins was through the OneCoin Exchange.
Bitconnect – scam worth more than $2.5 billion
Bitconnect was a cryptocurrency related to the high-yield investment program bitconnect.co. The cryptocurrency was released in 2016, allowing users to lend the value of Bitconnect tokens in exchange for interest payments. However, in January 2018, Bitconnect shut down its operations. It’s estimated that investors were scammed out of anywhere between $2.5 and $3.5 billion.
GainBitcoin – cloud mining pyramid scheme
It’s estimated that the GainBitcoin scam generated around $300 million from users. The scam was presented as a cloud mining platform promising unrealistic returns to the users. Indian investor Amit Bhardwaj, who is behind this pyramid scheme is currently in jail.
Centra Tech – support from celebrities
Centra Tech managed to get exposure through celebrities such as Floyd Mayweather and DJ Khaled, who marketed the cryptocurrency. The company also decided to conduct an ICO.
However, in April 2018, things got bad. SEC filed a complaint against Centra Tech co-founders, stating that their ICO was illegal. As a result, the operations related to the cryptocurrency were shut down.
Pincoin and iFan – profit in the amount of $600 millions
One of the biggest scams in crypto history was organized through the ICOs of Pincoin and iFan. After investors noticed that something was wrong, they started to protest outside the company’s offices, demanding their funds back.
However, the building owner claimed that the offices were vacated a month earlier. Moreover, it turned out that nobody knows the company’s current location.
How to stay safe and avoid crypto pyramid schemes?
- The company promises high investments with no risk. Remember, every investment takes certain risk.
- The platform or cryptocurrency isn’t registered. Pyramid schemes usually involve unregistered investments.
- You have difficulty with receiving payment. Be skeptical in case you have problems cashing out your investment.
- The company is secretive about investment information. Always read the disclosure statement carefully before investing. If the company doesn’t have one, run and never look back.
Crypto space is still unregulated. Hence, this leaves a lot of space for different scams, including pyramid schemes. If you want to get involved with cryptocurrencies, remember: always do your own research.
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