A billion-dollar scam. The largest cryptocurrency pyramids

A billion-dollar scam. The largest cryptocurrency pyramids

Millions of defrauded depositors, stadium spectators and hundreds of thousands of stolen bitcoins. This is how you can describe the three most high-profile Ponzi schemes in the blockchain industry. We tell you how it all started, how much investors lost and what income they promised

Cryptocurrencies have many advantages. For example, low transfer fees, fast transactions, limited emissions and others. Despite this, digital assets still have a controversial reputation that prevents their recognition in society. One of the reasons for this is the financial pyramids.

The term is used to describe a fraudulent organization operating under the Ponzi scheme. The company organizer invites investors, promising them a big profit in the future. But there are two conditions: users must contribute funds, as well as attract new participants. The latter is given a similar task. And so on - on the chain.

Such organizations do not create products, do not represent services. Therefore, all profits that early investors receive are generated by late investments. As a rule, the organizers of the pyramid receive most of the funds, and the rest of the participants are left with nothing or the same, as in our case, with the depreciated cryptocurrency. We tell about the largest financial cryptopyramidas, who was behind them and how many billions users lost on it.

OneCoin, 2014 — 2017

OneCoin is considered to be the largest financial pyramid. It was founded by "crypto-royal" Ruzhi Ignatova in 2014 and in less than three years attracted more than 3 million people who invested about 4 billion euros, according to the FBI. The Russian service of the BBC named an even greater sum, according to their calculations the total damage could reach 15 billion euros.

The pyramid worked on the principle of network marketing. Participants were rewarded for attracting new entrants under the guise of innumerable wealth in the future. As Ignatova assured, OneCoin was to become the most successful digital asset in the world. It was supposed that the "promising" coin would be used for payment around the world and "kill bitcoin", but it did not even have a blockchain.

In this regard, OneCoin was fundamentally different from other cryptocurrencies. First, it could not be mined, the issue was handled exclusively by One Coin Limited. Secondly, oneCoin operations were only possible through sites under the control of the pyramid manual. Thirdly, the management had the entire database of the project in its hands.

A billion-dollar scam. The largest cryptocurrency pyramids 2


The first rudiments of the struggle against the pyramid appeared in September 2015. Then the Bulgarian Financial Supervision Commission issued a special report on OneCoin. It stated that this digital currency, like others, was not regulated by law, was not recognized or considered a financial instrument, and that investment in it posed a high risk. After that, OneCoin stopped working in the country and stopped using local banks to process payments.

In September 2016, the UK joined the business. The local Financial Conduct Authority (FSA) said OneCoin did not need licensing, but that its operations could pose a risk to consumers. Three months earlier, Ignatova had performed at the famous Wembley Stadium in London. By this point and since the beginning of the year, the British have invested about 30 million euros in the pyramid.

In 2017, the Bank of Thailand and the Financial Markets Authority of Austria delivered harsher rhetoric towards Onecoin. At the same time, Italy's financial regulator banned all actions with the cryptocurrency OneCoin, and the German government ordered the company to stop business in the country, banned the trade in tokens and froze 29 million euros in bank accounts that were used for money laundering.

Probably, the interest of financial regulators prompted Ignatov to act. In October 2017, a conference with pyramid investors and its promoters was to be held in Lisbon. However, the "crypto-royal" did not come to it. She has not been heard from since. So far, the U.S. authorities have filed several charges against Ignatova for electronic fraud, securities fraud and money laundering. She faces up to 25 years in prison.

However, the hand of justice reached the other organizers of the pyramid. OneCoin lawyer Mark Scott was detained in the United States in 2018. Two months later, the FBI arrested Sebastian Greenwood, Ignatieff's partner. Her brother Konstantin Ignatov was caught in the United States in the spring of 2019. He then appeared in court, at which he stated that he had been deceived and did not realize that he was involved in the ponzi scheme.


Bitconnect, 2016 — 2018

The second largest fund-raising pyramid is Bitconnect. It was organized in 2016 by an unknown team of developers, the chief of which called himself Satao Nakamoto. Investors were offered to buy BCC tokens and temporarily block them on a special platform. It allegedly worked a trading bot, which eventually had to return the received funds with a profit.

Bitconnect allegedly guaranteed users a monthly income of 40% of the investment, which was blocked for 299 days. In addition, the more the amount invested by the client, the earlier he could take the funds and in addition to this received a bonus in the form of a daily interest. For example, $1000, according to the business model of the scheme organizers, was to turn into $50 million in 3 years.

One of the first to report the similarity of Bitconnect with the financial pyramid was the creator of Ethereum Vitalik Buterin. In November 2017, he wrote on his Twitter account that promises of 1% as a daily profit were a net Ponzi scheme. A few weeks later, Litecoin founder Charlie Lee and the head of Galaxy Digital,billionaire Mike Novogratz, expressed a similar opinion.

At the same time as Buterin, the UK Government issued a warning about Bitconnect's activities. It gave the organization two months to disclose details of the business model used, threatening forced closure. However, this did not prevent the pyramid to continue its work and attract new customers. For example, it entered into a temporary partnership with Blockchain Expo, which led to the ICO EVENT conference in Amsterdam as a sponsor, and then held a meeting with investors in Thailand.

The point in the history of Bitconnect was set by the U.S. government. In January 2018, financial regulators in Texas and North Carolina called the Bitconnect business model a classic financial pyramid and asked organizers to suspend the activities and sale of BCC tokens.

Following this, trading platforms began to delist the cryptocurrency project. This and the actions of regulators led to an immediate decline in the price of BCC. After reaching a historic high above $500, it hit more than 90%, below $30. The damage to investors amounted to about $3.5 billion.

Law enforcement managed to catch only one of the Bitconnect participants. In August 2018, Divayesh Darji was arrested, he was one level below the founder of Bitconnect and ran the Indian branch. The detainee was suspected of being in connection with criminal structures that laundered money in the country. However, Darji was released on bail in 2019.

A billion-dollar scam.

PlusToken, 2018 — 2019

One of the last, large pyramids was PlusToken. It was first reported in the summer of 2018, information about the new earning scheme was distributed in the Chinese messenger WeChat. Organizers promised investors an income of 10% to 30% per month, bonuses for attracting new participants, used a similar mechanism to Bitconnect. To participate, it was necessary to exchange bitcoin and other coins for the cryptocurrency PLUS, in which customers received rewards. At that time it could be purchased on the Huobi and Bithumb exchanges.

According to the Bitcoinmagazineportal, PlusToken has managed to attract more than 4 million investors from China, Japan, Germany, as well as Russia and Ukraine, and other countries. Thus, more than 200,000 people were collected. BTC, 789 thousand. ETH and 26 million EOS. The last, by the way, the day before yesterday, June 22, came into motion. All 26 million tokens were transferred from PlusToken's wallet to an unknown address, the transaction was recorded by Twitter-bot Whale Alert.

PlusToken was focused on people who are not versed in digital assets. Organizers, in order to gain the trust of customers, held educational lectures. They told how to buy cryptocurrency and, accordingly, convert it into Plus tokens.

Unlike Bitconnect and Onecoin, the six organizers of this pyramid overtook justice. On June 25, 2019, authorities on Vanuatu, home of PlusToken's headquarters, arrested the scammers at the request of Chinese law enforcement.

However, it was not possible to recover the funds of investors. Some of the coins have already been washed. Another cryptocurrency remained with unknown plusToken supporters and still periodically moves between addresses. In total, the damage to the pyramid's customers amounted to at least $3 billion in bitcoin and other coins.

PlusToken organizers, in addition to fraud, are also accused of manipulating BTC quotes. This opinion was expressed by the co-founder of Primitive Venture, Davi Wang. She argued that from February to March last year, the pyramid significantly increased fundraising efforts. At the same time, the rally in the cryptocurrency market began. The bitcoin rate began to rise from the mark of $3200 and on June 26, the day after the arrest of fraudsters, set an annual high of $14,000. On June 27, the price of the coin plummeted to $10,500 and has since entered a phase of long-term decline.

Arrest of the pyramid organizers is not the end of the pyramid

Despite the fact that all the listed pyramids in one form or another ceased their activities, it did not prevent them to continue to deceive people and steal their money. For example, after the break-up of Bitconnect, unknown people announced the launch of the Bitconnect 2.0 project. And various branches of OneSoin, which itself is a continuation of the pyramid BigCoin, can still be found in social networks.

Unfortunately, novice investors in the pursuit of fast money are trusted by scammers. And financial regulators do not react quickly enough to such schemes. Therefore, the best way to fight against financial pyramids will be prudence and awareness. If a company promises multiple income in exchange for your investments, try to find out where it takes money from. For example, read reviews on the Internet, study its history, conduct your own investigation. It is possible that the main source of funding for the organization is the funds of other depositors.


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