Undoubtedly, blockchain has numerous perks of its own, but every technology comes with certain loopholes too. The technology is a revolution, but the hype of blockchain comes with some mud on the image! Over the past 10, many corrupt minds have used the blockchain platform for gigantic scams. The fraudsters always go an extra-mile to swindle unsuspecting investors.

Though the total market cap of top 10 cryptocurrencies in the world has reached over $1 billion, the rise in the number of scams is alarming.

2017 – The year of ICOs and also the year of ICO scams

According to the report of Australian Watchdog, 2017, was the year of crypto scams, and the trend continues in 2018. According to the statistics of Australian Competition & Consumer Commission’s (ACCC) Scamwatch program, 2017 witnessed 1,289 complaints from within the crypto industry. The financial losses due to the scams accounted to about $1,218,206.

 

Scams continue in 2018 and the impacts of 2017

Let us see the biggest blockchain-enabled scams of 2018.

1) Pincoin and iFan – The scam came under media scrutiny in April 2018. These two coins came under a single company called Modern Tech, headquartered in Ho-Chin-Min city in Vietnam. The two coined swindled about 32,000 investors and gobbled more than $660 mln of investment.

Both these ICOs from the same company have been classified as multi-level marketing scams, and it is believed to be the biggest in the history of ICOs.

Benebit – The scam managed to fool a large number of people and ran away with about $3 million in investor funds.  The company pulled out an exit scam and went offline on January 22, 2018.

2) Benebit lured investors by promising a global decentralized ecosystem with a loyalty program for corporations.  The company gained trust by having a full-featured website, a whitepaper, and detailed information about the team online.

The company had over 9,000 followers on Telegram and a positive rating on ICO review websites. The fake team spent an estimated sum of $500,000 into marketing the ICO, so as to make it look legitimate.

Benebit.io was one of the publicized ICO’s of 2018 with its website filled with vague, grandiose statements about how they were building a “global decentralized ecosystem” for corporations.

3) Mining Max – The fraud Mining Max was able to raise a whopping $250 MIllion from investors. The company seemed legitimate initially as it provided users with decent returns for a couple of months. After a few months, the felonious scam was exposed, when the company was unable to sustain its business model.

The hoax company spent only $70 million on operations out of the whopping $250 Million of investment.

4) Bitconnect – It was a popular name in the cryptocurrency circle during its launch in January 2017. The company accused of being a Ponzi scheme, finally discontinued operations in January 2018. The company offered interest rate over one user lending  Bitconnect Coin (BCC) to other users. But the interest rates offered by the company were just not feasible and within a years time, the company had to shut down after they were issued with a host of cease and desist orders.

The company accused of a fraud of about $700,000, was among the world’s top 20 most successful tokens.

 

5) Plexcoin – The company came up with the great pomp and show in December 2017. The company promised investors over 1300 per cent return on investment per month before the US Securities and Exchange Commission (SEC) ordered the company to stop operations. Plexcoin raised an impressive investment of over $15 million. But days before the ICO was to go live with its platform the company’s assets were frozen.

The founder Dominic Lacroix, was charged after being accused of defrauding investors by making false claims and promises that could not be delivered upon. This was the first time SEC had intervened and charged an ICO through its Cyber Crime Unit.

Special Mention: Mt. Gox

Mt. Gox, a bitcoin exchange based in Japan, announced that approximately 850,000 bitcoins belonging to customers and the company were missing and likely stolen. Whether it is stolen or it is a conspiracy, we don’t know. You can find more on this here.

The time for investors to wake up!

The solution to the problem is not to avoid blockchain and decentralization but to be aware of our investments.

A well-informed investor is always cautious of Ponzi schemes and fraud companies. There are certain points which should always be in an investors mind before risking their money.

1) Make sure you keep up with the latest blockchain red flags and be well-informed of the market. Remember, Knowledge is power!

2) Don’t share your private information in any sense. Privacy is for protection of your valuables.

3) Double and triple check the source before jumping into the investment.

As American investor and founder of Skill Incubator, Chris Dunn, says,

“The crypto community needs to promote financial education and ethical investment practices, otherwise governments will over-regulate and stifle real innovation. The most effective way to protect investors is through education. Investors need to learn how to evaluate investment opportunities, quickly spot scams, and know how to manage risk.”

Being cautious in delicate deals of business and investment is a mark of a good businessman. The outreach of applications of blockchain can’t be limited so why try to do that? The solution can be found in being aware about the feudal mind-set which aims to use this boon of technology as a bane against investors for their personal profit. It’s time we eliminate the bad in good!