There is a lot of money to be made with cryptocurrencies and where there is money, there are also scammers and hackers! Since 2011, more than 15 billion euros worth of cryptocurrencies have been stolen or looted worldwide in crypto-related scams. This is apparent from an analysis of media reports and legal documents about fraud with these digital means. Take OneCoin, a fake cryptocurrency. In March 2019, the US Public Prosecution Service announced that it would prosecute its owners: they would have sold 3.6 billion euros worth of fake cryptos worldwide.
Crypto exchanges and no deposit casino sites where you can deposit and trade cryptocurrencies are also regularly hacked. Tens and sometimes hundreds of millions are often lost. Those hackers are rarely caught, although the United Nations announced in August that North Korea had hacked into some South Korean crypto exchanges. The proceeds would, among other things, finance the North Korean nuclear weapons program.
This gold rush attracts a lot of people with downright bad intentions. Hacks and scams in crypto land are rarely big news, but a lot of money is often lost. That’s why we’ve listed the biggest hacks and scams from 2011 and added up their damage.
The Biggest 3 Crypto Hacks & Fraud Cases
In the next part, we will mention the most prominent incidents of theft that took place using Bitcoin, of course we won’t mention all Bitcoin fraud cases here, but in terms of number we can tell you that since the beginning of 2011 until now there have been more than 150 incidents of Bitcoin theft. All the hacks and tricks mentioned below are implemented in different ways. We’ll also list a number of techniques, but don’t take the risk of using any them, simply because lightning doesn’t strike the same place twice. Moreover, you may be arrested as a lot of scammers who participated in these scams have been caught.
1. The Exit Scam : QuadrigaCX
A shrewd entrepreneur starts an online exchange where you can trade cryptocurrencies, manages customers’ money and one day just closes the tent and runs away with the money. The most bizarre example of this is QuadrigaCX.
This Canadian crypto exchange was founded in 2013 by Gerald Cotten and a business partner. Within a few years, QuadrigaCX grew into the largest crypto exchange in the country. In 2017, when bitcoin became very popular, almost two billion euros flowed through this company.
However, things quickly went wrong after that. Cotten turned out not to invest the money of customers in bitcoin, but to steal it himself. He bought an expensive yacht, a few big houses, a private jet and let it all hang out. Meanwhile, QuadrigaCX ran into financial difficulties.
In December 2018, Cotten went on a honeymoon in India with his wife. There, according to his wife, he contracted food poisoning and died shortly afterwards in a private hospital. His body has never been examined and its whereabouts are unknown.
It turned out afterwards, according to the woman, that Cotten was the only one who had the passwords for all systems of QuadrigaCX. He hadn’t written those passwords down anywhere and so were lost with his ‘death’. Without those passwords, customers’ money could not be moved. More than 160 million euros from customers seemed to have gone up in smoke.
There is currently no way to say for sure whether Cotten is dead or not, but investigations by forensic accountants have revealed that QuadrigaCX was a common scam and that this is believed to be an exit scam.
The Strange Story of QuadrigaVanity Fair features a beautiful reconstruction of the rise and fall of QuadrigaCX and the bizarre life of Gerald Cotten.
2. Launch a new coin (ICO)
If you want to launch a cryptocurrency, you can do an ICO, aka: an Initial Coin Offering. You then offer your new digital currency for a reduced rate at a very early stage. With the money you collect, you can cover the costs for the further development of your cryptocurrency. An ICO is thus a way of raising capital.
There have been thousands of such ICOs, especially since 2017, when many people believed they could make quick money with cryptocurrencies due to the high price of bitcoin. Strip clubs, gambling sites, porn farmers, weed growers, game makers, real estate entrepreneurs, fruit growers and countless small businesses suddenly started issuing cryptocurrencies.
That boom also attracted many malicious parties: scammers who, just like with an IPO, quickly put together a site, a ‘white paper’ published, honked nice promises on social media and then left with investors’ money. Behold, the ICO scam. Around 2017-2018, 80 percent of all ICOs would be scams.
3. Multi-level Marketing
About four years ago, the Bulgarian entrepreneur Ruja Ignatova launched a new cryptocurrency that should make bitcoin and all other cryptocurrencies obsolete: the OneCoin. It was a currency with which you could buy stuff online, but which you had to buy especially if you wanted to become filthy rich: the currency, she promised, would increase in value enormously.
However, there appeared to be little ‘crypto’ about this coin. There was no blockchain, the underlying technology of cryptocurrencies. There was also not really a market, because OneCoin turned out to be above all a form of ‘multilevel marketing’, a kind of pyramid scheme. For a funny explanation of ‘multilevel marketing’ see this video by John Oliver.
Existing customers acquire new customers and earn a commission for this. When those new customers acquire new customers, the commissions pile up. If you are at the top of the pyramid, you will indeed become filthy rich. However, if you are low in the pecking order, then you have a problem.
OneCoin was, from the company’s point of view, a huge success. Millions of people around the world purchased these coins and convinced friends and family to do the same. Although there had been strong indications for years that Ignatova and her associates were bottlenecking, the company was able to operate undisturbed. When the ground got too hot in Europe and America, recruitment shifted mainly to Africa and Asia.
When the ground got too hot in Europe and America, recruitment shifted mainly to Africa and Asia
In 2017, Ignatova suddenly disappeared from the scene. Some other associates were arrested and some have since been convicted in the United States for fraud. The US authorities estimate that OneCoin eventually knocked about 3.6 billion euros out of the pockets of gullible investors. This makes OneCoin one of the largest fraud cases ever.
