The Biggest Scams and Threats of 2018

The Biggest Scams and Threats of 2018

There are a lot of reasons why the crypto community will not forget 2018 anytime soon. The year started by continuing with the hype of 2017, only to experience the largest crypto market crash in the history of digital currencies a few weeks later. This was a start of the bear market that had a tight grip of the crypto space for the following 12 months, with only a few short breaks here and there.

However, the hype that came before the crash allowed cryptocurrencies to blow up despite unfriendly conditions, and thousands of new investors were in a hurry to join the market. As it is well-known, whenever there is a lot of people interested in something, there is also a lot of scammers wishing to exploit those who are not careful enough.

ICOs (Initial Coin Offerings) are one of the best examples of this. As a form of crowdfunding that was used for providing startups with funds that were to be used for launching their businesses, ICOs became increasingly popular, especially when the prices skyrocketed. However, due to the fact that most of the investing was based on the trust in the project, the trend quickly became scammers‘ favorite way of obtaining the money by tricking newcomers.

Of course, scams come in many shapes and forms, which is why we will now take a look at some of the biggest ones that have marked the previous year.

1. BitConnect

The BitConnect scam is one of the well-known schemes in crypto history. While the “project” ended in early 2018, it still managed to scam thousands of crypto investors who were promised 300% returns on their investments. Since the crypto craze was at its peak at the time, a lot of people eventually fell for it.

The idea was a simple one – BitConnect offered investors to get BitConnect Coin (BCC) in exchange for Bitcoin (BTC). Then, investors could use BCC for lending out at different rates of return in interest.

Eventually, the platform was noticed by the regulators in the US, and they were forced to shut down, after being labeled a Ponzi scheme. Many assume that a similar scam would not work today, as investors seem to be significantly more careful. After some quick research, they would quickly realize that the company owner was anonymous, in addition to numerous other suspicious aspects of the operation. This scam may be one of the largest impacts on the ICO reputation, which eventually led to the death of the trend.

2. Price Manipulation

Price manipulation is nothing new in the financial industry, and it is still an on-going issue today. This type of scam usually works by organizing price hikes via messaging apps and then selling holdings in order to make a profit.

The most infamous messaging apps in this regard are Discord (1,051 reported pump-and-dump schemes) and Telegram (3,767 pump-and-dump schemes). While still illegal, the practice became quite popular, as it can be seen from these reports. Most of the scams focused on various altcoins, although some of them (approximately 82) even tried to impact Bitcoin itself.

3. Twitter Scams

Social media networks were often a place where investors were targeted by scammers, with Twitter being the most commonly used one. One of the biggest examples of this type of fraud was the impersonation of Elon Musk, the founder of Tesla and SpaceX. Someone attempted to impersonate Musk and promote a scam revolving around Bitcoin fundraising. The scam used several wallets, with one of them eventually raising as much as $150,000.

The trend of hacking or impersonating famous individuals in order to promote similar schemes is well-known, which is why investors can never be certain about what is real and what is not.

4. The Sim-Swap Heist

Another incident that made numerous headlines happened in August 2018, when a 19-year-old known as Xzavyer Narvaez was discovered to be behind a sim-swap heist that resulted in a theft of over $1 million in Bitcoin. Basically, the teen managed to steal phone numbers and gain access to other people's financial accounts, social media, and alike. After that, he performed a so-called sim-swipe, which allowed him to use his own devices for accessing and controlling these accounts.

In a few short months, between March and June 2018, Narvaez's digital currency wallet received more than 157 BTC. The reports also stated that he likely wouldn't have been caught if he did not spend the stolen money nearly immediately on buying a McLaren sports car from the same device that he used for performing sim-swaps.

However, this was not the case, and he spent $200,000 on buying a car via BitPay. While the Narvaez incident may be the best-known one, it is certainly not the only heist of this kind, as it is believed that there is an entire cross-state syndicate that is stealing money in this same way.

5. Vietnamese ICO Scam

Another big news regarding ICO scams appeared in April of the previous year when over 32,000 investors in Vietnam got affected. Scammers managed to trick enough investors to steal over $660 million in total, in two different ICOs. However, both of them were run by a single company based in Ho Chi Minh City.

The projects were named Pincoin and iFan, and they managed to trick their investors swiftly and successfully. The owners left their offices, as well as the city itself before anyone even remembered to alert the authorities. The idea behind the projects was simple — iFan was supposed to be a social network for celebrities, while Pincoin was an ERC-20 token that was supposed to power the PIN project, which was in turn expected to grow into a big, successful advertising network, that would also offer a vast variety of other services.

Needless to say, both of them promised high returns on all investments, and as soon as they gained their supporters' money, they disappeared with it.

6. Mining Schemes

Crypto-based scams go even further than ICOs and Twitter impersonations, and just last year, two connected mining scams were made public. The person responsible for the scams is the GAW miners' and Paycoin cloud mining's CEO, Homero Joshua Garza. Garza started both projects in 2015, with only a few months between them. GAW was soon recognized as a Ponzi scheme which led to its closure, and Garza was finally sentenced to 21 months in jail in September 2018.

7. Taiwanese International Scam

Last summer, in August 2018, Taiwanese authorities received a complaint about a crypto scam that has been targeting wealthy international investors, and which already managed to scam people out of $24 million in crypto.

Authorities determined that the guilty party was a citizen, Prinya Jaravijit, who allegedly targeted Aarni Otava Saarimaa, a Finish investor, as well as his Taiwan-based business partner, Chonnikan Kaewkasee. The two turned to the country's authorities after realizing their mistake of investing in Dragon Coin — a cryptocurrency with a focus on gambling and casinos.

The Fight Against Scammers

2018 has definitely been a year of scams and scammers, although the authorities did manage to fight back in a lot of significant ways. Around the world, the authorities increased the amount of action taken against scammers, and multiple high-profile arrests were made throughout the year.

Still, the problem remains, as scammers now know that the crypto world can be tricked out of its money, and there is not much that can stop them from trying their luck. The only thing that regulators can do to help stop the trend is come up with regulations which will make it more difficult and dangerous for scammers to continue tricking people. And, while the bearish year did make investors much more suspicious and careful regarding what they invest in, there are still cases of scammers stealing crypto all over the world.