Nine of the most notorious cryptocurrency schemes in the Internet
While the general practice of cryptocurrency fraud stays sadly widespread due to the nature of cryptocurrency (namely, the lack of central regulation and policing that makes them attractive in the first place), some schemes stand out among the others and somehow manage to stay afloat despite the layers of bad publicity and exposure they received. These nine villains of the crypto world are the following:
- LCF Coin;
- Centurion Coin;
Bitconnect is a notorious pyramid, or, more precisely, a Ponzi scheme. It claims to be both a system of cryptocurrency loans and banking and an automated trading system that calculates trends. In fact, it is neither. How does it work?
Bitconnect is a centralized enterprise that can boast an enormous capitalization clocking up to billions of euro. This means that this particular Ponzi scheme is nearing its inevitable collapse and disappearance of vast sums of money.
Dascoin is an MLM style pyramid, operating in multiple levels and ranks of participants. Advancing in level, of course, costs money. While Dascoin gladly accepts payments to advance one’s level, the profits it actually pays are much less. It offers flashy gifts and member meetings, but aside from that, it is not possible to get any richer using Dascoin.
Plexcoin is a notorious fake cryptocurrency startup company offering its own cryptocurrency token based on Ethereum. The advertised goals of the company include making cryptocurrency as easy to use as normal currency; it offers banking cards based on the VISA system that is linked to wallets. While there weren’t any cases of money loss to Plexcoin observed so far, the company is very secretive, heavily hinting that there is some kind of scam involved.
The company does not reveal its mechanics of operation, or even its address. The official description of the PlexCard technology cannot be verified, so it is not known how the card works and what guarantees the inviolability of your account (most likely, nothing does).
Onecoin is a pyramid scheme that combines the MLM and Ponzi styles of fraud. This Bulgarian based company openly advertises itself using such notable publicity stunts as opening its own charity funds and grows in capitalization solely through those attracted by these stunts and fooled into investing. Of course, all side projects of Onecoin are absolutely opaque; for instance, it is not possible to check if the “charity fund” One World Foundation actually does any charity.
The company rewards its most active and generous investors with impressively sounding decorations such as the “Black Diamond” and the “Double Diamond”, as MLM style schemes are wont to do, and occasionally gives away expensive gifts to the most gullible (the price of the gift is always lower than the sum mooched from the victim).
A rather simplistic scheme also known as Coinspace, S-Coin is a fake ICO that is suspected to be a Ponzi scheme, but equally likely to be just an “air salesman”. It promises to create a new cryptocurrency token but so far failed to deliver; the whitepapers describing the technology behind the coin contain glaring errors such as offering physical coins to be sent by mail (which is known to be impossible in the world of cryptocurrency).
Another fake coin, its premise is basically another cryptocurrency to be traded. However, the analysis of EarthCoin technology according to CoinTelegraph suggests that it is not actually a cryptocurrency to be mined, it is a pre-generated token that can be “mined” instantly, and the creators of EarthCoin distribute it as a pump and dump scheme.
Despite that, many exchanges trust EarthCoin and offer trading it for other cryptocurrencies. This is dangerous, do not attempt to trade EarthCoin for profit, it might be a worthless fiat token, and its price may drop to zero on exposure.
LCF Coin is a Chinese ICO that has all the warning signs of a scam. The clues hinting towards its fake ICO status are the following:
- Lack of transparency;
- No website;
- False claims by the developers.
Among other things, the developers of LCF coin claim that Rotschild&Co invested into this ICO, while the Rotschild company officially denies such information and warns potential investors of a possible scam.
The Italian project known as Centurion Coin is a relatively new pyramid scheme similar to OneCoin and the other notable scams of this type. Unlike OneCoin, Centurion Coin actually offers its own cryptocurrency token, however, block analysis suggests that this token is not a cryptocurrency, just like EarthCoin. The vast amount of pre-mined tokens hints toward that this is actually a worthless fiat token. This makes Centurion Coin three schemes in one: Ponzi, MLM and pump and dump.
Bitpetite is a blatant scam that offers amazing profits to anyone who invests money in it and the ability to withdraw at any time. The true nature of this scam is not clear but, most likely, it is a Ponzi scheme in its late stage of impending collapse. There are many reports by people who were denied withdrawal by Bitpetite. Currently, Bitpetite is offline since 2017 as reported by Bitcointalk, which confirms its nature as a classic Ponzi scheme.
How to avoid scam
Now as you are familiar with the biggest scammers of the cryptocurrency world, you might be aware of the most common types of schemes: Ponzi scheme, MLM scheme, a fake pump and dump coin, a fake ICO that does not even offer a real coin. How to protect oneself from these kinds of deception? There are two methods of avoiding scam.
- Knowledge is half the battle. Knowing how cryptocurrencies work allows you to detect the crudest imitations thereof. Knowing how investments work allows you to understand MLM and Ponzi schemes which exist in the world of fiat currency as well as in the world of cryptocurrency;
- Blacklists help. The Financial Markets Authority publishes lists of known scammers. These lists are essential for a budding investor.