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2018 will be remembered for a long time as the start of a significant cryptocurrency bear market, but the declining market has nevertheless offered scam artists opportunities to trap unwary investors.
As 2017 was a year unsolved for Bitcoin (BTC) and the like, investors were clamoring for the melee while the price of cryptocurrencies soared towards the end of the year.
With such a positive environment, companies and developers have tried to exploit blockchain technology for new projects, leading to a boom in new initial coin offerings (ICOs) that have raised a total of over $ 20 billion from the start of 2017 .
This provided the right atmosphere for the most unfortunate people to set up scam operations trying to hide the unsuspecting victims.
The modus operandi varied from project to project, but there was no lack of conventional multilevel and pyramidal marketing schemes, as well as pump-and-dump operations.
While the year has ended, it is worth looking at some of the biggest scams of 2018, as well as some of the most bizarre and absolutely ridiculous schemes.
Bitconnect falls
BitConnect will become one of the biggest scams the cryptic world has ever seen, but the shady project saw its definitive end at the start of 2018.
Thousands of investors have been tricked by the platform, which has promised impressive returns on a loan scheme using its own native token.
The concept was simple enough: investors traded in Bitcoin in exchange for Bitconnect Coin (BCC), which could then lend to variable interest rates.
The Bitconnect loan platform has led to the accusation that the platform was a Ponzi scheme, which over time led to the issuance of a cease-and-termination order by US regulatory authorities .
What has further stimulated the legitimacy of the operation was the referral system and the anonymous ownership of the company.
The worst fears occurred when the anonymous creators of the program sold their coins and resorted to BTC reserves – leading to collective lawsuits from a number of interested investors.
The extent of Bitconnect's influence spread across different continents, leaving investors from all over the world to manage losses.
Pompami!
As a recent research by the Social Science Research Network suggests, the price manipulation of various projects is still widespread in the cryptocurrency community.
The perpetrators make use of messaging applications such as Discord and Telegram to orchestrate the price increase of some cryptographic tokens to sell their own for-profit items.
According to the results, the researchers identified 1.051 and 3.767 pump-and-dumps patterns on Discord and Telegram respectively, indicating how prevalent this illegal practice has become. According to current legislation, this practice is equivalent to securities fraud under the jurisdiction of the US Exchanges and Exchanges Commission (SEC).
While many of these schemes targeted a variety of altcoins, Bitcoin was not immune to orchestrated buying groups that operated through various chat groups.
The research identified at least 82 pumping patterns targeted at BTC on these two apps in 2018, although this amounted to slightly more than 1% of the total pump signals.
Social media cheats
Social media networks have also become a crucial tool for criminals to loot imprudent investors.
A prime example was the hacking of verified Twitter accounts that were then used to promote fraudulent fundraising programs.
The last instance saw a number of accounts impersonate Tesla founder Elon Musk, promoting a Bitcoin fundraising scheme. One of these Bitcoin wallets used in the scam has raised over $ 150,000, showing how many people have fallen for the authenticity of a "verified" account.
It was certainly not the first time that hackers took control of prominent accounts in 2018. At the beginning of the year, the founder of Litecoin, Charlie Lee, had a number of imitators who created accounts on Twitter, promoting fake LTC tributes.
Telegram founder Pavel Durov was also a victim, as several accounts seemed to take advantage of some downtime from the Telegram app, creating fake accounts that offered cryptographic homages for their support.
Puff of a kid who got fucked by Sim
Nineteen-year-old Xzavyer Narvaez made the news in August, after he was identified as the author of an elaborate sim-swap robbery that he saw stealing more than $ 1 million BTC.
According to reports, the teenager stole phone numbers and used them to access the social media and financial accounts of his victims. He would do it by running a "sim-swap" to take control of the accounts on their devices.
Investigators claim that Narvaez's Bittrex encrypted portfolio received over 157 BTCs between March and June 2018.
Narvaez addresses the charges on four heads of use of personally identifiable information without authorization; four accounts to alter and damage computer data with the intent to defraud or obtain money, and the theft of personal property worth more than $ 950,000, according to court documents.
Had it not been for its conspicuous spending on its illicit gains, which included the purchase of a McLaren sports car, and its brash use of the same device to process more than 20 sim-swaps, Narvaez may have gotten rid of the his crimes.
The purchase of the $ 200,000 vehicle, built with BitPay, also helped the authorities build a lawsuit against Narvaez.
Narvaez is not the only author to be arrested for stealing large amounts of crypts through the use of sim-swap.
According to Krebs On Security, police arrested a man in August who is believed to be part of a cross-state union involving nine suspects who used sim-swaps to steal large amounts of cryptocurrencies from his victims.
Vietnamese investors cheated by iFan, Pincoin
In April 2018, news broke down in a massive ICO scam that had hit 32,000 investors in Vietnam.
The fraud has been touted as one of the biggest to hit the cryptic community, since 660 million dollars of investor money have been stolen by two separate ICOs, managed by a parent company in Ho Chi Minh City.
Modern Tech ran two projects, iFan and Pincoin, which tricked investors before they could alert the authorities. The owners liquidated the company and left the offices in the city when interested investors pressured to recover their money.
iFan has been advertised as a social networking platform for celebrities to promote content and merchandising for fans around the world.
Modern Tech promised Vietnam users 48% monthly returns for iFan tokens but had to make an initial $ 1,000 investment. In addition, users have been assigned a commission of 8% for the referral of new investors.
Pincoin, an ERC-20 token that powers the PIN project, has promised users up to 40% monthly return on investment in the landing page of the website. The project promised to build an online platform based on cryptocurrency and blockchain to provide an advertising network, an auction and investment portal and a peer-to-peer (p2p) market, among other offers.
GAW, Paycoin operator Ponzi imprisoned
After a protracted legal battle, Homero Joshua Garza, managing director of the miners GAW and Paycoin now mining, was sentenced to 21 months in prison in September 2018. His offenses date back to 2015, when he was found guilty of having implemented schemes Ponzi.
Both projects were installed in that year, but within a few months GAW was accused of being a Ponzi scheme, which led to its closure in 2015.
GAW developers have also created Paycoin, a cloud-based cryptocurrency.
Taiwanese fraud created by a Finnish investor
In August 2018, the Taiwanese authorities acted on the basis of information worth 24 million dollars of fraud that had taken advantage of wealthy offshore investors.
The Thai town Prinya Jaravijit was detained in August by the authorities, suspected of being the main culprit of the investment fraud against the Finnish investor Aarni Otava Saarimaa and her Thai trading partner Chonnikan Kaewkasee.
The couple had alerted the authorities after failing to receive dividends from investments made with Jaravijit and nine other suspects.
Investors believed their $ 24 million would be pumped into the cryptocurrency based on gambling and the Dragon Coin casino (DRG). After separating from the funds, the pair never received dividends from the so-called investment, a test of investment in DRG, nor were they invited to shareholders' meetings.
The case attracted international attention when Jinya's younger brother, Jiratpisit "Boom" Jaravijit, a well-known soap opera actor, was arrested in August.
Sniffing the authors
While the number of fraudulent transactions may be surprising, it seems that there has been a real success on the part of the authorities that seek to act and protect investors.
The chairman of the US Commodity Futures Trade Commission, Christopher Giancarlo, said the organization has seen an increase in the number of actions and fines taken against fraudulent projects, including the cryptocurrency sector.
"We were not shy about bringing these cases to court, winning major victories in this sector in the last year – including a precedent that enshrined victory in a trial of fraud with Bitcoin (BTC)."
While regulatory authorities and financial authorities may have issued fines, the conventional authorities have made a number of high-profile arrests over the course of the year, as Cointelegraph has previously reported.
Some of the anonymous ones have been included in this article, but these arrests show that even the anonymous features of cryptocurrencies can not completely hide traces of illicit activities.
Given that regulators gain a better understanding of the details of cryptocurrencies and Ico, the prevalence of these types of crimes could very well fall.
However, these stories show that investors must be careful with their cryptography and make sure that due diligence is made when investing.
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