Cryptocurrency & ICO Scams

Cryptocurrency and Initial Coin Offerings (ICOs) have become very popular investment opportunities for investors who want to make huge profits while investing in disruptive ideas by start-ups offering Blockchain-based products and services. According to icobench.com, over $4.5 billion has been invested in ICOs in the last 4 months.

ICOs present an innovative financing option that circumvents the traditional, highly-regulated funding process. Further, most investors do not fully understand the nascent blockchain technology. These two factors have provided a fertile ground for fraudulent scammers to thrive.

Crypto scams can be executed through hacks, thefts, Ponzi schemes, and Exit scams. In this article, we shall look at some of the exit scams that have been witnessed in the history of cryptocurrencies.

An exit scam refers to the deliberate and preplanned theft of investor funds. This happens whenever scammers collect funds from investors without the intentions of delivering the project. The scammers hype their ICOs in the market place, collect funds from unwitting investors, then disappear soon thereafter.

LOOPX

LoopX is the latest exit scam and was to be launched in February 2018. It promised to deliver a proprietary cryptocurrency trading platform. The team behind the scam claimed to have successfully developed and tested an algorithm that would enable
investors to make more money online and the payments would be made on a weekly basis.

The ICO whitepaper promised software that would have the capacity to process over  10,000 trades over 100 currencies per second ensuring enhanced profitability. At the end of the five separate token sales, the startup had pocked over $4.5 Million,deleted their website and social media profiles, and disappeared without a trace.

PlexCoin

PlexCoin promised an unrealistic return of 1,354% within one month. It was shrouded in mystery. The start-up behind the ICO advertised a non-existent development team, obscured the past financial crimes of its founder, Dominic Lacroix, and their whitepaper was not available until after the pre-purchase period was over.

The ICO was stopped by the US Securities and Exchange Commission (SEC) following official complaints about its founder. By the time this intervention by SEC, the startup had collected over $15 from unsuspecting investors.

Benebit

Benebit promised a novel blockchain technology to create a token for customer loyalty programs. The ICO was one the most hyped ever in the history of ICOs with an excellent PR team and heavy presence in the social media. For over one year, its Telegram channel had gained over 9000 followers. It was top-rated by multiple ICO review websites.

Two months to the launch date, the details of the development team turned out to be fake. It was discovered that they had used fake passports as proof of identity and the images had been stolen from a British boys’ school website. Soon thereafter, the ICO website and social media channels were closed leaving the investors counting their losses. ICO analysts estimate that between $2.7 million and $4 million was lost in the scam.

Opair and Ebitz

Opair.co and Ebitz.org scams were two separate scams which were executed by the same person. Ebitz presented itself as a variance of Zcash with an enhanced algorithm and new features but without the founder’s rewards. This would guarantee better returns to the investors. On its part, opair promised a system of decentralized debit cards built by combining the best of Bitcoin and Ethereum networks.

The scam was unearthed when it was discovered that the founders had used fake LinkedIn profiles. Additionally, although they had provided details of the development team including their photos, they refused to attend events or go on video calls for “privacy reasons.

The scammers used the same server DNS records for the two websites. As expected, as soon as the details of the scam went public, the ICO websites were taken offline, and the team went silent. By this time, investors had lost a combined sum of $2.9 million.

REcoin and DRC

 

These were two separate exit scams which were executed by the same person¸ Maksim Zaslavskiy, who claimed to create the first ever cryptocurrencies that were backed up by real estate and diamonds. The two projects were presented as fully-fledged and staffed companies.

However, according to Securities and Exchange Commission (SEC), the two schemes had no real operations. They had exaggerated their scale of investment and no investments were made on behalf of the investors. To make matters worse, SEC declared that REcoin and DRC were not ICOs but rather securities sales. In total investors lost $300,000.

Blocksims ICO

This is an ICO that was launched by a guy by the name of Shehar Yar. He stole data from a legitimate ICO, and tried to pass it off as his own. Like some of the other scams detailed in this article, Blocksims also created fake profiles on Linkedin for their founder, and fake team members.

Their fake profiles were easily discovered when it was found that one the photos they used for a supposed investor, was that of a Russian serial killer. Of course their scam failed miserably, but they are still out there trying to scam people.

Here is a full investigative report on the scam –https://medium.com/@janeandersonresearch/mobilink-blocksims-ico-what-happened-scam-report-e6121d128593

Conclusion

ICO exit scams are a reality and many investors have lost their hard-earned cash in these ventures. It is advisable that you carry out a thorough appraisal of the ICOs before investing. Additionally, consider consulting an expert for a professional due diligence.