Ponzi Schemes in Crypto

By  //  August 19, 2022

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A Ponzi scheme is typically a sophisticated investment fraud used to entice shareholders with the promise to make large sums of money quickly from a dormant business.

The company’s primary focus is typically on acquiring capital via new investors and dispersing it to previous backers under the guise that this capital represents earnings from legitimate investing activity. Such a structure eventually breaks down when the stream of new investments stops. 

Ponzi schemes have a long history dating back to the 19th century. But it was not until the illegal activities of Italian conman Charles Ponzi in the early 1920s that this kind of fraud was eventually brought to light.

In a crypto Ponzi scam, the con artists create fictitious crypto businesses and entice investors with a variety of tales and false figures.

With cryptocurrency, it is a little simpler to advertise improbable rewards to a market that does not fully grasp how it operates or is otherwise mesmerized by the potential of digital assets to produce appealing returns on investment. Moreover, there are 5 ways to add bitcoin to your investment portfolio and they can be read from articles available online.

How to identify a Ponzi scheme?

While Ponzi schemes have changed as technology has advanced, they frequently exhibit the following warning signs: 

 The guarantee of fast and risk-free investment returns, irrespective of market circumstances.

Investment patterns or business events behind such schemes that are offered as apparently too complicated to describe.

Withholding access to records that could attest to the validity and actuality of the business and its investments.

Trading is not done or others on a blockchain network.

History of some of the biggest crypto Ponzi schemes 

■ Onecoin:

Onecoin is the crypto industry’s longest-running Ponzi scheme. Onecoin, which was started by the Bulgarian scammer Ruja Ignatova, alias Cryptoqueen, was successful in luring investors between 2014 and 2019. The Ponzi scam was alleged to have deceived shareholders of $5.8 billion during this time by promoting Onecoin as a Bitcoin Killer and the newest and trendiest advancement in the cryptocurrency space.

Underneath this business endeavor was a multi-level sales tactic that paid participants in cash and Onecoin for each new investment they brought on board. The lack of a Onecoin-owned blockchain was the issue rather than the marketing campaign itself. Because Onecoin was not supported by recognized digital asset technologies, anytime investors received or purchased it, they possessed a useless coin. 

■ Bitconnect:

Bitconnect, another significant cryptocurrency Ponzi fraud, debuted in 2016 as a Bitcoin lending solution that promised returns of 40% every month. The operators were an anonymous group of programmers led by a person named Satao Nakamoto. Investors had to buy BCC tokens, lock these on the platform, and wait until trading bots traded with their locked money.

■ PlusToken:

One of the newest and biggest Ponzi scams to be reported in the cryptocurrency realm is PlusToken. Most of the scam’s promotion was done through the Chinese messaging platform WeChat, where it lured investors in with the promise of 10 to 30 percent monthly profits. Over three million people invested in PlusToken, the bulk of whom were from China, South Korea, and Japan.

■ GainBitcoin:

GainBitcoin, an Indian cloud mining service, first appeared in 2016, promising to produce profits of 10% per month for 18 months. As ludicrous as it may sound, Indian investors contributed at least $300 million to the project. In 2017, it became evident that the complex design was not supported by any actual mining activities or equipment.

■ Mining Max:

Like GainBitcoin, Mining Max hid the true nature of its unlawful operations under an apparent cloud mining business. The platform promised users a way to profit from the increasing cryptocurrency frenzy.

Mining Max promoted the prospect of taking part in a multi-crypto mining environment with the potential to yield substantial profits. However, most of the business model was dependent on aggressive marketing campaigns intended to draw in new investors, like every other cryptocurrency Ponzi scheme. 


Because these assets trade in open markets rather than in a financial black box created by a Madoff or Ponzi, crypto, aside from the outright rip-offs, will forever have a free-floating price structure. Undoubtedly, some people will read this and interpret it as a critique of government expenditure or support of victims of fraud.

You can, however, employ a word without concurring with it. Comparing cryptocurrency to a Ponzi scheme can be completely descriptive, value-free, and emotive.