The cryptocurrency market is largely an unregulated area: to date no international laws apply to the procedure of launching an ICO. As result the world has seen small and large frauds and SCAM projects that helped to enrich individuals with deliberate intentions to earn money even at the cost of professional reputation. We’ve selected the 3 biggest ICO SCAMS in history. Companies spending major investments in promotion and creation of a credible image, may be nothing better than a Ponzi scheme in a gift wrap.
OneCoin is an altcoin with a private blockchain. The business of OneCoin company is based on selling educational material for trading. In other words the business of OneCoin is simply multi-level marketing. Its founder, Ruja Ignatova, claims that the company doesn’t sell cryptocurrency – only educational material. The real focus of the company are coin sales: “Only in 2013 this currency has seen a 75 times increase in its starting price. It started at a price of only 0.10 USD per coin and has been traded for over 1.100 USD per coin”. The company uses traditional marketing tools: participants are stimulated to invest in coins by various rewards for high participation activity. Though one can “mine” Onecoins, it is not possible to exchange them to other currencies. Before January 2017 the exchange could have been conducted only on the internal market place of OneCoin. It is worth mentioning that the project is supported by OneCoin Limited, registered in Gibraltar, and is also supported by offices in Dubai and Belize. The company’s CEO, Ruja Ignatova, is from Bulgaria. According to CoinTelegraph, her identity and professional background can’t be called credible: biography, published on her website wasn’t confirmed by any official sources. Bulgaria, Finland, Sweden, Norway, Italy, Latvia included OneCoin in the observation list and warned its participants that the company may be a fraud. In April 18 OneCoin representatives were put in jail in Mumbai. According to The Atlantic, the company “moved at least $350 million in allegedly scammed funds through a payment processor in Germany”.
Gnosis is a platform for market predictions. It is based on Ethereum and enables participants to ask questions about random events and then buy or sell shares in the outcome of such an event. For example, this can be applicable in sports betting or with insurance risk management. Participants of various forums highly debate if Gnosis is a SCAM or just a bad investment option. These discussions are sparked by the Gnosis token distribution model. The maximum market cap is set at 300 $ million, with around 5% of the tokens going to investors. Basically Gnosis is going to extract maximum amount of money in exchange for tokens. The founders give no guarantees regarding the legality of the platform or its launch in any given jurisdiction. The worst scenario occurred after the Gnosis’ ICO was actually launched: the team ended up with the majority of the tokens. It means that Gnosis simply gamed the system in favor of the projects founders. It took Gnosis only 12 minutes to sell their currency “GNO” worth $12.5 million. This means that they reached their target at 300 $ million cap, and the project turned out to be overpriced and may be unprofitable in long term. Though the project has a strong advisory board, including Vitalik Buterin, most of the core team members have no experience in blockchain – and this again may question the company’s credibility.
Earthcoin is a cryptocurrency based on scrypt algorithm and committed to sustainable development. It is an extension of Litecoin and uses scrypt as a proof of work mechanism. The author of this article had troubles in finding information about Earthcoin, since the official website of the project wasn’t working during the time the material was prepared for publication. Journalists from CoinTelegraph argue that they also couldn’t find enough details to conduct a full analysis of this ICO. There is a lengthy interview with the founders of the company on BitCoin PR Buzz, but the material hardly sheds light on the prospectus of Earthcoin. The founders preferred to stress upon their social responsibility culture (planting forests and saving animals in Costa Rica), rather than giving details of their business. It is also worth mentioning that the founders stated that they do not have a certain business program for the project development. The main feature of the project is that the coins are pre-mined. This means that developers released the coins before the public launch. Detailed information about the coin and its volume is lacking. The founders argue that Earthcoin allows faster transactions and has attractive marketing: the coin payout follows the season pattern (with highest payouts in Spring and lowest in Autumn) and regular bonus payout days – double payout every 2 weeks, and 5 times payout each month. These may be attractive features, but one shouldn’t be surprised if the Earthcoin’s value will fall in one moment. The project has all features of what can be called a pump and dump set-up scheme.