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Are Cryptocurrencies The Latest Scam?

27th August 2018.George Kottakal.0 Likes.0 Comments

In August 2018, the head of Bitconnect India, Divesh Darji was intercepted by immigration officials at IGI International Airport in New Delhi. This is just moments after he disembarked from a flight from Dubai. Formally arrested by the Gujarat CID branch on 25th August 2018, Divesh Darji has been charged for conning several investors of crores of Rupees. With this incident in mind, it becomes imperative that we discuss just how vulnerable an individual is to get swindled while investing in cryptocurrencies.

As the value of bitcoin has risen, cryptocurrency has become a buzzword. The problem isn’t with the titans of cryptocurrency like Bitcoin, Ethereum, Neo and Ripple but with new virtual coins which are nothing more than cryptocurrency scams.

The Rise Of Cryptocurrency

The world’s first cryptocurrency came into existence in 2009. Satoshi Nakamoto (a pseudonym) is credited with developing Bitcoin and was hailed as a revolutionary. It was an interesting concept but few thought it would survive, let alone become an investment option. However, by December 2017, when its value rose to 17,531 US Dollars, everyone took notice. The early adopters of bitcoin, who still retained the virtual currency, suddenly found that they had become overnight millionaires. Now, everyone wanted a part of the bitcoin bandwagon to cash in on its spectacular rise. Unfortunately, fraudsters, tricksters and investment bankers know that an uninformed public looking for a gold rush are the perfect victims.

Why Are People Vulnerable To Cryptocurrency Scams?

A new cryptocurrency gets launched every other day. Unfortunately, many of them don’t provide any improvement on the technology and offer nothing of value. While cryptocurrencies like Etherium brought about smart contracts, many of them are just out there to cash in on an uninformed public. A good example is what happened in the 1990’s with the internet. No one fully understood it but there were companies like Netscape Navigator, Amazon, Yahoo and that made overnight millionaires. This resulted in so much fear of investors losing out on the gold rush, that people literally threw money at anything that ended with ‘.com’. History is repeating itself again today, so be careful while investing your hard earned money in cryptocurrencies.

Initial Coin Offering: A Scammers Haven


An Initial Coin Offering (ICO) is similar to an Initial Public Offering (IPO) minus the regulation.  This means that there is a very strong chance that you could get swindled. In fact, one study claimed that as many as 80 percent of all ICOs are scams and offer no value.

Basic Features Of An ICO

  • A digital token is created by an individual or a group of developers. This can be traded using digital currency like bitcoin or ripple.
  • The digital token does not provide any ownership rights to the investors, unlike an IPO.

How Do You Spot A Potential ICO Scam?

  • The coin or token has no practical application.
  • The white paper is vague.
  • The initial investment is for developing a promised technology. i,e, The white paper only talks about the idea and requires an investment on your part to develop that technology.

Note that not all ICO’s are scams. The Ethereum project in 2014 which started out of an ICO is the second most popular cryptocurrency.


Cryptocurrency Ponzi Schemes


One Coin Home Page

Last year, the Mumbai police arrested 18 people in a cryptocurrency scam. The fraudsters had made false promises about how investing in OneCoin (a cryptocurrency) could increase an investor’s wealth. It turns out that this Cryptocurrency Ponzi scheme had victims who lost as much as 75 Crore Rupees. Surprisingly, the Ponzi scheme is still going strong.

If you go to Google and type “One Coin”, you’re going to see the company website as one of the first results. Or you could just click this —> OneCoin. Did you do it? Congratulations, now you know what the web page of a Ponzi scheme looks like. A sleek looking website with over 1,00,000 followers on Facebook, it could easily be mistaken for an honest business.

How Do You Spot A Cryptocurrency Ponzi Scheme?

  • Are the returns unbelievable? Even when the stock market is bullish, 15% is a high number. If anyone says that they can get returns of more than 40%, it’s a Ponzi scheme.
  • Do they deliver that 40%? If you keep getting consistent returns for more than a few months, you’re probably early in the game. No investment can consistently give these kinds of returns.
  • Are they unable to explain how the token or cryptocurrency works? Does the logic sound vague? A Ponzi scheme may be at hand.
  • If you are unable to cash out, that’s a huge red flag and that’s about the time the whole thing is about to fall apart.

Cryptocurrency Pyramid Scheme

A time-tested model for a variety of scams, the pyramid scheme is a rewards-based program that gives out a commission for getting new recruits. The value of the cryptocurrency is artificially increased because of recruitment and not because the investors believe in the coin itself.

How To Spot A Cryptocurrency Pyramid Scheme?

  • The cryptocurrency doesn’t have any practical applications.
  • There is a referral system i.e, you bring in recruits, you get paid a commission.
  • Outrageous claims made about how you can make a lot of money in a short amount of time.
  • You are asked to invest lots of money even though you don’t see any returns with the promise of great returns just around the corner.


Whenever some new gold-rush comes out, investors always let their guard down, which is always taken advantage of. Like any sensible investor, analyse the benefits of the cryptocurrency you want to invest in before putting your hard-earned money into it.



*All allegations against any mentioned company is purely speculative in nature. Readers are advised to do their research and come to their own conclusion.

Categories: Cryptocurrency

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