Top 5 cryptocurrency scams!!

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The bankruptcy of MtGox, once the world’s largest bitcoin exchange, began in February 2014 with the loss of an estimated 750,000 bitcoin worth $35 million dollars at the time. While MtGox remains the largest bitcoin scam to date there have been others, some not as well known, causing investors to lose millions of dollars. Here is our list of the other top 5 cryptocurrency scams of 2014.

Fifth Place

The BTC-Arbs cryptocurrency scam only lasted a few months in the first quarter of 2014. The company was a typical HYIP (high yield investment program) promising returns of over 1% per day on a minimum deposit of $50 in bitcoin.

BTC Arbs
When the site went dark there was an effort by customers to obtain refunds which was only slightly successful. Of those who joined in the effort there is a spreadsheet indicating over 573 bitcoin were lost with refunds of only 14 bitcoin.

Fourth Place

Bitcoin Trader was another HYIP ponzi that lasted much longer than BTC-Arbs: from late 2013 until October 2014. Bitcoin Trader promoted itself with a much more polished website than BTC-Arbs and tried to hide the fact that is was a ponzi scheme by claiming it earned profit from both bitcoin mining and arbitrage.

Cryptocurrency Scams

The owner John Carley also did his best to keep Bitcoin Trader off review sites that rated HYIP programs like Money News Online lending credibility to the site. Customers of the service lost from $250,000 to $500,000 according to estimates by CoinDesk.

Third Place

Fibonacci was a company started by Jason A. Hudgins of Florida, USA to produce scrypt ASIC miners. Mr. Hudgins was a respected member of the Litecoin Association and poster at the Litecoin Forum which he used to promote his scam. Fibonacci began accepting payment for pre-orders of scrypt ASIC miners in March 2014, encouraging customers to pay not only with bitcoin and litecoin but a new altcoin called CacheCoin he had developed. The company claimed they would beat KnCMiner to market and would deliver their litecoin miners in late summer 2014.

Fibonacci

Of course the company never produced any miners at all and Fibonacci and Mr. Hudgins is now being sued in Lee County, Florida. It is estimated that investors were defrauded of more than $1,000,000 and the criminal complaint can be read here.

Second Place

Fibonacci was not the most successful litecoin scam of 2014. That dubious honor goes to Litecoin GEAR.

Litecoin GEAR began with sales of FPGA litecoin miner boards in October 2013 by Cristian ‘Chris’ Ilie Schipor of Bucharest, Romania. He posted using the handle ‘beekeeper’ at the Litecoin Forum and was actually first to market with a successful commercial litecoin miner based on an FPGA chip; up to then litecoin was mined using a GPU graphics card. He claimed 15 years experience in FPGA design and did earn a Bachelor’s Degree in Computer and Informatic Science from the Polytechnical Institute of Bucharest in 2000. He operated under the umbrella of a legitimate Romanian based company called Bitcage Tech SRL, see this report for details.

In early 2014 ‘Chris’ began selling litecoin cloud mining from his website as ‘Farm$hares’ granting buyers a percentage of profits from the litecoin mining farm he claimed to have developed. Sales were brisk and a new product was soon introduced called ‘qASICS’ mining shares; supposedly based on custom ASIC chips he had manufactured for him in China. Shares cost about $5 per mH/s and offered return on investment in as little as 6 weeks.

Litecoin GEAR was never transparent, never provided a public mining address or photos of what had to be a very large mining farm if legitimate. Red flags should have been set off for everyone investing but the promise of easy money was too much for many to resist. To add to his credibility many trusted members of the Litecoin Forum either promoted the scam as affiliates or gave tacit approval.

What may have started as a legitimate hosted mining operation appears to have turned into a full blown ponzi scheme in August 2014 when Chris introduced an affiliate program to help him sell qASIC shares. Within a month literally hundreds of affiliates were promoting Litecoin GEAR across the internet. The scam began to unravel in late November and early December 2014. Apparently in desperate need of new funds to payout investors and keep his ponzi afloat several sales at up to 49% discount were offered.

By that time Litecoin GEAR had over a thousand customers and had sold mining power rhok0 estimated from a low end of 196 GH/s to as much as 574 GH/s. Note that the hashrate of the entire litecoin network is presently only 1192 GH/s. In late December Chris halted weekly payouts claiming his site had been hacked and his user database corrupted. Four months later the website is still online but no one has received any payouts. Because hope springs eternal and it is often hard for someone who has been scammed to own that reality many threads at the Litecoin Forum are still actively monitoring Litecoin GEAR and hoping the service resurrects.