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The biggest scams and failures on cryptocurrency market

The biggest scams and failures on cryptocurrency market
Margaret NAIL
04.12.2017  |  in Blockchain
Cryptomarket is one of the most adventurous spheres of the economy. Here you can earn millions with your own or someone else's idea, and you can lose everything in a surprisingly short time. Bitnewstoday.com is recalling how the dreams of crypto innovators were broken and how the money of investors turned into dust.

Thousands of projects burst like bubbles

Only 10% of the projects that launch ICO survive before they turn into the full-fledged business. In addition, many of the projects that attempted to develop blockchain-based systems without raising funds via initial coin offering failed as well.

"Now, there are thousands of such (failed) projects. Quite often, blockchain is used where it is not necessary. For example, having a distributed ledger is very expensive for a single bank or organization," comments Nikolai Ermakov, co-founder of the Nakamoto Capital cryptocurrency fund.

In other words, it makes no sense to make any blockchain-based IT projects for a single organization, if there are already systems capable of solving the problem no worse than blockchain. Or if the development of systems based on a distributed ledger is unreasonably expensive.

One of the failed projects of implementing blockchain in the Russian banking sector, was Sberbank's attempt to create a system of cross-border transfers. The idea of ​​the project was that a user in Russia buys tokens for rubles, and upon arrival in another country, these tokens could be sold for dollars. The goal is to eliminate the transaction costs associated with the transfer of currency across the border. However, the legislation does not yet allow the implementation of this project.

Mistrust of the US authorities to the crypto sector led to the closure of one of the largest and oldest crypto exchanges BTC-E, which made a big fuss and became a cause of concerns to investors. In addition, the collapse of the exchange was accompanied by arrests, seizures and scandals. A few months ago the exchange reopened as Wex.nz.

Fatal errors and sticky fingers of scammers

The complete collapse of crypto projects sometimes is caused not only by the intervention of regulator, but also by mistakes made by project's team, especially in terms of security. One of the striking examples is the failure of The DAO. The error in the code made the system vulnerable and led to the theft of $60 million and buried the project that was once considered successful.

Another high-profile case in the cryptosphere affected ethereum-based crypto wallet Parity. It suffered an attack that resulted in more than $156 million in digital currency being frozen and inaccessible.

One of the largest projects that successfully held ICO, but failed to start, was a startup called Tezos. The project is among the leaders in terms of the amount of funds raised. Investors appreciated the idea of ​​this startup, whose team planned to create "ethereum killer", and invested in the project more than $232 million. However, the project's successes have come to an end at that stage. The launch of the platform was constantly postponed, the community became aware of the internal conflicts within the team. In this regard, several investors have already sued. It is hoped that this is just a team's difficulty in organizing a business, not just another scam.

Scams

Among the projects launching ICO, there are very often those which intentionally try to be unsuccessful: to raise money, and then tell investors that they failed to develop the project.

Declouds team can be awarded for its over-insolence among those knowingly unsuccessful projects. It promised its investors to put about 295 BTC (more than $ 1million at the time of the ICO) raised via ICO in creating a cloud service for the purchase and sale of precious metals. The owners of the project not only created fake pages in the social networks, but they announced cooperation with one of the European banks. To make it more convincing, they "photoshopped" one of the project owners to the photo showing presentation of the bank's management at one of the conferences.

Such projects as Opair (raised $1 million via ICO) and Confido (raised $374 thousand), which removed all their websites, pages in social networks and disappeared with investors' money after having successfully placed their tokens.

Klimentii Tselovalnikov, co-founder of the multi-currency crypto market CoinPlace comments: "Basically, among scams are often small projects, that is, within 300-500-800 thousand dollars. There is such an expression as a light-scum, that is, when the project is working, but very badly, and this can be explained by anything: both by poor management, and by the fact that they have withdrawn too much money from the project. Another factor is the changes in the market itself. They can be too fast, and the project loses its relevance after a while."

Most likely, in the future many projects will fail, and investors will lose their money they put in scams. However, as the cryptosphere develops, the market will become more civilized. The most important thing is that representatives of the crypto industry should draw conclusions from their failures and learn not only from their own, but also from other people's mistakes.

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Margaret NAIL
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