The most infamous cryptocurrency fraud schemes of all time

Perianne Boring, founder and CEO of the Digital Chamber of Commerce, says the lawmaker’s “false and misleading statements” should be investigated on “The Claman Countdown.”

THE growing diffusion of cryptocurrencies it has also led to more frequent and elaborate cryptocurrency scams over the years.

One such scam by a fraudulent cryptocurrency company called Centra Tech is now the subject of a new Netflix movie called “Bitconned”, which is scheduled for release on January 1st.

“Ray Trapani has always wanted to be a criminal, ever since he was a boy,” reads the film’s description. “In 2017, amid the economic frenzy of the bitcoin boom, there was no better place for cryptocurrency scammers. So when a friend of Ray’s approached him with the idea of ​​creating a cryptocurrency debit card, Trapani jumped at the opportunity. There was only one problem: he had no idea how to do it.”

Centra Tech is one of many recent, high-profile crypto scams that have resulted in millions and billions of dollars in losses for customers around the world.

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Here are some of the most infamous cryptocurrency fraud schemes in history:

Tech Center

Principal co-founder Sohrab Sharma, along with Robert Farkas and Trapani, founded Centra Tech in 2017. The company advertised cryptocurrency financial products, including a so-called cryptocurrency debit card they dubbed the “Centra Card.”

The company tricked customers into believing they could use the card to make payments at establishments that accepted Visa or Mastercard payments. They also convinced investors to purchase unregistered securities in the form of digital coins, or “Centra Tokens,” according to the Justice Department.

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The founders founded Centra Tech on the lie that its fictitious founder, “Michael Edwards,” had more than 20 years of banking experience and a master’s degree from Harvard. They also perpetuated other lies “that Centra Tech had partnered with Bancorp, Visa, and Mastercard to issue Centra cards licensed by Visa or Mastercard” and “that Centra Tech had money transmitting and other licenses in 38 states, among others claims,” the DOJ. said in a press release.

All three co-founders have since been convicted and sentenced to prison, according to the Securities and Exchange Commission.

“Sohrab Sharma conducted a scheme to deceive investors by falsely claiming that the startup he co-founded had developed cutting-edge, fully functional cryptocurrency-related financial products,” Ilan T. Graff, a U.S. lawyer, said in a statement of 2021. “In reality, Sharma’s most prominent inventions were the fake executives, fake business partnerships, and false licenses that he and his co-conspirators advertised to trick victims into handing over tens of millions of dollars.”

FTX

FTX, a bankrupt and fraudulent cryptocurrency company, made national headlines this year when its founder Sam Bankman-Fried was indicted in February and put on trial Manhattan Federal Court.

FTX founder Sam Bankman-Fried appears in federal court during his fraud trial in Manhattan, New York on October 26, 2023. (Jane Rosenberg/Fox News)

In November the court found Bankman-Fried guilty of defrauding investors, clients and lenders who took part in the collapse of his crypto empire in one of two criminal trials has faced.

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The collapse of FTX wiped out about $1 billion in client funds.

“Sam Bankman-Fried perpetrated one of the largest financial frauds in American history.”

– US Attorney for the Southern District of New York Damian Williams

Bankman-Fried was charged with two counts of wire fraud and five counts of conspiracy. Prosecutors alleged that the 31-year-old founder of FTX and its sister hedge fund, Alameda Research, misappropriated and siphoned billions of dollars from FTX client deposits, planning to mislead investors and grooming other executives at his companies to do the same.

Sam Bankman-Fried, co-founder of FTX Cryptocurrency Derivatives Exchange, arrives in court in New York on January 3, 2023. (Stephanie Keith/Bloomberg via Getty Images / Getty Images)

“The cryptocurrency industry may be new. The players, like Sam Bankman-Fried, may be new. But this type of corruption is as old as time,” said US Attorney for the Southern District of New York Damian Williams after the announcement of the verdict.

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The founder of FTX, who amassed an estimated net worth of $26 billion before his company filed for bankruptcy last year, also testified during his trial. He admitted he had made mistakes but maintained his innocence, saying he had not defrauded anyone.

BitConnect Ponzi Scheme

The FTX scam has often been compared to the BitConnect Ponzi scheme.

BitConnect, which has since collapsed, was a fraudulent cryptocurrency investment company that at one point reached a peak market capitalization of $3.4 billion, according to the Justice Department.

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A San Diego federal grand jury last year indicted the founder of the company, the Indian Satish Kumbhani. Kumbhani is alleged to have deceived investors about the company’s “loan program,” which in reality operated as a Ponzi scheme by paying off BitConnect’s early investors with funds from new investors.

Prosecutors say Kumbhani and his co-conspirators received a total of $2.4 billion from BitConnect investors.

“This indictment involves a massive cryptocurrency scheme that defrauded investors of more than $2 billion.”

– U.S. Attorney Randy Grossman for the Southern District of California

“As cryptocurrency gains popularity and attracts investors around the world, alleged scammers like Kumbhani are using increasingly complex schemes to defraud investors, often stealing millions of dollars,” Special Agent in Charge Ryan L. Korner said in a statement of the Los Angeles field office of IRS Criminal Investigation. 2022 statement announcing indictment against Kumbhani.

OneCoin and the ‘Crypto Queen’

Ruja Ignatova, a Bulgarian woman Known as the “Cryptoqueen,” she is accused of defrauding millions of investors worth an estimated $4 billion through her fraudulent cryptocurrency company, OneCoin, since 2014.

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Ignatova is on the FBI’s 10 Most Wanted list. Authorities believe she may have received assistance from armed guards or associates and she may have altered her appearance after traveling to Athens, Greece, in 2017. Her co-founder, Karl Sebastian Greenwood, was sentenced to 20 years in September.

Ruja Ignatova, a Bulgarian woman known as the “Cryptoqueen,” is accused of defrauding millions of investors worth an estimated $4 billion through her fraudulent cryptocurrency company, OneCoin, starting in 2014. (FBI/Fox News )

OneCoin marketed a fraudulent cryptocurrency to unsuspecting investors around the world.

“As the founder and leader of OneCoin, Karl Sebastian Greenwood operated one of the largest fraud schemes ever perpetrated. Greenwood and his co-conspirators, including fugitive Ruja Ignatova, swindled unsuspecting victims out of billions of dollars with the promise of a ‘ financial revolution’ and claims OneCoin is the ‘bitcoin killer,’” Damian Williams said in a September statement.

“In fact, OneCoin was completely worthless and investors were left with nothing, while Greenwood lined his pockets with over $300 million.”

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Ignatova, who is charged with conspiracy to commit wire fraud, conspiracy to commit money laundering, conspiracy to commit securities fraud and securities fraud, allegedly told investors to transfer funds to their OneCoin accounts to purchase packages OneCoin, according to the Department of Justice.

Bitclub network

Similarly, BitClub Network was a $722 million fraudulent cryptocurrency scheme “that solicited money from investors in exchange for shares of purported cryptocurrency mining pools and rewarded investors for recruiting new investors into the scheme” between 2014 and 2019, according to the Department of Justice.

Several people, including BitClub Network creator Matthew Brent Goettsche and Silviu Catalin Balaci, Russ Albert Medlin, Jobadiah Sinclair Weeks, Joseph Frank Abel and Gordon Brad Beckstead, have been charged in connection with the scheme.

A representation of bitcoin, June 23, 2017. (Benoit Tessier/File Photo/Reuters Photos)

Goettsche, Balaci, Abel and Weeks were all released on bail in 2020 and await sentencing hearings.

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“The indictment describes the defendants’ use of the complex world of cryptocurrencies to take advantage of unsuspecting investors,” U.S. Attorney Craig Carpenito said in a 2019 statement. “What they allegedly did amounts to little more than a modern high-tech Ponzi scheme that defrauded victims of hundreds of millions of dollars Working with our police our partners here and across the country, we will ensure that these scammers are held to account for their crimes.”

The suspects spent their money “lavishly” defrauding investors, who Goettsche described as “stupid” and “sheep.” He also said that he was “building the entire model on the backs of idiots,” according to the Justice Department.

Fox News’ Breck Dumas contributed to this report.

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