The Largest Financial Pyramids in Cryptocurrency History

These plots expertly masquerade as bona fide operations with the prime objective of illicitly acquiring funds from gullible individuals, tantalized by grandiose promises of substantial returns on their investments within a brief timeframe. Profits distributed to the initial investors are ironically fueled with the capital infused by newcomers, while a sizable fraction of the unlawfully amassed wealth is funneled into the architects' coffers.

Financial pyramids surface quite frequently in the realm of cryptocurrency. This stems from the fact that many users, eager to profit from cryptocurrencies, lack an understanding of cryptography and blockchain. Hence, they are easily misled and confounded. Let's examine some glaring examples of cryptocurrency Ponzi schemes.

A noteworthy instance of a Ponzi scheme that managed to sustain its operations from 2014 to 2017. At the helm of this pyramid were public figures Ruja Ignatova, hailed as the Cryptoqueen, and Karl Greenwood. By official accounts, they defrauded investors to the tune of over 5 billion dollars under the guise of their spurious venture. Yet several investigators, including BBC correspondents, posit that the actual amount could be as staggering as 15 billion dollars. 

Onecoin was branded as the nemesis of Bitcoin, the revolutionary harbinger of a new era of blockchain, touted to redefine the landscape of the crypto world. In an ironic twist, the promised blockchain was non-existent. Thus, individuals purchasing Onecoin were essentially investing in a nonentity. These so-called assets, devoid of technological validation, lacked functionality and were conceptually hollow. The fraudsters ingeniously manipulated the price of Onecoin, thereby inducing a buying spree among the populace.

Karl Greenwood was apprehended in 2018; however, he only conceded his guilt in 2022. Ruja Ignatova remains elusive and is still at large. Rumors suggest she might be under the protection of the Bulgarian Security Service and certain influential Arab Sheikhs. 

The Bitconnect scheme surfaced in 2016, orchestrated by Satish Kumbhani and aggressively marketed by Glenn Arcaro, who also served as the director of Future Money LTD, a company utilized for promoting Bitconnect's services. Disguised as a lending platform promising rewards in exchange for liquidity, users were enticed to lock up their BTC and were in return issued BCC tokens and promised a monthly income of 40%.

By 2017, the scheme drew the attention of the British government, which demanded proof of lawful operations, a request Bitconnect failed to fulfill. In 2018, the U.S. government stepped in, labeling the project a Ponzi scheme and outlawing its operations on American soil. Consequently, the company shut down the same year, and the BCC token plummeted from its 20th position in the cryptocurrency market cap ranking, losing 90% of its value.

In 2021, the SEC and the Department of Justice brought criminal charges against Bitconnect, alleging that the scammers had defrauded users of $2.4 billion. However, only Arcaro was convicted, who pleaded guilty to the fraud charges and agreed to repay $24 million to the victims. In addition, Arcaro received a lifetime ban on conducting ICOs and working in marketing. The whereabouts of Kumbhani remain unknown.

PlusToken, a financial pyramid scheme created in 2018, was the brainchild of Chen Bo. The scheme used a crypto wallet as a façade for a fraudulent company. They issued their own token, which traded under the ticker PLUS on the Huobi and Bithumb exchanges. By investing in this asset, 'investors' were promised monthly returns of 10-30%. The scheme was heavily advertised on the Chinese messaging app WeChat, targeting individuals with little education from China, South Korea, and Japan. 

In 2019, six participants of the scheme were arrested in Cambodia and were deported to China to face fraud charges. At this time, other PlusToken representatives were actively moving funds out of the pyramid to various wallets and exchange addresses. 

However, in 2020, the Chinese government managed to arrest 27 main accomplices and 82 employees of the company. They were sentenced to prison terms ranging from 2 to 11 years. Assets amounting to $4 billion were seized and transferred to the state treasury.