The crypto industry must stop scammers from stealing another $ 16 billion


Related articles

Unsuspecting investors lost $ 16 billion buying crypto projects that they thought were the next best thing. And that money is almost impossible to get back. As the crypto industry established itself as a disruptor to currency and technology, and Bitcoin (BTC) gained momentum in 2017, scammers took advantage of naive investors interested in getting involved.

Connected: Crypto Crimes Rated: From the Twitter Hackers to Not Your Keyser, Not Your Coins

Discover fraud

The crypto startup market is growing and growing daily. There are startups working to create alternative banking opportunities that raise capital through initial coin offerings, tag assets for easier use, create exchanges, and innovate in decentralized finance. Unfortunately, as usually happens, many of the good projects are overshadowed by the few bad ones. However, crypto scams are easy to spot once you know what to look for.

When investigating some of the biggest fraud cases in the crypto space, there is a pattern for running these schemes. One type attracts investors with the promise of incredibly high returns and, in some cases, up to 1% interest per day. This Ponzi program is usually run by a person who claims to have created a special trading bot that can generate these returns. In the end, however, they simply pay off what other investors invest without a valid product.

The second type is a pyramid scheme where the crypto project attracts investors, promises high returns, uses tokens on an exchange and participates in the “next big thing”. But an investor can really only make money by referring to new investors, not an actual product. Crypto scams can be one or the other or a combination.

Scammers have also created tokens that can only be used within their own exchanges and are essentially worthless. Fraud also fools investors with lots of hype, flashy promotions, buzzwords, and jargon. Some investors lose their money because the projects collapse and cause a sudden drop in prices, and others have lost their money because the founders suddenly disappeared with it.

According to our “Crypto Investor Scam Report”, 132 different crypto scams have paid off since 2012 with investor funds totaling over 16 billion US dollars. Because of the unregulated nature of the industry, this money is unprotected and will be very difficult, if not impossible, to get back. And what were the consequences of these actions? According to the report, although there have been 132 crypto scam projects since 2012, only 71 of the projects have been prosecuted.

Connected: Did you fall for it? 13 ICO Scam That Fooled Thousands

What the industry has to do

There are many things that an investor can look for when evaluating crypto projects for credibility and value – for example, the evaluation of his white paper, the evaluation of his team, the question of a working business model and confirmation that it does not only deliver value wants hype – The crypto industry shouldn’t leave this due diligence to the investor alone. There are ways not only to hold crypto projects accountable, but also to make it easier for investors to learn more about projects they may want to support.

Transparency and disclosure

Right now, if an investor wants to know more about a crypto project, its history, its team and its business model, they have to search the internet for it – if this team has provided such information. One of the main mistakes in crypto scams is that investors support projects they know little about.

Instead of leaving it to chance or leaving it to investors, the industry should actively encourage new projects to post their information in a source or registry. When it becomes the industry standard, those willing to disclose company information will show that they have nothing to hide. Those who refuse to reveal anything can be flagged for potentially fraudulent activity.

Better IR practices

The young crypto startup industry didn’t necessarily have to consider establishing a set of best practices for investor relations. Still other companies in other industries have established methods by which they interact with investors in order to keep them fully informed about the company’s operations and finances.

Building a culture of good IR in crypto will lay the groundwork for crypto companies to communicate with investors – and those who are not ready may be flagged as scams. Similarly, a foundation is created to encourage investors to ask questions and get involved to find out how their money is being used.

Education and awareness

As seen above, investors’ ignorance of the crypto space fell victim to the fact that everyday people were lured into the promise of high returns without really knowing what crypto was about, thinking it was like a ponzi or pyramid scheme works. The responsibility of educating the world about how crypto works rests on the shoulders of the industry, who must expand these initiatives to those outside of the crypto, finance, or technology space so that new investors are not exploited.


After all, the industry must hold fraudsters accountable. While some founders of these fraudulent projects have been brought to justice, there are many who are still at large or who continue their seedy practices. Will the industry proclaim them? It is actually too late to deceive ignorant victims. What kind of checks and balances like the ones outlined above is the industry going to put in place to drive out bad actors before they have a chance to start?

Win investors for the future

Although $ 16 billion has already been lost, there are ways to prevent it. This includes an obligation on investors to thoroughly review any startups they wish to support. Above all, however, the industry must commit itself to accountability and transparency in the future.

The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Lihan Hyunwoo Lee is a serial entrepreneur and technologist who solves real-world problems with a data-driven approach. He previously founded OpenSurvey, Korea’s largest mobile survey startup. He also co-founded a leading food and beverage startup that deals with sensitive medical data. His current passion is using data analytics to solve the transparency problem that plagues the crypto industry.