Top 5 Fraudulent ICO 

 July 19, 2021

By  Brian Forester

As the cryptocurrency sphere is gaining momentum, the number of scams inside the sphere increases. The main number of scams are related to the ICOs’ (Initial Coin Offering) activity, and the main security risks (as well as investment opportunities and a great number of financial transactions) are also connected to this technology.

What are ICOs

ICO (Initial Coin Offerings) is a new technology in the cryptocurrency Wild West. In basic words, it is something allowing blockchain-related startups, potential investors (and other users) to raise funds on the cryptocurrency exchange. This technology first appeared in 2013 by analogy with the IPO (Initial Public Offering) with the main difference: ICOs (Initial Coin Offerings) are about purchasing tokens, and IPOs (Initial Public Offerings) are about purchasing shares.

Another difference between ICOs and IPOs is that IPOs are protected by financial authorities (and federal securities laws), and ICOs aren’t protected at all. That creates a favorable atmosphere for various ICO scams and fraudulent schemes relating to the ICOs (which steal tokens and investors’ money from unsuspecting investors and their companies).

Though, sometimes ICOs can be securities offerings, and be under the jurisdiction of the SEC (the US Securities and Exchange Commission) which enforces federal securities laws. Quite often, such ICOs acting as securities offerings sell “utility tokens” to deceive financial regulations established by SEC (the US Securities and Exchange Commission). Usually, when this happens, Ponzi schemes and various fraudulent schemes are involved in the process.

But how do these fraudulent ICOs (and their working schemes) work?

Fraudulent ICOs and How Do They Work

As it was already mentioned, ICOs were created as securities offerings for assisting ordinary users and investors in raising the number of the digital assets (and money, as a result) on the cryptocurrency exchanges so they can use them for investments in some blockchain startup, for example (or for any other investment opportunities, as well).

Nowadays, most of the traditional capital markets in the financial sector are under the tight control of government regulators, which helps to minimize the increased risk of encountering scammers and the manipulations they are responsible for. For this reason, savvy minds turn to innovative technologies in an economy, and cryptocurrency is one of these innovative trading technologies as it’s not subject to control.

The main purpose of the ICOs’ attackers is to attract the interest of potential investors to their fake products and to stimulate investments in this project in the cryptocurrency equivalent or fiat currencies (or cash).

We can call the project fraudulent when there is evidence that all funds (and all virtual currency) raised during the preliminary or main crowd-sale (that’s how ICOs are called, in other words) have been stolen. The project team is not communicating with its customers and potential investors. This indicates that the entire scam scheme of actions was planned, and the theft was deliberate. As anyone can encounter such a scam and put yourself at risk, it’s essential to increase the security of your personal data and the personalized content you post on the cryptocurrency exchange platform.

What are the most well-known fraudulent ICOs took place in the modern cryptocurrency markets?

1. The Opair and Ebitz Project (loss of 2.9 million US dollars)

The Opair and Ebitz systems were accused of fraud, but the founder of these systems, known as Wasserman, wasn’t found by deceived investors until now. The attacker was attracting funds and cash in the course of the ICO of the exchange platform in the amount of 388 Bitcoin coins.

The Opair system offered users work with debit cards within a decentralized environment and using their own XPO coin. The network participants found that the user profiles in the LinkedIn system were fake, as a result of which the Opair project with all the organizers quickly “evaporated,” and the research showed losses amounted to about 190 BTC tokens.

Amateur investigations, organized by deceived investors left with no cryptocurrency funds during the crowd sale, allowed to establish that the Ebitz mail servers system redirected data to the Opair project domain – it was also recommended as a clone of the ZCash platform with minor changes. The founders of the project, calling themselves “a group of ethical hackers,” planned to attract at the ICO 500 thousand Bitcoin – the crowd sale was launched on November 28, 2016.

Two days after the ICO started, the BitcoinTalk system participants discovered Opair and Ebitz MX connection (they saw this information on the Opair company website). Instantly, the Ebitz site was disconnected, but in the course of the sail, the attackers were able to collect about 2 hundred BTC before disappearing. People from different countries (and various companies, as well) believed the promises of the Opair system founder and lost their Bitcoin. That shows there’s no need to put yourself at risk and trust someone (or something) you see for the first time and have no proofs this person (or a company) is worth your trust.

Wasserman could create this fraudulent scheme, steal digital assets, and had the opportunity to exit a scam created by his own hands. His Ponzi scheme affected millions of people all over the world, and these people incurred losses in the amount of 2.9 million US dollars.

2. The Benebit Project (loss of 2.7-4 million US dollars)

According to the developers of the Benebit system, the project was focused on the use of Blockchain technologies, and it was supposed it will work with digital coins to ensure the unification of various loyalty programs to users. In reality, the main focus of this trading system was the air transport industry.

ICO of this project was characterized by all signs of reality, including the presence of a live Telegram channel, which had more than 9,000 participants. There was an advertising budget of more than half a million dollars, as well. Also, the Benebit company conducted a marketing campaign related to the organization of the pre-session of the token. Due to the innovative concept, mass advertising campaign, and an impressive amount of money spent on the project, the Benebit system created around itself a stir. It attracted the genuine interest of investors wanting to invest in this exact project.

As a result, after the detailed research of the participants of the Telegram channel, it was found that all the photos of the Benebit project team members were stolen by fraudsters from the UK university catalogs. Moreover, the passport information of the alleged founders of the Benebit system turned out to be fake, as well.

After the charges were brought, new and efficient means were conducted. The participants of the fraudulent Benebit project were voluntarily engaged in the destruction of everything that had any connection with the false project: the documentation, the “official” site, the system account in various social networks. According to experts, the amount of losses varies in the range from 2.7 to 4 million dollars – this amount of funds could be “taken away” by intruders from credulous investors.

This situation shows investors need to do their due diligence when it comes to things like these, as the risks of their mistakes can be too high (and cost too much). If fraudsters can exit scams they created, the participants of these scams, unfortunately, can’t bring their assets back, and all the investment opportunities they had turned out to be used in vain.

3. The Plexcoin Project (loss of 15 million US dollars)

The Crowdsdale system of Plexcoin was stopped in December 2017 by the decision of the Securities and Exchange Commission (or SEC, in other words). This was due to the filing of an official complaint, under which Dominique Lacroix (the founder of the project) was charged with scam. The complaint dealt with Lacroix advertising and its promises of an incredible profit of about 1354 percent, which, according to the research of experts from the SEC, could not be obtained anyhow. All this provoked a group of alleged experts to provide invalid data. Assets of this trading company in the amount of $15 million US dollars were frozen. This amount was collected as a result of a crowd sale taking its place since August 2017.

Dominique Lacroix, as the founder of the project Plexcoin, went to jail, and the company was fined 100 thousand US dollars. Until now, about 810 thousand dollars are on hold by Stripe, which deals with the processing of payment transactions, and the balance is placed in cryptocurrency depositories owned by Lacroix. Now, it’s still unclear what kind of accusations will be made against Lacroix, as the fate of the coins is in the swindler’s wallets. But for us, he looks like the main character of the popular movie “The Wolf of Wall Street” who had no compassion when it was about the profit he could gain.

The Plexcoin project is considered to be one of the largest scams of fraud using ICO in the history of the existence of cryptocurrency. It’s good all the beginnings of intruders were stopped, but, at the same time, we have the investment advice for those starting their journey in the world of investing and trading cryptocurrencies: keep in mind to always due diligence when it comes to token sale and other manipulations in the modern digital markets.

4. The PonziCoin Project (loss of 250 thousand US dollars)

The PonziCoin Platform is a real trading platform for investing and trading cryptocurrencies, and its tokens also exist. However, some trusting users claim they lost their funds after investing in this project. It is actually funny how the last marketed PonziCoin positions itself as the first legitimate Ponzi scheme in the world. In fact, it is a duplicate of the first PonziCoin coin that entered the market in 2014 with a project capitalization of $ 7 million equivalent. If we take into account the current asset rate, then it would be about 2 million US dollars.

The second PonziCoin system was launched in 2017 with the same address. In a few years after this, the last marketed PonziCoin project was created as a clone of the original, and it was a scam. Although, the fact two previous PonziCoin projects were scams did not alert depositors who managed to invest their assets in the amount of a quarter of a million dollars. Those funds were stolen after the open recognition of the fraud project.

5. The REcoin and DRC Projects (loss of 300 thousand US dollars)

The Real Estate coin systems, or REcoin, and Diamond Reserve Club, or DRC, initially demonstrated ambitious development plans and real prospects for projects. The main aim of these imaginary platforms was the creation of a cryptocurrency backed by real estate and diamonds.

Maxim Zaslavsky, the founder of these systems, stated these startups were ready for operation and token sale: they had legal support, formed relationships in the retail and investment spheres, and were equipped with all the necessary tools for efficient work with assets. Unfortunately, none of the listed criteria met any of the systems. That’s why these systems were called scams, and the founder of these schemes was called a scammer.

According to the SEC, both REcoin and DRC did not provide any opportunity for its clients and investors to conduct real operations in the event of distortion of investment indicators. They had no personal tokens and any connection with the Blockchain technologies. By decision of the SEC, which did not recognize ICO projects as valuable, Zaslavsky was arrested on September 29, 2017. He was fined 300 thousand US dollars. Although, as he claimed himself, the number of funds raised during the crowd sale was more than $2 million.


There are some things everyone needs to remember before participating in crowd sales. Fraudsters are finding more and more ways to steal your assets, and that’s why one who wants to invest cash or digital coins in any crowdsales needs to be as careful as possible. We mention crowd sales, as in most cases, fraudsters show their activity on those exact platforms. If you’re not sure the ICO you found is reliable and secure, you can check the information on HoweyCoins: the website launched by the SEC for helping companies and investors to check the reliability of the platform.

Since the activity of fraudsters in the organization of ICO is quite aggressive, investors often make ill-considered actions and lose their money invested in the “wrong” projects. Keep in mind, any decisions regarding the investment of funds should be taken on a “cold” head and carefully analyzed as this will avoid the loss of assets (especially this is related to the newbies in the cryptocurrency sphere).

Before taking part in the ICO of any cryptocurrency, it is recommended to do the following steps mentioned below:

  • Examine everything relating to the White Paper project (and the ICO itself);
  • Find out if any issues can be solved by organized crowd sales and their feasibility for the businesses, ordinary clients, and potential investors;
  • Know who are the people in the ICO project team, and get acknowledged with their professional experience. It is advisable, but not obliged, to contact the project founders and its leading experts and to ask them questions of increased complexity. You can find their profiles in Internet resources and social networks as fraudsters often use fake photos and data. You can also “drive” the data through services like Google images (that’s how you know the images are fake);
  • Check the forums to get a clear view of users about this exact project you’ve chosen. On these forums, you can find users who have already encountered fraudsters, and usually, they give good advice on what to do if you encountered fraudsters yourself. For example, you can check such information on Reddit;
  • Check the reliability of the escrow company used within the ICO. For example, using Escrow resources will allow investors to get their money back if the project fails to comply with the conditions of the crowd sale;
  • Check the opinions of rating companies about the ICO you’ve chosen. In the absence of any evaluation, this project is likely fraudulent. Usually, you can always find any information relating to the projects like these.

Always check all the information relating to the company before trading within it. If the blockchain startups have no codes or links to samples on such repositories as GitHub, it usually means there’s no blockchain development at all. And it means you need to stay away from projects like these.

Also, if there are no whitepapers, project timelines, or patents, it’s the reason not to invest your digital coins in the project as this project is likely to be a scam. Keep in mind and some professional scammers run social networks to create the illusion of reliable people with reliable ICOs. That’s why you need to be careful and accurate while checking all the information relating to their projects. The cost of a mistake can be too high.


How to avoid Bitcoin Scams?

Even advanced Bitcoiners can get caught in scams as the working schemes of scammers are improving every year (not to say a day). For avoiding losing your assets, you need to check everything connected with such ICO projects carefully. Check the social networks of ICOs founders (if there are any). If there are no social networks, it might mean the whole project is a scam), whitepapers, patents, project timelines, and forums where people share their experience. If you feel uncomfortable anyhow, consider avoiding trading in the project.

How to trade cryptocurrency?

You can have any cryptocurrency (whether it is Bitcoin, Ethereum, Litecoin, or others) you like, and the way of trading it will always be the same. For starters, you need to create a cryptocurrency brokerage account and fund it (it means you need to connect it to your bank account. Mind it might take up to a few days.). After this, as you’ve already chosen the cryptocurrency you’d like to trade, you have to choose the cryptocurrency wallet where you’ll store, trade, and purchase your currencies. Once the wallet (or cryptocurrency exchange) is chosen, you can start utilizing it and complete any trading manipulations you like (depending on the functions available in your wallet).

How to buy Bitcoin with Paypal?

First of all, you need to download the PayPal app on your mobile device (it doesn’t matter what platform you’re utilizing). After this, you need to select “Crypto” on the dashboard, choose the button saying “Buy,” and verify your identity afterward. Once it’s done, you can start selling and purchasing Bitcoin in the app, but keep in mind you won’t be able to withdraw your currencies into your bank account. Also, you won’t be able to transfer your currencies to other PayPal clients.

How to approach Bitcoin trading training?

Trading cryptocurrency, and specifically trading Bitcoin, is not easy for everyone (and even for advanced Bitcoiners). It requires specific skills and knowledge, so, for starters, it’s advisable to get acknowledged with the cryptocurrency basics and main principles of cryptocurrency trading. You can do this on your own, or you can complete some crypto trading courses as there are a lot of them on the Internet. Choose the strategy meeting your interests and demands the most, but always remember to stay careful and accurate when it comes to cryptocurrency trading.

Brian Forester

Brian is an experienced journalist and crypto enthusiast. Founder of CryptoCurry - famed for his insightful input on the future of cryptocurrencies and blockchain technologies.

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