Cryptocurrency and Blockchain – Part 3 of 5 Weekly Series

Common Crypto Scams


There is a huge rise in cryptocurrency exchanges; all wanting your attention, and sometimes your money, obtained by them through very obscure transaction fees that come with handling your purchases.

Crypto exchanges have appeared and disappeared almost overnight.

  • If you’re entirely new to cryptocurrency, you might not have heard of Gox. This was an early cryptocurrency exchange that at one point accounted for over 70 percent of all Bitcoin transactions worldwide. One morning, in February 2014, Mt. Gox suspended trading. It later emerged that 850,000 Bitcoins had been stolen (valued at $450 million at the time, over $3.5 billion as of this writing — yeah, you read that right!) over a period time. 

Trusting people in an entirely digital world is extremely difficult, especially if you cannot audit or verify what is taking place behind the scenes.

  • In the spring of 2017, a Mumbai-based company called OneCoin was delivering a sales pitch to a room of investors. Indian financial enforcement officers raided the meeting, ultimately jailing 18 OneCoin representatives for operating a cryptocurrency Ponzi scheme. At the time of their arrest, OneCoin had already moved over $350 million through a payment processor.
Pump & Dump Scams

Many prominent financial experts have also dismissed cryptocurrency as a scam.

In many ways, the thousands of smaller altcoins have taken the place of penny stocks, albeit with a technological edge.

Furthermore, there are several groups dedicated to this exact practice. They hold a monthly vote to choose an altcoin with a tiny market capitalization, and descend.


Initial Coin Offerings (ICOs) are the IPOs of the cryptocurrency world. Cryptocurrency startups create initial coin offerings to raise substantial amounts of money. However, many of them vastly overestimate the value of their startup. Others are simply elaborate pump and dump schemes.

The Securities and Exchanges Commission (SEC) is extremely wary of ICOs. They advise that they suspend trading in stock when:

  1. There is a lack of accurate or current information about a company.
  2. Questions arise concerning the accuracy of publicly available information, including press releases and media coverage.
  3. There are questionable trading practices, such as insider trading, market manipulation, and more.
Vulnerability in Code has occurred.

The DAO – When DAO (a decentralized autonomous organization named for the acronym) completed their 2016 ICO, raising over $34 million, it was considered a success.

That was until some users exploited a vulnerability in the DAO code, and siphoned one-third of The DAO’s funds to another account. To return the funds to the original account, the Ethereum community had to agree to a hard fork, tearing the cryptocurrency in half.

A protracted cryptocurrency crash would ‘spill over’ into stocks, Wells Fargo warns.


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