The Notorious Scams That Shook the Crypto World

The trading of tokens has never been safe: traders, investors, and clients of crypto platforms have always faced risks of fraud, theft of balances

The trading of tokens has never been safe: traders, investors, and clients of crypto platforms have always faced risks of fraud, theft of balances, or exchange bankruptcies.

Since the launch of Bitcoin in 2009, high-profile scandals related to illegal trading operations, account hacks, and the disappearance of billions of dollars have been persistent. Yet, people continue to engage in digital assets and trading.

According to blockchain analytics company Chainalysis, the volume of crypto crime grew from moderate levels in 2018 to astronomical levels by 2022, significantly spurred by the collapse of Sam Bankman-Fried’s FTX exchange.

Most crypto crimes are linked to online fraud (scams) and the activities of cybercriminal groups. However, the world of crypto crime is often intertwined not only with ordinary hackers, scammers, and malefactors but also with flamboyant and controversial personalities who challenge the “throne” of the blockchain world.

Mark Karpelès – The First “King” of Bitcoin

Type of scam: Exchange hack due to weak security system. Amount lost by users and investors: $432 million.

Experienced crypto traders still remember the Tokyo-based Mt.Gox exchange, which was considered the largest between 2010 and 2014. At its peak, it handled 70% of all Bitcoin transactions.

The history of Mt.Gox began in 2007 when American entrepreneur Jed McCaleb registered the domain Mtgox.com, intending it to be a platform for trading Magic: The Gathering cards. This project failed but inspired McCaleb to create a Bitcoin exchange. When he saw transactions worth tens of thousands of dollars, he realised he was in over his head. In 2011, McCaleb sold the site to Mark Karpelès—a passionate programmer, crypto enthusiast, and future “king of Bitcoin,” whose star was just rising.

Mark Karpelès

Rewriting the site’s server software, Karpelès transformed Mt.Gox into the most popular crypto exchange. However, the same year, hackers exploited security weaknesses to steal user credentials and transfer cryptocurrency. Thousands of Bitcoins disappeared from customer accounts.

Karpelès’ chaotic storage of users’ cryptocurrency in various physical and software wallets made the funds vulnerable to hacker attacks.

Unfortunately, this did not teach the Mt.Gox CEO a lesson. Due to numerous bugs and security system weaknesses, customer funds became easy prey for hackers. In February 2014, the platform detected suspicious activity in users’ digital wallets, revealing that 850,000 Bitcoins worth $450 million had disappeared.

Mt.Gox officially could not determine how or where the virtual coins went, with speculation pointing to Russian hackers. This incident severely shook the entire crypto market, and Karpelès’ company teetered on the brink of bankruptcy. In April 2014, it was liquidated.

In 2015, Japanese authorities arrested Karpelès on charges of embezzlement and misuse of customer trust. He was acquitted of most charges but convicted of data falsification. Former Mt.Gox customers met every six months from 2014-2018 in a small Tokyo courtroom to hear updates on the recovery of their funds from trustee Nobuaki Kobayashi.

A total of 24,750 claims were registered for about ¥45 billion ($432 million). As of July 2024, this sum stands at a staggering $45 billion. In July 2024, in a message to creditors, Kobayashi announced that the company had begun making payments to Mt.Gox users. They had waited ten years.

Ruja Ignatova – The Crypto Queen Who Never Was

Type of scam: Ponzi scheme. Amount lost by investors: $4.5 billion.

In 2016, Ruja Ignatova appeared on the huge stage of Wembley Arena, revolutionising the world of cryptocurrencies. She looked impeccable: diamond earrings, a blood-red evening gown, and matching lipstick.

Ruja Ignatova

Thousands of fervent supporters listened as Ignatova spoke about the inevitable demise of Bitcoin. She claimed that Bitcoin was flawed and too complicated for ordinary people to understand, so she created OneCoin, an alternative coin (altcoin) poised to change the crypto industry forever.

Ignatova founded OneCoin in 2014, claiming it worked like other cryptocurrencies: it could be mined and used for payments. After her meteoric success at Wembley, investors from around the world began pouring money into OneCoin, reaching a total of €4 billion.

OneCoin’s income peaked at €800 million in the third quarter of 2016, but that year, Ignatova’s magic began to wane. Investors increasingly realised that OneCoin had no blockchain