Bitcoins Scam: Crypto’s most notorious pyramid scheme


Cryptocurrencies are difficult to understand and for the most part, unregulated, which makes them an ideal vehicle for scammers. It is often difficult to know if you have found a genuine opportunity or an invitation to be duped.

Enter BitConnect

In an act of organized deception that would have made Bernie Madoff proud, a cryptocurrency project known as “BitConnect” managed to pilfer what authorities believe to be between USD $2.5 and $3.5 billion dollars from its investors between 2016 and 2018 before its anonymous creators vanished.

The project was known mostly for its guaranteed returns and over-the-top publicity events, frequented by the infamous “Carlos Matos” who became an instant meme in the cryptocurrency community (see for yourself). BitConnect drew plenty of attention to itself in the form of negative publicity but due to them having a stream of their own content (and the ecstatic content of their affiliates) the negativity was buried, making it difficult for investors to determine the legitimacy of the project.

Numerous commentators in the cryptocurrency space were quick to label BitConnect a ‘Ponzi (or pyramid) scheme,’ which is a system where returns that early investors receive are derived from the deposits made by later investors. They were 100% correct, but BitConnect took it a step further by providing users an affiliate program where referring new investors to the platform resulted in increased returns. They even promised higher returns for larger deposits. Could the deal have been any sweeter?

Judgement Day

It seemed things were beginning to catch up with BitConnect when, In late 2017, it was noticed that many of its promoters had begun distancing themselves from the project. It was later learned that this had coincided with a wave of cease-and-desist orders, most notably from the Texas State Securities Board and the North Carolina Secretary of State Securities Division, as well as a strike-off notice from the UK Companies House.

This prompted BitConnect to release this statement on their website, stating that it was “closing the BitConnect lending and exchange platform” which led to a massive decline in the value of their token (ticker: BCC) catching many investors off-guard. In spite of the aforementioned regulator scrutiny, BitConnect was brash enough to launch a new ICO called BitConnect X, which was simply another empty scheme designed to part investors with their money. The activities of BitConnect eventually caused the FBI to begin investigating the scheme in 2019.

Many in the industry felt a bitter-sweet wave of schadenfreude when BitConnect collapsed while others were softer in their response, expressing concern for the number of investors that had lost money. BitConnect was another example of how scammers can leverage the latest trends to hypnotize otherwise unsuspecting investors and part them with their money.

Key Takeaways

Unfortunately, there are many other scams similar to BitConnect that have pervaded the Cryptocurrency industry and will continue to do so in the future. Fortunately, you can protect yourself by adopting a skeptical mindset and always asking yourself the question: “Is it too good to be true?”

BitConnect offered 1% daily returns on its users Bitcoin deposits based on returns produced from a trading bot they claimed yielded 5% per day, which was an exponential return that would have dwarfed the market capitalization of the entire cryptocurrency market in short order. Despite the claims being mathematically impossible, the excitement of early BitConnect evangelists (e.g, Trevon James) was sufficient to attract more victims suffering from FOMO.

It is always wise to treat the euphoria of the crowd with caution. Despite many prominent members of the community publicly stating their skepticism, including Ethereum founder Vitalik Buterin labelling it an outright ponzi scheme, BitConnect took in far too much money than it otherwise should have and created an unfortunate and dangerous meme that still persists today: “The scams pump the hardest.”

Originally published: