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Just as privateers patrolled the coasts when ships were invented, a similar phenomenon emerged with the advent of Bitcoin and its surrounding ecosystem. Explore the top 10 scandals below and heed the warnings.
Top 10 scandals in Crypto.
Silk Road (2013): While not solely a cryptocurrency scandal, Silk Road was an online marketplace known for illegal activities, including drug trafficking, where Bitcoin was the primary currency. The platform was shut down by law enforcement, and its founder, Ross Ulbricht, was arrested.
Mt. Gox (2014): One of the most infamous cryptocurrency scandals, Mt. Gox was a Japan-based Bitcoin exchange that filed for bankruptcy in 2014, claiming that hackers had stolen 850,000 Bitcoins, valued at that time around $450 million.
Bitfinex and Tether (2017): Bitfinex, a major cryptocurrency exchange, and Tether, a stablecoin issuer, faced controversy over concerns about whether Tether (USDT) was fully backed by the US dollars it claimed. The companies were subpoenaed by the U.S. Commodity Futures Trading Commission (CFTC).
OneCoin (2017): OneCoin was a Ponzi scheme marketed as a cryptocurrency, claiming to have its blockchain. However, investigations revealed that it was a fraudulent scheme, and its founders faced legal action in various countries.
QuadrigaCX (2019): The Canadian cryptocurrency exchange QuadrigaCX collapsed after its founder and CEO, Gerald Cotten, reportedly died with the sole knowledge of the exchange's private keys. This incident led to the loss of customer funds.
PlusToken (2019): PlusToken, a large-scale Ponzi scheme based in China, attracted millions of users and reportedly stole billions of dollars in cryptocurrency. Several individuals associated with PlusToken were arrested.
Binance Insider Trading (2021): Binance, one of the world's largest cryptocurrency exchanges, faced allegations of insider trading in connection with its listing of certain tokens. The company denied any wrongdoing, but the incident raised concerns about market manipulation.
Terra-Luna Collapse (2022): In May 2022, the value of Luna collapsed from over $120 a coin to effectively zero, wiping out over $50bn in market capitalization of UST/LUNA and causing over $400bn in losses for the broader cryptocurrency markets.
Collapse of Celsius (2022): Celsius lied to investors by presenting itself as a safe investment opportunity and a chance to gain financial freedom, but, behind the scenes, the company operated a failing business model and took significant risks with investors' crypto assets.
Collapse of FTX (2022): A surge of customer withdrawals, due to concerns over this questionable financial valuation practice and unusually close relationship with Alameda, pushed FTX and Alameda into bankruptcy and shook the volatile crypto market, which lost billions and fell below a $1 trillion valuation.
