Crypto Ponzi Scheme
Crypto Knowledge

Crypto Ponzi Scheme

written by John Murphy | March 9, 2023

As a refresher, a Ponzi scheme is an age-old fraud where new inflows pay off earlier investors. Many cryptocurrency critics put it on the same plate as Ponzi, claiming no one is in charge of the scheme. Although a handful of crypto Ponzi schemes are circulating, binning the entire crypto world is harsh.

Moreover, numerous critics have provided reasons that the crypto investment story ends like a Ponzi scheme – champagne for those at the top, tears for everyone else.

However, this is not the whole story; a market worth billions of dollars cannot label a fraud like the Ponzi of the old time. Investors have all the reasons to believe in cryptocurrency and its future, as crypto will make the world a better place.

But, we cannot rule out mishappening in the crypto space, for which traders should remain proactive. Let us highlight key aspects and try to learn more about the crypto Ponzi schemes. 

Biggest Crypto Ponzi Schemes

With crypto attracting huge investments within a decade of its inception, many fraudsters have also surfaced in the market since crypto is a relatively new concept; thus, the chances of people tricked are high.

Moreover, high volatility and crypto crashing leave many investors unaware of the Ponzi nature of coins. Here are a few famous cryptocurrency Ponzi schemes involving coins like Bitcoin and Ethereum.

  • Onecoin

One of the longest-running Ponzi schemes in the crypto space was Onecoin. A Bulgarian fraudster Ruja Ignatove, also known as Cryptoqueen, lured investors to successfully run this scheme for five years between 2014 to 2019. 

During this period, the fraudster was able to defraud investors worth $5.8 billion by marketing Onecoin as a Bitcoin Killer and presenting it as the next big hit.

  • Dekado Coin

Masterminded by Divyesh Darji, Ranjeet Saxena, and their partners ran the Dekado coin scam through a tagline that read – Anyone who says there is nothing like earning free Bitcoin is wrong.

The scheme offered a 40%-70% monthly return on Dekado coins, as expected. The website went down when investors from nations other than India started logging in. 

  • Bitconnect

Launched in 2016, Bitconnect was another Ponzi scheme that involved the sale of Bitcoins by offering 40% monthly returns. The operators were a group of known developers known as Satao Nakamoto.

Users had to lock BCC coins with Bitconnect and wait while trading bots used their funds; the scheme ran in 2022.

  • Regalcoin

Michael James and Raymond Weil were able to trick investors into holding their Bitcoins with them with a confirmed monthly return of 50%. Moreover, they got their coin listed on certain cryptocurrency exchanges like

The company was dissolved in 2019 as the coin’s value nosedived from $70 to 0.005, thus leaving investors scratching their heads.

  • PlusToken

PlusToken is one largest cryptocurrency Ponzi schemes that have ravaged the digital asset market. The scam conducted its campaign in the Chinese messaging app – WeChat. Like other schemes, it offered 10-30% monthly returns on investment.

The scheme was so successfully run that at one point, and it had 3 million users. The entire crypto model circulated a wallet service and crypto literacy.

  • Gain Bitcoin

It was an Indian-based cloud mining company promising 10% to 18% of monthly returns. The project gathered $300 million worth of investment from India only. However, in 2017 it was flagged as a Ponzi scheme and hence stopped its operations as there were no mining machines.

  • Ether trade Asia Scam

The fraudsters presented themselves as a crypto trading platform and offered a 3% daily return. However, it was disallowed whenever a trader wished to withdraw their earning, citing a technical problem. Furthermore, the website did not have the company’s address or contact details.

Red Flags for Crypto Ponzi Schemes

The question for investors is to check whether a particular scheme is Ponzi when investing in cryptocurrency. Since Ponzi schemes share some common characteristics, the following are a few red flags.

  • High return with minimum risk

Any crypto offering high returns with minimal risk is a Ponzi scheme, so stay away. Since each investment bears some degree of risk, so be aware of any cryptocurrency that offers guaranteed return with minimum risk.

  • Overly consistent returns

Investments are bound to go up and down, especially in a volatile crypto market. Hence, any offer offering consistent returns over time is surely a Ponzi scheme and one to avoid.

  • Difficulty receiving payments

Crypto investors must get suspicious if they are unable to cash their profits. Moreover, Ponzi schemes encourage participants to roll over their promised payments.

  • Unregistered investments

Cryptocurrency Ponzi schemes involve investments that are not registered with the local authorities.

  • No age requirement

Most legitimate investment opportunities set a minimum age limit, especially where risk is high. So, investors should recheck its authenticity if any crypto scheme allows investment to any age group.

Frequently Asked Questions

Is cryptocurrency a Ponzi scheme?

Although there are numerous incidents where fraudsters have used cryptocurrency to raise funds and run a Ponzi scheme, cryptocurrency itself is not a Ponzi scheme. It is highly regulated, and governments have started recognizing it. 

Are there crypto Ponzi schemes?

Sadly, the number of crypto Ponzi schemes was higher than 70% in 2022 compared to last year, meaning users must remain alert for many crypto Ponzi schemes.

How to identify a crypto Ponzi scheme?

The following are a few red flags to identify a crypto Ponzi scheme.

  • High returns with little risk
  • Overly consistent returns
  • Unregistered investments
  • Unlicensed sellers
  • No minimum investor qualification

Parting Thoughts

Cryptocurrency has become a billion-dollar industry and increasing, thus becoming an ideal space for fraudsters and scammers to trick investors. It is fair to say that many have already successfully cheated investors by staging crypto Ponzi schemes.

Therefore, investors must stay alert to such schemes to save their investments. One major red flag for early identification of a Ponzi scheme is that it offers high returns with low risk. Moreover, it does not allow you to withdraw your earnings easily. 

So, one of the best ways to secure investments is to stay away from such scamming activities. You should thoroughly check the background of any new project and take full time before making an investment decision.

We hope this article helped identify the cryptocurrency Ponzi scheme and how to identify them. Please leave feedback in the comments section and stay alert for scammers.