Beyond Thodex: Top 5 Crypto Scams That Shook the Industry

Last week, Faruk Ozer, the founder and CEO of the collapsed Turkish cryptocurrency exchange Thodex, along with his sister and brother, was sentenced to 11,196 years, 10 months and 15 days in prison. A court fine of 135 million lire (approximately $5 million) was also imposed.

Against the backdrop of this news, it will be interesting to know the history of this scam, as well as other major cryptocurrency fraud stories.

Bitclub Network and $722 million

BitClub Network was a cryptocurrency mining pool that operated from 2014 to 2019. At first, it presented itself as a service for investing in Bitcoin mining, promising investors high returns. BitClub Network offered membership in various tiers, with membership prices ranging from several hundred to several thousand dollars.

The project quickly gained popularity thanks to aggressive marketing and promises of quick and guaranteed profits. However, in reality, the videos showing the mining equipment from BitClub belonged to another mining farm, and the project was a regular financial pyramid. By the way, most of the stories from this article are financial pyramids.

In December 2019, the three founders of BitClub Network were arrested in the United States and charged with fraud and organizing illegal financial activities. One of the founders, Matthew Brent Goettsche, was sentenced to 10 years in prison. The other two founders, Jobadiah Sinclair Weeks and Joseph Frank Abel. also faced lawsuits.

Thodex and the theft of 2 billion dollars

Thodex was one of Turkey's largest cryptocurrency exchanges before it suddenly went offline in April 2021 and Faruk Ozer went missing. More than 400,000 participants were left without access to $2 billion in cryptocurrency deposits. Ozer fled to Albania but was arrested in August 2022 after Interpol issued a Red Notice against him.

In April 2023, Ozer was extradited to Turkey and was detained by police on seven charges upon arrival.

The founder of the cryptocurrency exchange said in court that he and his family faced injustice. According to him, Thodex was simply a bankrupt cryptocurrency company and had no criminal intentions. Ozer's translated statement to the court says:

"I am smart enough to manage all the institutions in the world. This is evidenced by the company I founded at the age of 22. If I were creating a criminal organization, I wouldn't act so amateurishly. What we are talking about is that the suspects in the case have been victims for more than 2 years".

The long-running case against the Thodex crypto exchange involved 21 defendants, five of whom were present in person at the trial. The court acquitted 16 defendants of qualified fraud due to insufficient evidence and ordered the release of four defendants. The remaining defendants in the case received varying sentences depending on the extent of their participation in the fraud.

BitConnect and $2.4 billion

BitConnect was a lending and exchange platform based on BitConnect Coin, founded by Satish Kumbhan.

The platform promised investors guaranteed high returns through their investments in BCC (BitConnect Coin) and participation in the referral program system.

However, it soon became apparent that BitConnect was a pyramid scheme and its profits were dependent on attracting new investors. In January 2018, BitConnect suddenly announced the closure of its trading platform and the price of BCC dropped from $471 to zero.

Many investors lost significant amounts of money, and from that point on, BitConnect became synonymous with scams in the cryptocurrency world.

After the closure of BitConnect, investigations began, and the main figures of the project were accused of fraud and fraud.

In September 2021, Glen Arcaro, who was the main promoter of BitConnect in the United States, pleaded guilty, saying he conspired with others to exploit investor interest in cryptocurrencies by deceptively marketing BitConnect's own coin offering and digital currency exchange as a profitable investment. A year later, Arcaro was sentenced to 38 months in prison.

In February 2022, the founder of BitConnect was charged with organizing a global Ponzi scheme worth $2.4 billion. However, he has not yet been arrested, and just over $17 million of the $2.4 billion has been returned.

Onecoin and over 10 billion dollars

Onecoin was a cryptocurrency that promised high returns to investors and also claimed that it would be “bigger than Bitcoin.” However, Onecoin was actually a Ponzi scam.

The founder of Onecoin was Ruja Ignatova, and since the project's inception in 2014, she and her team have been actively promoting it, attracting investors around the world.

In 2017, Onecoin faced increasing pressure from regulators and the media, and many countries began to conduct investigations. Ruzha Ignatova was arrested in July 2017, and her brother Konstantin Ignatov was arrested later.

As a result of investigations and trials, many Onecoin participants were sentenced to prison terms. Ruzha Ignatova was convicted in the United States of organizing fraud, and Konstantin Ignatov admitted his guilt and became a prosecution witness in this case. Many other participants were also arrested and convicted.

The Onecoin scam, now known as a giant Ponzi scheme, is believed to have siphoned off between $10 billion and $25 billion. Despite the fact that in 2017 the scam was closed by the authorities, surprisingly, it continues to exist.

The interesting thing is that Onecoin didn't even have a cryptocurrency, the technology was a hoax from the very beginning.

FTX and $30 billion

If the previous stories of scams happened relatively long ago, and most likely did not affect you, then this curly head could very well affect you.

The method by which Sam Bankman-Fried siphoned funds from FTX clients into the coffers of his trading company Alameda Research has been built into the cryptocurrency exchange's structure since its opening in 2019, US authorities say.

The bottom line is that when clients sent assets to the FTX exchange, these funds were sent to bank accounts that were controlled by Alameda Research, a fund founded by the same Sam Bankman-Fried. What initially appeared to be an accounting oversight quickly escalated into a major fraud, according to a lawsuit filed by the Commodity Futures Trading Commission.

This money was eventually wiped out by risky deals made by Alameda and by Bankman-Fried himself, who used the funds as his own to buy luxury homes, private jet flights and political donations. FTX used the money to buy advertising during the Super Bowl and to pay for naming rights to the arena where the Miami Heat play.

Ultimately, these actions led to an $8 billion hole in FTX's books, and after the exchange's collapse, clients lost about $30 billion.

Bankman-Fried now faces charges of securities fraud, wire fraud, money laundering, conspiracy and campaign finance violations.