5 Bitcoin Scandals You Need To Know

Photo: Flickr/Tony Webster

Everyone loves a good controversy. Especially if it involves astronomical amount of virtual money vanishing into thin air overnight in so many different ways.

So if you’re looking for some dirt on the top bitcoin scams to have scorched the news headlines, look no further. Here are the top 5. Exchange heists, stolen wallets, mysterious bankruptcies and missing CEOs-we’ve got it all. Welcome to the dark side.

1.Bitstamp hacked

The world’s third largest bitcoin exchange amounting to 6% of all bitcoin transactions had to suspend its operations on January 5, 2015 after less than 19,000 bitcoins were stolen from operational bitcoin wallets were compromised resulting in a $5 million loss. The Slovenia based company reopened operations a week later with extra security processes in place. Co-founder and CEO of Bitstamp Nejc Kodrik said this in his tweet on the day:

In a similar incident in February last year there was a collpase of Mt Gox bitcoin exchange in Japan. The exchange folded after hackers allegedly breached its systems stealing about $450 million worth of bitcoins. The company filed for bankruptcy protection leading to investigators in both Japan and US to probe the incident. Interestingly even after a year later we still don’t what happened to the missing bitcoins.

2.Silk Route Founder Ross Ulbricht convicted

Photo: Reuters/Jane Rosenberg

31 year old Ross Ulbricht known by his online alias “Dread Pirate Roberts” and the man behind the now shut website Silk Road was convicted for his role in orchestrating a scheme that enabled around $200 million of anonymous online drug sales using bitcoins on the website.He was found guilty of charges including conspiracies to commit money laundering, computer hacking and drug trafficking. His appeal for a new trial was rejected by a federal judge in Manhattan this April.

3.Bitcoin Start-up Neo & Bee disappears

A promising new bitcoin start-up based in Cyprus which came up with the idea of serving as a kind bitcoin bank mysteriously went under in March last year, a month after its conception and highly publicised launch. Its 28-year-old British born CEO Danny Brewster was served an arrest warrant for suspicion of fraud and is allegedly on the run according to media reports. Though he has denied any wrongdoing . His last tweet before he went MIA was this:

4.Hong Kong’s Mycoin shuts shop


Hong Kong police arrested six people in connection with an alleged scheme by Mycoin investment company to defraud investors of at least HK$169 million ($21.8 million) after the  bitcoin trading platform suddenly collapsed in February this year. All arrested are still awaiting formal charges. According to a report by the South China Morning Post, the arrests followed after more than 50 clients claimed they were unable to withdraw funds from investment accounts. Another report said that under the alleged ponzi scheme, the victims were told that for every 90 bitcoins they bought through MyCoin, they would receive 219 a year later – more than double their return.

5.Evolution marketplace website goes down


Close on the heels of the Silk Road website shutdown, another bitcoin marketplace website called Evolution accused of dealing in illegal drugs and stolen identity information was in the news for mysteriously going offline in March this year with an estimated $12 million in user bitcoins stuck and site administrators Verto and Kimble reported missing.The story was first broken on Reddit darknets market subforum .The Guardian in its report  dubbed it as an “exit scam”.

Now that you know the kind of murky stuff out there, it wouldn’t hurt to know how to avoid a bitcoin scam in the first place. So keep calm and invest on. And do feel free to chip in with any more scandal names in the comments section. We would love to hear from you!