Bitcoin and many other digital assets hold great potential for the good and the bad. They could make you rich in a heartbeat. They could also make you lose your shirt just as quickly. Cryptocurrency investing is very risky, which is why it can be highly profitable, and very exciting.
One of the things that make cryptocurrencies so exciting and open to the possibilities is also one of the things that make them so dangerous. That’s the lack of regulations from governments and institutions in general.
Lots of new exchange platforms, as well as wallet services, are popping out in the crypto verse all the time. And they remain unregulated. That’s why the risk of fraud, hacking and other misbehaviors remains real. Take the Bitfinex fiasco, for instance, which saw the platform lose USD 66 million. So the risks are here, they’re real, and every cryptonaut should be aware of them. And the Bitfinex example is not even among the most important ones.
And the lack of legal codes is not the only problem. The very nature of the beast makes it prone to moral hazard. It’s a situation that allows for huge risks, which, in turn, mean that equally big profits could be in the cards, which is why recklessness is present around the crypto verse.
In this article, we recapitulate for you some of the greatest scandals we’ve seen so far in the cryptosphere.
It could have been a Sherlock Holmes novel. A dead CEO, fraud accusations, millions of dollars lost. It shook the Bitcoin world, and while it looked like something out of thriller fiction, the nightmare was genuine for all those holders who lost their wealth.
It was 2018 and QuadrigaCX’s CEO, Gerald Cotten was enjoying his honeymoon in India. But he didn’t make it back. After Mr. Cotten’s death, the company found that it couldn’t manage the company’s cryptocurrency portfolio. So the bells rang, and the alarm was widespread.
QuadrigaCX’s wallets were cold. That means that the company’s cryptocurrencies are stored offline, which is a good thing when it comes to security because it makes hacks so much harder. But only Mr. Cotten was privy to the passwords, so the company suddenly was unable to give its customers their coins back.
The situation prompted an investigation on QuadrigaCX, and then new disturbing facts started to emerge. Once the investigators got hold of Mr. Cotten’s personal computer, the firm Ernst & Young found a way to locate all the wallets owned by the company. And the wallets were empty, which meant that from USD 140 to US 190 million were missing.
As the auditing company followed the money, they found that the wallets had been regularly emptied over a full year before Mr. Cotten’s honeymoon. So the investigators (and the customers) had the remains of a company and no assets to recover.
The highly irregular situation described above lead to all kinds of theories. For instance, some said that Mr. Cotten faked is own demise so he could get away with millions of dollars to enjoy with his new wife. His widow says that he actually died.
But what happened to the company’s deposits? Good questions. Nobody has been able to find out so far.
This cryptocurrency exchange was started by Jed McCaleb who enjoys an excellent reputation in the crypto world. Mt Gox stands for “Magic the gathering online eXchange.” No, we don’t understand what that means either. But the weird name didn’t stand in the way of Mt Gox becoming the world’s largest Bitcoin trader very quickly.
The platform was responsible for about 70% of the world’s trading in Bitcoin at some point. But things were never quiet for the company. It suffered from persistent security problems, it was always under attack by hackers, the CEO wasn’t the brightest bulb in the box, and they even got a lawsuit from the US government. So Mt Gox was always in the news for all the wrong reasons.
But painful as life was for the company, it was manageable. Then a real catastrophe hit. In 2014 the company had to go bankrupt because it lost half a billion USD in Bitcoins. Hackers had been emptying the company’s wallets over a long, and the company security team was none the wiser. Then, as users tried to withdraw their funds, they found they didn’t have any left.
The users complained, of course. The company answered by going silent and disappeared from all social media. The story isn’t over yet. It’s been almost five years already, and creditors are still trying to get their money back from Mt Gox. Some of them have been able to sell the debt at discounted prices, and the legal fight remains ongoing.
This company started in Slovenia. It was a crypto mining platform shared by both miners and investors. In December 2017, when Bitcoin was most attractive than ever, the platform had to face a very advanced hack attack. The hackers succeeded and went away with BTC 4,736,042 in their digital pockets. That’s the most significant number we’ve seen when referring to Bitcoins.
The token’s price was around USD 20k by then, so the hackers got away with trillions of dollars. And, to make things even worse, not a single Satoshi was recovered. So the unavoidable happened, and every member of the managing team had to resign.
Incredibly, and unlike most stories of this kind, the company survived. It remained in business and was able to rescue what was left of its heavily damaged reputation. They’re still in business trading BTC and other digital assets.
There is something to learn from these stories.
The cryptosphere can be lucrative in the extreme. But “gainful” always means risky as well. If you take on too many risks, you’re going to have to pay the price, sooner or later. So take advantage of your opportunities, but remind yourself of staying safe and use prudence. We wouldn’t like to know that you become part of a story such as the ones in this article.
Disclaimer: Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.