Top Scams in Crypto in 2022

1. Do Kwon – Terra USD 

Over the past few years, cryptocurrencies like Ethereum, Bitcoin, etc. have generated extremely high returns and have convinced investors to invest their money into these coins and consider them as an asset class in itself. However, these coins are very volatile as the crypto market is unregulated. The concept of ‘stablecoins’ came around which usually have some kind of an underlying value as they are pegged against certain currencies. The value of these stablecoins does not change as compared to coins like Ethereum or Bitcoin. They are usually backed by some real collateral so as to keep the price stable like the US Dollar. However, they can be backed by other crypto assets like how UST was backed by Luna which both happened to come under Terra.

Terra was a public blockchain that allowed people to build web apps on their blockchain and has two coins UST and Luna. UST is the stablecoin whose value was always supposed to be pegged to 1$. Luna and UST have linked algorithmically in such a way that UST was always backed by Luna. So, if the price of UST started falling Luna was there to back it up and vice-versa. For example, if investors decide to start selling the British Pound to such an extent that the value of the British Pound begins to fall the British Government starts to intervene by selling Dollars to ensure that the value of the British Pound does not fall dramatically. 

Using this same methodology, Terra managed to keep the price of UST pegged to a dollar and earned profits through Luna. This was made possible by algorithms that kept track of the demand and supply of Luna and UST and were designed to balance the two systems. 

This, however, started falling apart in May as large investors in the Luna project started selling off large amounts of Luna and UST simultaneously which led to a major drop in their values. This started happening, during the conflict between Ukraine and Russia and as the market was already in a panic as to what will happen to the global markets as there were threats of ‘World War 3’ looming from Russia’s side, other investors in the project also started selling their coins and holdings in the Terra project which led to massive price dumps of both Luna and UST and resulted in the value of UST dropping to less than a cent along with Luna prices dropping by a negative 100% and even further resulting in huge losses for their investors who once believed in the project.

2. Voyager backed by Billionaire Shark Tank Investor Mark Cuban scammed people

Voyager was one of the most famous entities in the Web3.0 space averaging around 3.5 million users at its peak and managing $5.9 Billion in assets. The platform consisted mainly of a large group of individual investors. The future looked very bright for Voyager until the bear market them like a truck in 2022. On July 1, 2022, Voyager froze people from withdrawing their investments on their platform and days later filed for bankruptcy. In their bankruptcy filing, they have laid out the mistakes made by the crypto lending platform. According to the bankruptcy filing, it all began with the collapse of the Terra Blockchain. To make this worse another crypto lending platform – Celsius was falling down at the same time. Voyager fell into a panic mode and had to file to bankruptcy which resulted in massive losses for the people invested in the project. Many investors claimed to have listened to Billionaire Mark Cuban who had previously promoted Voyager to his fans very publicly calling it an “almost risk-free platform, as risk-free as it gets in crypto”.

3. 3AC Hedge Fund

3 Arrows Capital, popularly known as 3AC was one of the most famous hedge funds in the Web3.0 space. Based out of Singapore, the crypto hedge fund at its highest managed around $10 billion worth of assets. However, it is now one of the many crypto companies that declared bankruptcy in this market. Their fall was not only a result of market-driven conditions but also a self-inflicted crisis brought upon themselves by their own decisions in the past which came back to haunt them in the future. The collapse of 3AC led to the downfall of massive crypto lending platforms like Voyager and Celsius who also had to file for bankruptcy due to the failure of 3AC who themselves filed for bankruptcy on July 1 with no whereabouts of their founders who are now on the run according to reputed news sources. The founders could face imprisonment over the 3AC scandal which has been called a Ponzi scheme in recent times.

4. Tornado cash – Founder now in Jail

Tornado Cash was a fully decentralized web app built on top of the Ethereum Blockchain. It is used to anonymize transactions made on the web app making it almost untraceable as to who owned the crypto and the crypto wallets which owned the crypto as well. The website was shut down by the US Treasury Department after they alleged that the platform was used by North Korean hackers. Recently Alexey Pertsev was arrested in the Netherlands on the suspicion of his involvement in the Tornado Cash platform. He was held in jail for two days. GitHub has also banned almost all of the people involved with the source code for Tornado Cash on their platform, right from people contributing to the open-source code to people who helped maintain the project on GitHub.

Who Saved the Market

1. FTX

The cryptocurrency has been in a bear state for the past few months and has lost more than 65% of its value since 2022. Due to this, many companies as mentioned above have been struggling to stay afloat. In this time of stress for some of the major platforms in the Web3.0 space, FTX has been helping some of these companies. The CEO, Sam Bankman Fried said this in a recent interview with Reuters, “We’re starting to get a few more companies reaching out to us. Those firms are generally not in dire situations, though some smaller crypto exchanges may still fail, he said, adding that the industry has moved beyond “other big shoes that have to drop.” 

FTX had lent Voyager Digital $200 million cash to help them in times of need. They also handed cryptocurrency lender BlockFi a $250 million cash revolving credit facility. He also explained how FTX is always ready to help companies and how FTX has enough cash to execute deals worth billions of dollars if needed. They started charging 0% trading fees to attract new investors and bring liquidity

2. Binance

During this Bear Market, Binance which is the most popular centralized trading platform in the cryptocurrency space has announced it will charge no trading fees to attract new people to the cryptocurrency market and also generate liquidity in the market. They also further announced their Most Valuable Builder (MVB) accelerator program for its fifth round which is an incubation cohort focusing on supporting new and upcoming projects in the decentralized finance space and Web3. They help the projects by funding them to get started on their journey to being a successful entity on their own in the upcoming future. 

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