Pincoin is the latest in a series of high profile ‘exit’ scams. Their ICO has made off with more than $660 million of investors' hard-earned money. With over 32,000 people conned, the Pincoin scam is one of the most "successful" in recent times.

And the funny thing is, it was always going to happen.

From the very beginning, the Pincoin project bore obvious signs of a Ponzi scheme. But the lure of 48% monthly returns proved too big a draw for many to refuse, leading to thousands of investors being scammed in broad daylight.

Join us as we explore how the scam came to be – and learn to spot the telltale signs of a Ponzi scheme in the making.

• 1 How the scam unfolded
• 2 How the situation stands now
• 3 The clear Red Flags in the Pincoin ICO
• 4 How to avoid such scams
• 5 Conclusion

How the scam unfolded

The Initial Coin Offering

On the 12th Jan 2018, a new crypto called Pincoin (PIN) hit the market.

At first glance, the project seemed legitimate, boasting about a well-planned roadmap and a professional whitepaper. However, the coin offered a phenomenal rate of return – 48% per month and that’s when alarm bells should have been ringing for potential investors.

Unsurprisingly, speculators flocked to its crowdsale and invested an incredible $660,000,000 in Pincoin. The funds went to the so-called ‘PIN foundation’, a non-profit group made up of a number of unknown Vietnamese individuals.

People were not worried though; the project had apparently been under development for more than a year already, with a slew of features still to come in the future. As the whitepaper put it; the aim of the Pincoin was ‘building an online collaborative consumption platform for the global community’. Whatever that is supposed to mean.

Promises of the moon

It’s common for crypto projects to set themselves one or two ambitious goals. However, Pincoin was special.

The Pincoin roadmap promised not one, not two, but a whopping eight blockchain based products. These products ranged from decentralized hedge-funds to P2P marketplaces to even a PIN game portal. In short, Pincoin promised the world to investors.

The website was pretty well designed and was elevated by some nice graphics. It’s not difficult to see why so many fell for the lies spread by Pincoin. After all, they were selling a dream. The problem with dreams is that they only take you so far and at some point, everyone wakes up.

Vanishing tricks

It was after making the first payment to investors in cash that the deception began in earnest.

Citing popular demand, the PIN foundation launched another cryptocurrency called iFan. This was supposed to be a social media token for artists and celebrities and the iFan token was then advertised aggressively on other websites. Investors did not know what to make of it when, suddenly, their payments started coming in the form of newly minted iFan tokens.

As the coin was not traded on any crypto exchange, it was all but useless. Investors rebelled, and rushed to the company offices of the Modern Tech in Ho Chi Minh, only to find the swanky premises deserted.

The birds had flown the nest.

How the situation stands now

Following the reports of a staggering $660 million in losses, the authorities in Vietnam jumped into action. The Vietnamese Prime Minister himself ordered six government ministries and the police to investigate the scam.

However, it may already be too late. The owner of the former office building of Modern Tech has revealed that the company has already annulled its contract and ran away to an undisclosed location in March. The initial investigation has brought the names of seven individuals to light. The following individuals are believed to be the masterminds of this brazen scam that made them multi-millionaires: Bui Thi My Ngoc, Ho Phu Ty, Ho Xuan Van, Luong Huynh Quoc Huy, Luu Trong Tuan, Nguyen Duc Trong, Nguyen Trung Hieu, and Vu Huu Loi.

As is often the case in such scams, the criminals have already fled the country. Moreover, the decentralized nature of cryptocurrencies makes it almost impossible for any government authority to confiscate the ill-gotten gains.

The money is essentially gone.

The clear Red Flags in the Pincoin ICO

No matter how well crafted a con is, there are always things in the lie that don’t quite add up. We have listed all the telltale clues so you hopefully never fall for similar scams in the future.

#1 Unrealistic returns

This is the single most important indicator of whether an investment opportunity is legit. Ponzi schemes and scammy crypto projects all tend to promise outrageous returns in order to lure more people into their net of deceit. Pincoin promising an insane 48% rate in monthly returns is a classic example of the good old-fashioned Ponzi scheme hook.

Remember, if the promised returns on any investment sound too good to be true, it almost always is. Don’t be fooled by fairy tale promises.

#2 Over-ambitious roadmap

Cryptocurrency markets are still in their infancy. This means that there is less competition in cryptocurrency niches than there is in the traditional e-business sector and the hard work of laying down infrastructure is still required. The result is that most legit cryptocurrency projects usually focus on delivering only one or two things. So, if you see a project like Pincoin that is promising to revolutionize a dozen or so different niches and they are shy in telling you how they intend to achieve world domination, then in all likelihood it’s a scam.

Learn to take all big promises with a grain of salt.

#3 Anonymous team

This is one is a big warning sign. Every crypto project worth its salt has some sort of team behind it, with visible founders and other key members. Names and faces lend credibility to a project because there are real people with their reputations on the line.

However, Pincoin never revealed any of its team members. Even the whitepaper sidesteps from mentioning even a founder – a glaring warning sign.

If a project is attempting to conceal the identity of its creators, it is almost certainly up to no good.

#4 Widespread typos

This is a more subtle clue. When a genuine project of any significant size is created, it engages professionals for crafting their press-releases and website content. Scams, in contrast, focus more on an appearance of professionalism than professionalism itself.

Reading through the Pincoin whitepaper, you can come across several sloppy typos, such as ‘base on’ instead of based on, missing spaces and many more. Also, the language is awkward in many places, with weird sentence constructions.

While not a clinching proof by itself, the lack of proper spelling and grammar points to hastily cobbled together document. This is another hallmark of a scam.

#5 Unnecessary jargon

Ponzi crypto projects often use complicated sentences and words to hide the lack of real material. By shoehorning the text with industry jargon, they try to turn attention away from the lack of any legitimate project. Also, technical speak tries to reinforce the ‘knowledge’ possessed by the crypto projects by making readers feel stupid.

The Pincoin whitepaper and website hosts many such gems of complicity and jargon. ‘The PIN Project is about building an online collaborative consumption platform for global community, base on principles of Sharing Economy, Blockchain Technology, and Crypto Currency’.

When a whitepaper starts throwing around crypto jargon like magic words, it is time to realize that it has nothing concrete to offer.

How to avoid such scams

Research the crypto you are planning to invest in

We cannot stress this point enough. You should never, ever, invest in a cryptocurrency based on just hearsay. Always take the time to explore the nitty-gritty details of the project yourself. If that sounds like a lot of work, it is.

Before buying a cryptocurrency, it is vital to have some understanding of what problem it is trying to solve. Unless you are willing to put in the extra effort to do so, consider investing in something else instead.

Back the team

Another important consideration. A crypto project is a complex and technical endeavor, requiring a prolonged development and testing cycles. This means a crypto needs to have a solid team behind it, covering all roles from engineering to marketing.

Also, the track record of the individuals making up the team hints at the viability of the project itself. This is because professionals with previous experience in developing products are more likely to get things done properly.

So always look into the team of crypto project – it is one of the main factors that will make or break a cryptocurrency project.

Follow the crowd

No, I am not kidding. Stupid as it may sound, sometimes going for a popular choice is the best bet. It is unlikely that a project being backed by illustrious crypto investors like Pantera Capital will end up being a scam. Quite simply, these crypto hedge funds are here to make money and owe it to their investors to do extensive due diligence.

Moreover, if a very large section of the population is invested in the project, it is harder for the founders to pull a fast one on their investors. And finally, the presence of a large community provides a platform for voicing your doubts and concerns as well.

The lesson? Take interest in what everyone else is talking about and look for projects being backed by large crypto hedge funds.

Conclusion

Due to the enormous sums floating around at ICOs these days, it is only natural that they have attracted scammers. What makes this issue more of an issue is the anonymity rife in the crypto space and the ability to use privacy coins to hide huge transfers of value. It’s actually quite difficult to track down the conmen making ill-gotten gains.

The onus of security rests squarely on your own shoulders. No government, authority or regulatory body can replace the due diligence of a savvy investor.

With any cryptocurrency investment, it’s your money that is on the line. Just remember to stay savvy and thoroughly evaluate every investment opportunity you are considering.