What Is a Crypto Scam? Common Fraud Schemes and How to Protect Yourself

Popular Cryptocurrency Scam Schemes

Cryptocurrency scams encompass a wide range of deceptive tactics aimed at stealing users' digital assets. As cryptocurrencies continue to gain traction, fraud schemes are becoming more prevalent and increasingly sophisticated. Understanding the primary types of crypto scams is essential to protect your funds and prevent loss.

Phishing

Phishing is one of the most widespread forms of crypto fraud. Scammers create fake websites that closely replicate the interfaces of popular crypto wallets or trading platforms. The intent is to trick users into entering their login credentials, private keys, or seed phrases on the fraudulent site.

Key indicators of phishing attacks:

• Unexpected emails from reputable exchanges urging urgent account updates
• URLs with minor differences from the official domain (such as a letter substitution or added hyphen)
• Spelling mistakes in the domain name
• Missing SSL certificate (no padlock icon in the browser address bar)

Real-world example: In 2020, KuCoin users received fraudulent emails with links to a fake website mimicking the official exchange. Thousands entered their credentials on the phishing site and became victims of a large-scale theft. More than $280 million in cryptocurrency was stolen, making this one of the largest phishing breaches in crypto history.

Scam Disguise

Scam disguise schemes involve creating entirely fake cryptocurrency platforms that pose as legitimate exchanges, wallets, or investment services. In the early stages, these platforms operate normally, allowing users to deposit funds and even make small withdrawals to build a false sense of trust. However, when users attempt to withdraw substantial amounts, access to their assets is blocked.

Common traits of scam platforms:

• Promises of guaranteed high returns with no risk
• Numerous fake positive reviews
• Aggressive pressure to deposit more funds
• Inability to withdraw large sums or ongoing "technical problems" during withdrawal
• Lack of licenses or regulatory oversight

Real-world example: In 2020, Arbistar—promoted as an automated crypto arbitrage system—suddenly ceased all payouts to investors. Organizers cited "serious technical problems," resulting in over 120,000 investors losing access to approximately $1 billion. Investigations later revealed Arbistar was a classic Ponzi scheme, paying early investors with new deposits.

Fraudulent Tokens

Token-related scams take several forms. One approach involves attackers sending users tokens that appear valuable or linked to reputable projects. When users attempt to sell these tokens on a decentralized exchange, a malicious smart contract activates, granting access to the victim's wallet and stealing real assets.

Another common scheme is launching tokens specifically for "pump and dump" operations. Organizers create a new token, aggressively promote it on social media and through paid ads, artificially driving up the price. When the price peaks, they sell all their tokens, crashing the value and leaving regular investors with worthless assets.

Signs of fraudulent tokens:

• Unknown tokens suddenly appearing in your wallet
• Aggressive marketing campaigns promising rapid growth
• Lack of information about the development team
• Sales restrictions built into the smart contract

Real-world example: In 2021, the SQUID token—supposedly inspired by the popular show "Squid Game"—attracted millions of investors. The token’s price surged to several thousand dollars, but investors found they couldn’t sell due to smart contract restrictions. When the developers disappeared and withdrew all liquidity, investors lost $3.38 million and the token price crashed to nearly zero within minutes.

Rug Pull

Rug pull refers to a scam where project creators aggressively promote a new token, generating hype and attracting investment. Once considerable sums are invested, the developers withdraw all liquidity and vanish, leaving investors with worthless tokens.

This scheme is especially common in decentralized finance (DeFi), where launching new tokens and liquidity pools requires minimal technical expertise or investment. Scammers often mask their exit as "technical issues" or "hacker attacks."

Key signs of rug pulls:

• Overly aggressive marketing with unrealistic promises
• Complete anonymity of the development team or use of fake profiles
• No independent smart contract audit
• Sudden crash in project value after a period of rapid growth
• Inability to contact developers after the collapse

Real-world example: YAM Finance launched in 2020 as an innovative DeFi platform, attracting over $750 million in deposits within days. Soon after, a critical smart contract bug was discovered, making protocol management impossible. Despite community efforts, most locked funds were lost and the project went bankrupt, leaving investors unable to recover their assets.

Payout Scams

Payout scams are classic frauds adapted to crypto. Scammers promise to double or drastically increase users’ cryptocurrency if they transfer a certain amount. These schemes often use hacked or fake celebrity accounts on social media.

The process is simple: scammers claim to be hosting a "giveaway" or "promotion," offering to return double or triple the crypto sent to them. In reality, once they receive the funds, they disappear.

Main warning signs:

• Promises to double or multiply your investment
• Messages allegedly from celebrities promoting crypto giveaways
• Requirement to send crypto first to receive a payout
• Artificial urgency ("offer valid for a limited time")
• Numerous fake comments from "happy participants"

Real-world example: In 2020, hackers attacked the X platform (formerly "Twitter"), compromising accounts of numerous celebrities including Elon Musk, Bill Gates, Barack Obama, and major companies. These accounts posted bitcoin "giveaway" messages, claiming anyone who sent bitcoin to a provided address would receive double in return. Despite the obvious scam, thousands of users lost over $120,000 within hours.

Social Media Romance Scams

Crypto romance scams are long-term frauds where scammers build emotional relationships with victims through social networks or dating sites. After weeks or months of establishing trust, the scammer proposes "profitable crypto investment opportunities."

These schemes involve extended "courtship" and the illusion of romance. Scammers use stolen photos of attractive individuals and fabricate convincing personal stories. They regularly communicate, show interest, and gradually gain the victim's trust.

Common signs of romance scams:

• Rapid relationship development and declarations of affection from a stranger
• Offers to "help" you profit from crypto investments
• Persistent requests to transfer funds via obscure platforms
• Excuses for avoiding video calls or in-person meetings
• Stories about "financial difficulties" or "missed opportunities"

Real-world example: In 2021, a 75-year-old US woman met a man on a dating site who claimed to be a successful investor. After months of daily interaction, he convinced her to invest in crypto through an "exclusive" platform, promising high returns. She transferred over $300,000 to a fake investment platform. When she tried to withdraw funds, the website shut down and her "friend" disappeared. Investigators found the platform was a complete fraud and all her money was stolen.

Extortion and Blackmail Schemes

Crypto extortion involves various forms of blackmail in which attackers demand a cryptocurrency ransom. The most common tactic is threatening to expose compromising information about the victim. Scammers may claim to have hacked the victim’s computer and accessed personal files, photos, or browsing history.

Another variant is ransomware, which encrypts files and demands cryptocurrency for decryption. Criminals prefer crypto for its anonymity and the difficulty of tracing transactions.

Indicators of extortion schemes:

• Threats to publish personal or compromising information
• Demands for ransom exclusively in cryptocurrency
• Short deadlines for payment, with escalating threats
• Claims of hacking your computer or accounts
• Use of real (often previously leaked) passwords for credibility

Real-world example: In 2021, the DarkSide hacker group launched a major cyberattack on Colonial Pipeline, the largest fuel pipeline operator on the US East Coast. Ransomware locked critical systems, halting fuel supply. Hackers demanded $4.4 million in bitcoin to restore operations. The company paid the ransom to resume services and avoid a regional crisis. Law enforcement later recovered a portion of the stolen funds.

Money Mule Schemes

Money mule scams recruit unsuspecting individuals to launder money through crypto transactions. Victims are offered "easy jobs" processing financial transactions with promises of high pay for minimal effort.

The scam works as follows: the mule receives funds to their bank account or crypto wallet, then forwards them as instructed, keeping a commission. In reality, these funds come from criminal activity, and the "employee" becomes an accomplice to money laundering and faces serious legal consequences.

Warning signs of money mule scams:

• Offers of high-paying jobs with no skills or experience required
• Requests to open new bank accounts or crypto wallets
• Instructions to receive and transfer funds to other accounts
• Promises of pay as a percentage of processed sums
• No formal employment contract

Real-world example: In 2021, US authorities uncovered a large criminal network recruiting people through social media job ads. Organizers promised high earnings for "help converting funds to crypto." Recruits received bank transfers, converted them to bitcoin, and sent them to designated addresses. The funds originated from fraud, hacking, and other crimes. Many participants, unaware of their role in money laundering, faced prosecution as accomplices.

Largest Crypto Thefts in History

The history of cryptocurrency is filled with massive thefts and scams that have led to billions in losses. These incidents highlight vulnerabilities in the crypto sector and offer important lessons for investors and developers. Below are some of the most significant cases of crypto theft and fraud.

FTX — $8 Billion (2022)

The collapse of FTX and its related firm Alameda Research ranks as one of the biggest and most high-profile frauds in crypto history. Founder Sam Bankman-Fried, once seen as an industry leader, was accused of misappropriating roughly $8 billion in client funds. Investigations revealed client assets were illegally used to cover Alameda Research's losses and for personal spending, including property purchases and political donations.

OneCoin — $4 Billion (2014–2017)

OneCoin is one of the most notorious and largest Ponzi schemes in crypto. Led by Ruja Ignatova, the project was promoted as a revolutionary cryptocurrency that would surpass Bitcoin. Millions of investors worldwide were lured with promises of high returns and financial independence. In reality, OneCoin had no real blockchain, and its tokens were worthless and never traded on legitimate exchanges. Investors lost about $4 billion, and Ignatova disappeared in 2017 and remains at large.

PlusToken — $2 Billion (2018–2019)

PlusToken was a fraudulent crypto project marketed as a multifunctional wallet and investment platform, targeting Asian investors, especially in China and South Korea. Organizers promised high passive returns of 10%–30% per month for storing crypto in their wallet. It operated as a pyramid, paying early investors from new deposits. When the scheme collapsed, investors lost about $2 billion in various cryptocurrencies.

Thodex — $2.6 Billion (2021)

Thodex was a Turkish crypto exchange that abruptly ceased operations in April 2021. Founder Faruk Fatih Ozer vanished, allegedly fleeing the country with a huge sum of client funds. About 400,000 users had assets worth approximately $2.6 billion on the exchange. Before closing, Thodex announced a "temporary suspension of trading" supposedly due to a partner deal, but access to funds was never restored. This incident remains Turkey's largest crypto scam and led to tighter regulation.

BitConnect — $2 Billion (2016–2018)

BitConnect was one of the most infamous Ponzi schemes in crypto, promising extremely high returns through its "trading platform" and BCC token. The platform claimed to use an advanced trading bot and volatility software for profit. Investors were promised up to 1% daily returns, attracting participants worldwide. In reality, BitConnect was a classic pyramid, paying old investors from new deposits. When regulators began investigating, the platform shut down in January 2018, and BCC lost over 90% of its value in a day, resulting in $2 billion in losses.

Mt. Gox — $450 Million (2011–2014)

Mt. Gox was the world’s largest bitcoin exchange at its peak, processing up to 70% of all bitcoin transactions. Based in Japan, it was the primary marketplace for bitcoin trading. In 2014, the exchange declared bankruptcy after discovering the loss of 850,000 bitcoins (about $450 million at the time) belonging to clients and the exchange itself. Investigators found the theft had occurred gradually over several years due to hacks and poor security management. Some stolen bitcoins were later recovered, but the process of reimbursing creditors continues more than a decade after the collapse.

QuadrigaCX — $190 Million (2018)

QuadrigaCX was Canada's largest crypto exchange, which abruptly shut down after founder Gerald Cotten died in December 2018. Officially, Cotten died of Crohn’s disease complications in India, taking with him sole access to the exchange’s cold wallets, holding about $190 million in client funds. Investigators later uncovered numerous violations and suspicious circumstances, including faked trading volumes and misuse of client funds. Many experts and victims believe Cotten’s death was staged and that he absconded with the missing funds.

Africrypt — $3.6 Billion (2021)

Africrypt was a South African crypto investment platform founded by brothers Amir and Raees Cajee. The platform promised high investment returns and attracted thousands of investors in South Africa. In April 2021, the founders claimed the platform suffered a "hacker attack," compromising all accounts and wallets. Shortly after, the brothers disappeared and investors lost access to approximately $3.6 billion. Lawyers for victims argue that no hack took place and the brothers simply stole all the assets. This is one of Africa’s largest crypto frauds.

Bitpetite

Bitpetite was an investment scheme promising daily returns from bitcoin investments. The platform claimed to use advanced algorithms for crypto trading and profit generation, advertising daily returns of 4.5%–10% depending on plan—a clear pyramid warning sign. The scheme operated for several months, attracting new investors and paying out to early participants. Shortly after launch, organizers vanished with all funds and the website shut down. The total loss is unknown, but thousands lost their investments.

Coincheck — $534 Million (2018)

Coincheck was one of Japan’s largest crypto exchanges, suffering a major hack in January 2018. Attackers stole 523 million NEM tokens worth $534 million, making it one of the industry’s biggest breaches. Investigators found the exchange kept most client assets in hot wallets connected to the internet, making it easier for hackers. After the hack, Coincheck reimbursed clients from its own funds, strengthened security, and was later acquired by Monex Group.

How to Protect Yourself from Crypto Scams

Protecting against crypto scams requires a comprehensive approach—technical security, awareness, and constant vigilance. The following tips can significantly reduce your risk of falling victim.

Use Only Official Websites and Apps

Download crypto wallets and trading apps only from official sources such as Google Play Store, Apple App Store, or developers’ official websites. Avoid apps from third-party stores or direct links from unverified sources—they may contain malware.

Always check the URL in your browser before entering credentials. Phishing sites often use lookalike domains with small changes (such as "o" replaced by "0," adding a hyphen, or a different domain extension). Bookmark official sites for frequently used crypto services to avoid accidentally landing on fake pages via search engines.

Never Share Private Keys

Private keys and seed phrases are strictly confidential—never share them with anyone. They provide full access to your crypto assets. No legitimate platform, exchange, or support service will ever request your private keys or seed phrase.

For significant crypto holdings, use hardware wallets that store keys offline for maximum security. Paper wallets are also suitable for long-term storage—write your seed phrase on a physical medium and keep it safe, such as in a bank vault.

Enable Two-Factor Authentication

Two-factor authentication (2FA) is essential for all crypto accounts. Always activate 2FA for wallets, exchanges, and related email accounts. This makes unauthorized access much harder, even if your password is compromised.

Use authenticator apps (Google Authenticator, Authy) instead of SMS codes, as SMS can be intercepted via mobile carrier attacks. Some platforms support hardware security keys (YubiKey), offering the highest protection against phishing and unauthorized access.

Avoid Unrealistic Return Offers

Guaranteed high returns with no risk are a key warning sign of crypto scams. All crypto investments carry considerable risk, and no one can guarantee profits. If an offer sounds too good to be true, it probably is.

Treat promises of "guaranteed profit," "double your investment," or "effortless passive income" with suspicion. Always research any investment project—verify the development team, review technical documentation, and seek independent opinions from trusted sources. Remember: high returns always come with high risk.

Do Not Enter Data on Unknown Sites

Never enter login credentials, passwords, private keys, or other sensitive information on unknown or suspicious sites. Fake exchanges and wallets are designed to steal your data. Always check for an SSL certificate (padlock icon) and confirm the domain before submitting any information.

Be cautious with links sent via email, social media, or messenger apps. Instead of clicking, manually enter the site address or use bookmarks. If you receive a suspicious email from a crypto exchange or wallet, contact official support via their website to confirm authenticity.

Check Project Reviews and Documentation

Before investing in any crypto project, carefully review its reputation and legitimacy. Examine the whitepaper for clear descriptions of technology, business model, and roadmap. Missing or low-quality whitepapers with poor grammar and vague promises are red flags.

Look for independent reviews on trusted crypto forums, social media, and industry publications. Verify the development team’s credentials and past experience, and confirm real social media profiles. Find out if smart contracts have been independently audited by reputable cybersecurity companies. Be extra cautious with projects whose teams are fully anonymous or provide little personal information.

Protect Your Devices

Securing your devices used for crypto access is crucial. Install reputable antivirus software and keep it updated. Update your operating system and apps promptly with security patches.

Avoid installing suspicious browser extensions—especially those requesting broad data access. Some malicious extensions are designed to steal wallet data or change recipient addresses during transactions. Consider using a dedicated device or virtual machine for crypto activities if managing significant funds. Never use public Wi-Fi for crypto access without a secure VPN connection.

FAQ

What is a crypto scam? What are the most common types of fraud schemes?

A crypto scam is fraud involving cryptocurrencies. Common schemes include social media giveaways, Ponzi schemes, fake apps, phishing, and information manipulation. Avoid suspicious links, never reveal your private keys, and always check official sources.

How can you spot fake crypto projects and scam websites?

Check the official project website and whitepaper. Avoid promises of huge risk-free returns. Investigate the transparency of the development team and project history. Watch for typos, unreliable design, and lack of verified social accounts.

How do phishing, "pump and dump" (Pump and Dump), and fake cryptocurrencies work?

Phishing uses fraudulent sites to steal information. Pump and dump schemes artificially inflate prices using false information, allowing organizers to sell at a profit. Fake cryptocurrencies mimic real coins for fraudulent transactions.

How can you protect your crypto wallet and private keys from scams?

Use strong passwords and two-factor authentication. Store private keys in offline hardware wallets. Never share mnemonic phrases. Confirm the URL of official sites before connecting your wallet. Regularly review app permissions.

What should you do if you fall victim to a crypto scam?

Immediately contact law enforcement and file a report with FBI IC3. Save all evidence (screenshots, correspondence). Report the fraud to local authorities. Warn others about the scam.

Why is it difficult to recover funds lost to crypto scams? What legal options exist?

Crypto scams are hard to reverse due to anonymity and cross-border transfers. Legal options include working with law enforcement, blockchain analysis, and international cooperation. Quick action and legal support are key to success.

How do you distinguish legitimate crypto projects and teams from fake ones?

Review public information about the team and founders, project development history, and community feedback. Legitimate projects feature transparent developer profiles with verified expertise. Scams typically hide or falsify team details.

Are crypto investment tips on social media and celebrity endorsements trustworthy?

No—social media tips and celebrity endorsements are often unreliable and high-risk. Research shows celebrity-backed projects, especially outside their area of expertise, are frequently scams. Always conduct independent research before investing.