Cryptocurrency has lengthy been related to frauds and outright scams, relationship again to not less than the large lack of Bitcoin from the Mt. Gox crypto change in 2014. In some ways, crypto is a perfect automobile to commit fraud due to its broad adoption by criminals, the anonymity of transactions and a gullible public that views cryptocurrencies as lottery tickets to riches.
Whereas cryptocurrency actually hit the mainstream with the run-up in Bitcoin in 2017, it’s exploded in reputation since 2020, when the Federal Reserve dropped rates of interest to zero, encouraging a flight to dangerous property. Even U.S. President Donald Trump now has a cryptocurrency ($TRUMP) and First Girl Melania Trump has her coin, too ($MELANIA). President Trump has develop into a notable crypto supporter and launched the U.S. Strategic Bitcoin Reserve.
The latest emergence and explosion of cryptocurrency into the mainstream has additionally introduced together with it a raft of fraud, blowups and rug pulls, the place crypto creators merely depart with the cash that’s been invested of their crypto mission. Listed here are 5 of the biggest crypto scandals.
5 big crypto scandals
The numerous, many crypto scams are testomony to the hazard of investing in cryptocurrency.
1. FTX
FTX was one of many world’s largest crypto exchanges and one of many greatest blowups, following the hunch in cryptocurrency markets in 2022. FTX was supposed to carry $11.3 billion in shoppers’ property at Alameda Analysis, the corporate’s hedge fund arm. Nevertheless, simply $2.3 billion of these funds could possibly be discovered, as FTX had moved funds out of buyer accounts and used them for its personal functions — embezzlement, in line with the U.S. Division of Justice. FTX filed for chapter in November 2022. FTX founder and CEO Sam Bankman-Fried was convicted of fraud and conspiracy to launder cash, and was sentenced to 25 years in jail in March 2024.
2. Binance
Binance Holding, the identify behind the massive Binance crypto change, pled responsible in November 2023 to a wide range of crimes, together with violations of the Financial institution Secrecy Act and failure to register as a money-transmitting enterprise. The corporate agreed to pay greater than $4 billion as a part of the costs. On the identical time the corporate’s CEO, Changpeng Zhao, pled responsible to failing to keep up an efficient anti-money laundering program, after which resigned as CEO. “Its willful failures allowed cash to move to terrorists, cybercriminals, and baby abusers via its platform,” stated Secretary of the Treasury Janet L. Yellen on the time. Binance was launched in 2017 and rapidly turned the world’s largest cryptocurrency change.
3. Terra USD cryptocurrency
The yr 2022 was tough for cryptocurrency, as rising charges drove risk-averse merchants away from the sector. And that insecurity helped blow up Terra USD, a stablecoin pegged to the U.S. greenback. In Could 2022, merchants started promoting the stablecoin and, for technical causes, it had bother sustaining its peg with the greenback. After that preliminary break from the peg, the coin spun uncontrolled and plummeted, changing into just about nugatory over a couple of days. It was one of many first crypto blowups in 2022 because the Federal Reserve quickly raised rates of interest to battle inflation.
4. Squid Recreation
The Squid Recreation coin was launched in 2021 to piggyback on the recognition of the Netflix sequence “Squid Recreation,” promising an “play-to-earn” on-line sport based mostly on the sequence. Sadly, the coin’s builders handled its traders each bit as badly because the contestants on the sequence have been handled. Squid coin was a basic rug pull operation, with the mission’s founders absconding with shoppers’ funds just some days after launching the mission. The coin skyrocketed in its few days of existence, peaking round $2,861 per coin, however traders had bother promoting the tokens. Days after the launch, the mission’s founders cashed out $3.36 million put up by traders and disappeared. In minutes the coin plummeted to lower than a cent in worth. Whereas small in complete worth, the fraud was a media sensation, with many crypto merchants studying what a rug pull is.
5. LIBRA
Javier Milei, the president of Argentina, promoted a cryptocurrency referred to as $LIBRA in February 2025 posts on social media retailers. “This personal mission might be devoted to encouraging the expansion of the Argentine financial system by funding small Argentine companies and startups,” stated a message on X in translation. Following the message, tens of millions poured into the coin. However simply hours later insiders, who owned many of the cryptocurrency, offered out and took an estimated $250 million with them, and the crypto’s worth crashed by 90 p.c or extra. The advertising and marketing group behind the Argentina fraud can be the identical one which launched Melania Trump’s cryptocurrency.
Donald Trump’s personal cryptocoin generated $2 billion in cumulative losses for some 800,000 traders, in line with the New York Instances.
Why is cryptocurrency related to scams?
Cryptocurrency is related to scams for a wide range of causes:
- Get-rich-quick mentality: Cryptocurrency as a complete guarantees the flexibility to get wealthy rapidly, turning what purports to be an funding right into a lottery ticket. No query, many cryptos have soared, however actually hundreds are just about nugatory. Scammers prey on the lack of awareness of victims searching for a simple approach to get wealth.
- Public ignorance of cryptocurrency: Few members of the general public perceive how cryptocurrency works and the need of securing digital property, so it may be straightforward to bamboozle a technically unsophisticated sufferer.
- Cryptocurrency is just not backed by something: Most cryptocurrency is just not backed by something akin to property or the money move of an underlying enterprise. A couple of people might put collectively a web site for memecoins, for instance, with no cash and try and promote them to traders as a get-rich-quick funding. Since crypto has no elementary worth, the one factor propping up the costs of crypto is the demand for them.
- Anybody can create a cryptocurrency: Actually anybody can create a cryptocurrency, and a reported 37 million exist already as of March 2025, in line with Tangem, a blockchain firm.
- Semi-anonymity of transactions: Cryptocurrency permits folks to maneuver cash anonymously (or not less than semi-anonymously). So those that don’t need their transactions related to them, akin to criminals, discover it an efficient means to maneuver cash.
- Facilitates crime: Due to its anonymity, crypto is an efficient approach to facilitate crime, permitting criminals to extort people, pay for illicit transactions after which launder cash.
- Crypto transactions are irrevocable: As soon as crypto cash have been despatched someplace or been stolen, they’re gone for good. It’s subsequent to unattainable to get them again. Criminals can run away together with your cash and also you received’t have the ability to do something about it.
These elements have all created an setting that makes it straightforward for scammers to make use of crypto to dupe the general public.
Backside line
Cryptocurrency is a perfect means to facilitate crime, and the general public’s lack of awareness about crypto and its want to get wealthy fast mix to create an incredible recipe for scams and frauds. Merchants want to pay attention to the dangers they run when buying and selling crypto and shield themselves from scams.
Editorial Disclaimer: All traders are suggested to conduct their very own unbiased analysis into funding methods earlier than investing choice. As well as, traders are suggested that previous funding product efficiency isn’t any assure of future worth appreciation.
