The major crypto investment and withdrawal scams you need to know about

While the crypto industry offers groundbreaking opportunities for growth and innovation, it also attracts its share of fraudulent activities. Investment scams in crypto often come dressed as tantalizing opportunities, promising high returns with minimal risks. They can range from sophisticated Ponzi schemes to deceptive ICOs (initial coin offerings), luring investors into traps set by cunning fraudsters.

On the other hand, withdrawal scams add another layer of complexity, where investors find themselves trapped in schemes that hinder or falsely manipulate the process of withdrawing their digital funds. These can include phishing attacks or fake exchanges that aim to steal personal information or assets.


  • Scammers use methods like phishing and rug pulls to take advantage of blockchain's lack of central control.

  • Crypto investment scams, like Ponzi schemes, claim to make you a lot of money quickly. They inevitably fail when they run out of new money.

  • Withdrawal scams trick users with fake exchanges and phishing tactics to steal funds.

  • It's crucial to be vigilant and thoroughly research investments promising unrealistic returns.

  • Stay informed and skeptical, especially when faced with aggressive marketing and unclear details.

What are cryptocurrency scams?

Cryptocurrency fraud, a troubling issue in digital assets, encompasses a range of illegitimate actions that exploit blockchain technology's decentralized and loosely controlled nature. These scams can be phishing schemes, rug pulls, false giveaways, and impersonations designed to defraud traders by falsely claiming substantial gains with little risk.

Historically, crypto scams have evolved with the technology. Early scams were simpler, like fake exchanges and wallet scams, but as the market grew, more complex schemes like pump-and-dump strategies emerged. Scammers took advantage of the public's lack of familiarity with blockchain tools and the general appeal of cryptocurrencies to position themselves as trustworthy experts or leaders in this domain.

Common characteristics of crypto scams include:

  • Aggressive marketing.

  • Unrealistic promises of high returns.

  • A lack of transparency.

  • Pressure to participate quickly.

Fraudsters take advantage of the lack of a central regulatory body, making it difficult for those scammed to find a solution. The fact that crypto transactions can't be reversed and that users are anonymous adds to the complexity of tracing and correcting these scams.

To avoid becoming a target of these fraudulent schemes, it's essential to thoroughly research and exercise caution when considering investments that promise unrealistically high returns. Government organizations such as the U.S. Securities and Exchange Commission (SEC) release alerts and advice to help traders detect and steer clear of fraudulent tactics.

Being vigilant, mindful, and conducting thorough research, particularly regarding social media promotions and unbelievable deals, is crucial for safely navigating the crypto space. Familiarizing oneself with the usual traits of these fraudulent schemes and being cautious of unrealistic guarantees are also vital in safeguarding against potential deceit.

How do investment scams in crypto operate?

There are multiple cryptocurrency investment scams, such as Ponzi schemes, pyramid schemes, fraudulent ICOs (initial coin offerings), token scams, pump-and-dump schemes, and cloud mining scams.

Crypto Ponzi schemes are fraudulent financial ventures that claim to guarantee significant earnings for participants. They rely on using money from new participants to pay off early participants, giving the appearance of a successful enterprise. Yet, when new participants stop contributing, these schemes inevitably crumble.

Both pyramid schemes and Ponzi schemes rely on bringing new members to the organization. These new members are guaranteed compensation or prizes for recruiting others into the program. However, this setup isn't applicable because it requires a constant influx of new recruits to sustain the scheme.

Deceptive ICOs and token sales are scams that seek to obtain funds for a non-existent or fraudulent cryptocurrency. Con artists swindle money from investors and disappear, leaving them with worthless tokens or no return on their investment.

Pump-and-dump schemes involve artificially inflating the price of a digital asset through false or misleading statements. Once the price is high enough, the scammers sell off their holdings at a profit, causing the price to plummet and leaving other traders with significant losses.

Cloud mining scams offer the opportunity to participate in cryptocurrency mining without owning the necessary hardware. However, these are often fraudulent, as they don't mine any cryptocurrency. Instead, they simply use new funds to pay returns to earlier investors, similar to a Ponzi scheme.

In 2022, a staggering $7.8 billion was lost to cryptocurrency pyramid and Ponzi schemes worldwide. Two of the largest prosecuted crypto Ponzi schemes were Forsage and Trade Coin Club, with Forsage netting nearly $974 million and Trade Coin Club over $295 million from investors before their collapse.

Before participating in a crypto project, it's key to be vigilant and thoroughly investigate the opportunity. Be cautious of projects that guarantee high profits with minimal risk, lack transparency, or aren't registered. These are all warning signs of possible fraudulent activities.

What are withdrawal scams and their tactics?

Withdrawal scams in the crypto space are a growing concern, and involve tactics like withdrawal fraud, phishing attacks, and fake exchanges. These scams are designed to deceive users into parting with their digital assets or personal information.

Phishing schemes are a common tactic employed during withdrawal procedures. Fraudsters fabricate fake online platforms or send deceptive emails linking to platforms that resemble authentic businesses or digital wallets. They deceive individuals into disclosing their login details or confidential data, which is then exploited to gain unauthorized access to the victim's crypto assets.

Another often used strategy is the creation of fraudulent exchange platforms and wallets. These deceitful platforms entice investors with the prospect of significant rewards, typically requesting a fee to set up an account. After the victim deposits their funds, the scammers embezzle the money, leaving behind manipulated portfolio displays that falsely portray lucrative trades or earnings.

No actual trading occurs, and the scammers pocket the funds.

Honeypot withdrawals entail the establishment of deceptive cryptocurrency enterprises. These fraudulent plans entice investors by offering token acquisitions, but they realize it's unattainable upon attempting to sell or withdraw. The fraudsters manipulated the token's value to decrease rapidly, rendering investors incapable of divesting and suffering considerable financial setbacks.

To protect against these scams, users should follow best practices such as using reputable crypto exchanges and wallets, looking for "HTTPS" in URLs to ensure secure connections, being wary of promises of high returns, and never sharing private keys. Awareness and due diligence are crucial in navigating the crypto space safely and avoiding becoming a victim of withdrawal scams.

What can we learn from past crypto scams?

Studying past crypto scams offers valuable knowledge on the techniques employed by fraudsters and their effects on investors and the crypto industry. That should make it easier to critically assess an opportunity to decide if it's trustworthy or not.

Major historical scams in crypto

  • OneCoin Scandal (2014): Launched by Ruja Ignatova, OneCoin was a fraudulent pyramid scheme that masqueraded as a digital currency. It had little trading activity and served solely as an "investment," ultimately resulting in massive financial losses when Ignatova went missing.

  • Bitconnect (2016): Bitconnect promised high returns through automatic trading bots, but it turned out to be a Ponzi scheme. Despite its initial success, investigations led to its collapse, with investors losing substantial amounts.

What scam tactics are used?

  • Aggressive marketing: OneCoin and Bitconnect used charismatic and aggressive marketing tactics to lure investors.

  • Multi-level marketing and ponzi structures: Investors were incentivized to recruit more participants, creating unsustainable financial pyramids.

  • False promises of high returns: A common thread among various crypto scams, such as Ponzi and multi-level marketing schemes, is the promise of high financial gains without any significant risk.

The lessons learned

  • Critical evaluation of investment projects: Knowing the technology and business strategy behind cryptocurrency investments is essential.

  • Beware of projects that overpromise: If an investment sounds too good to be true, it likely is.

  • Regulatory scrutiny is vital: Many scams could have been mitigated or avoided with stricter regulatory oversight and investor due diligence.

Impact on participants and crypto market

  • Financial losses: Investors lost billions in these scams, with the median individual reported losses being significant.

  • Market credibility damage: These fraudulent schemes have negatively affected the crypto market's reputation, causing potential investors to be cautious.

  • Urgent need for regulatory frameworks: Scams highlight the need for regulatory measures to protect investors and maintain market integrity.

How can you detect crypto scams?

To effectively prevent and identify crypto scams, it's crucial to have knowledge of the warning signs, adopt safe practices for crypto transactions and storage, and stay informed.

Red flags in crypto investments

  • Unrealistic promises: Be careful of promises of big earnings without much risk. They could be a warning sign.

  • Aggressive marketing: Skepticism should be exercised when encountering exaggerated promotions, particularly on social media.

  • Lack of transparency: Vague details about project operations, development teams, or white papers signal potential fraud.

  • Unusual payment demands: It's doubtful if any request for cryptocurrency payment, especially when forced, is legitimate.

Secure practices for crypto transactions and storage

  • Use reputable exchanges: Stick to well-known crypto exchanges with good track records.

  • Secure storage: Use hardware wallets for storing significant amounts of cryptocurrency.

  • Strong passwords and 2FA: Use strong passwords and implement two-factor authentication (2FA) on all crypto accounts.

  • Beware of phishing attempts: Exercise caution when receiving emails or messages that ask for personal details or prompt you to visit unfamiliar websites.

To minimize the chances of being targeted by crypto scams, individuals must familiarize themselves with warning signs, implement secure methods for conducting transactions and storing currency, and stay informed about the legal environment. It's crucial to exercise caution when something seems too good to be true and to investigate and carefully consider any potential crypto investments thoroughly.

What's the future outlook for crypto scams?

The future outlook for cryptocurrency scams involves emerging threats, blockchain security advancements, and the crucial role of education.

Emerging trends and new tactics in crypto scams

  • Sophisticated scams: Hackers constantly evolve their tactics, using advanced technologies like social engineering, ransomware, and fraud schemes.

  • Rug pulls and flash loan attacks: These consist of fraudsters depleting funds from a project or taking advantage of weaknesses in decentralized finance (DeFi) platforms.

  • AI and cybersecurity: As AI technology becomes increasingly incorporated into security systems, it may also become a prime target for cybercriminals, potentially resulting in more sophisticated cryptocurrency scams.

Preventing scams with blockchain and smart contracts

  • Immutability and transparency: Blockchain's core features, like immutability and transparency, can be powerful tools against fraud. However, these features also present challenges, making reversing transactions difficult if fraud is detected.

  • Smart contract audits: The frequent examination and reinforcement of smart contracts can help avoid vulnerabilities. DeFi platforms progressively implement strict safety protocols such as multi-signature wallets and time locks.

  • Enhanced security protocols: Implementing multi-factor authentication and encryption are effective methods for reducing the risk of fraud in cryptocurrency transactions.

Importance of education and public awareness

  • Critical for prevention: Educating about crypto's risks and red flags is key to preventing scams. Awareness about common scams like phishing, impersonation, and Ponzi schemes can help traders to avoid falling victim.

  • Staying updated: Traders need to stay informed about the latest developments in blockchain technology and cybersecurity to understand new threats and how to protect themselves.

  • Collaboration with regulatory bodies: A joint effort between regulators, cybersecurity firms, and cryptocurrency platforms can create educational resources and guidelines that help protect participants in the space.

The battle between developing scam tactics and improving blockchain security measures is expected to shape the future of crypto scams. Educating traders and raising public awareness in this environment is important.

As the crypto industry continues to grow and mature, a concerted effort from all stakeholders, including developers, security experts, traders, and regulatory bodies, will be crucial in mitigating the risks of scams and preserving the safe growth of this innovative sector.

The final word

Over time, crypto scams have progressed from basic fraudulent exchanges to more elaborate pump-and-dump schemes, taking advantage of the public's limited knowledge of blockchain technology.

Crypto scams are hard to track and fix because there's no central regulation, and transactions can't be reversed. To stay safe, traders should research carefully and practice healthy skepticism, especially with opportunities that promise big rewards. As the saying goes, if it sounds too good to be true, it probably is. Meanwhile, regulatory bodies like the U.S. SEC regularly provide warnings and guidelines to help identify and avoid such scams.

By applying the guidance listed above, moving with caution as you explore new opportunities, and staying informed about crypto's evolution — from technology to new threats — you're well-placed to protect yourself and your assets.

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