Cryptocurrency has long been associated with frauds and outright scams, dating back to at least the massive loss of Bitcoin from the Mt. Gox crypto exchange in 2014. In many ways, crypto is an ideal vehicle to commit fraud because of its broad adoption by criminals, the anonymity of transactions and a gullible public that views cryptocurrencies as lottery tickets to riches.
While cryptocurrency really hit the mainstream with the run-up in Bitcoin in 2017, it’s exploded in popularity since 2020, when the Federal Reserve dropped interest rates to zero, encouraging a flight to risky assets. Even U.S. President Donald Trump now has a cryptocurrency ($TRUMP) and First Lady Melania Trump has her coin, too ($MELANIA). President Trump has become a notable crypto supporter and introduced the U.S. Strategic Bitcoin Reserve.
The recent emergence and explosion of cryptocurrency into the mainstream has also brought along with it a raft of fraud, blowups and rug pulls, where crypto creators simply leave with the money that’s been invested in their crypto project. Here are five of the largest crypto scandals.
The many, many crypto scams are testament to the danger of investing in cryptocurrency.
FTX was one of the world’s largest crypto exchanges and one of the biggest blowups, following the slump in cryptocurrency markets in 2022. FTX was supposed to hold $11.3 billion in clients’ assets at Alameda Research, the company’s hedge fund arm. However, just $2.3 billion of those funds could be found, as FTX had moved funds out of customer accounts and used them for its own purposes — embezzlement, according to the U.S. Department of Justice. FTX filed for bankruptcy in November 2022. FTX founder and CEO Sam Bankman-Fried was convicted of fraud and conspiracy to launder money, and was sentenced to 25 years in prison in March 2024.
Binance Holding, the name behind the huge Binance crypto exchange, pled guilty in November 2023 to a variety of crimes, including violations of the Bank Secrecy Act and failure to register as a money-transmitting business. The company agreed to pay more than $4 billion as part of the charges. At the same time the company’s CEO, Changpeng Zhao, pled guilty to failing to maintain an effective anti-money laundering program, and then resigned as CEO. “Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen at the time. Binance was launched in 2017 and quickly became the world’s largest cryptocurrency exchange.
The year 2022 was rough for cryptocurrency, as rising rates drove risk-averse traders away from the sector. And that lack of confidence helped blow up Terra USD, a stablecoin pegged to the U.S. dollar. In May 2022, traders began selling the stablecoin and, for technical reasons, it had trouble maintaining its peg with the dollar. After that initial break from the peg, the coin spun out of control and plummeted, becoming virtually worthless over a few days. It was one of the first crypto blowups in 2022 as the Federal Reserve rapidly raised interest rates to fight inflation.
The Squid Game coin was launched in 2021 to piggyback on the popularity of the Netflix series “Squid Game,” promising an “play-to-earn” online game based on the series. Unfortunately, the coin’s developers treated its investors every bit as badly as the contestants on the series were treated. Squid coin was a classic rug pull operation, with the project’s founders absconding with clients’ funds just a few days after launching the project. The coin skyrocketed in its few days of existence, peaking around $2,861 per coin, but investors had trouble selling the tokens. Days after the launch, the project’s founders cashed out $3.36 million put up by investors and disappeared. In minutes the coin plummeted to less than a cent in price. While small in total value, the fraud was a media sensation, with many crypto traders learning what a rug pull is.
Javier Milei, the president of Argentina, promoted a cryptocurrency called $LIBRA in February 2025 posts on social media outlets. “This private project will be dedicated to encouraging the growth of the Argentine economy by funding small Argentine businesses and startups,” said a message on X in translation. Following the message, millions poured into the coin. But just hours later insiders, who owned most of the cryptocurrency, sold out and took an estimated $250 million with them, and the crypto’s price crashed by 90 percent or more. The marketing team behind the Argentina fraud is also the same one that launched Melania Trump’s cryptocurrency.
Donald Trump’s own cryptocoin generated $2 billion in cumulative losses for some 800,000 investors, according to the New York Times.
Cryptocurrency is associated with scams for a variety of reasons:
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Get-rich-quick mentality: Cryptocurrency as a whole promises the ability to get rich quickly, turning what purports to be an investment into a lottery ticket. No question, many cryptos have soared, but literally thousands are virtually worthless. Scammers prey on the lack of knowledge of victims looking for an easy way to get wealth.
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Public ignorance of cryptocurrency: Few members of the public understand how cryptocurrency works and the necessity of securing digital assets, so it can be easy to bamboozle a technically unsophisticated victim.
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Cryptocurrency is not backed by anything: Most cryptocurrency is not backed by anything such as assets or the cash flow of an underlying business. A few individuals could put together a website for memecoins, for example, with no money and attempt to sell them to investors as a get-rich-quick investment. Since crypto has no fundamental value, the only thing propping up the prices of crypto is the demand for them.
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Anyone can create a cryptocurrency: Literally anyone can create a cryptocurrency, and a reported 37 million already exist as of March 2025, according to Tangem, a blockchain company.
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Semi-anonymity of transactions: Cryptocurrency allows people to move money anonymously (or at least semi-anonymously). So those who don’t want their transactions associated with them, such as criminals, find it an effective means to move money.
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Facilitates crime: Because of its anonymity, crypto is an effective way to facilitate crime, allowing criminals to extort individuals, pay for illicit transactions and then launder money.
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Crypto transactions are irrevocable: Once crypto coins have been sent somewhere or been stolen, they’re gone for good. It’s next to impossible to get them back. Criminals can run away with your money and you won’t be able to do anything about it.
These factors have all created an environment that makes it easy for scammers to use crypto to dupe the public.
Cryptocurrency is an ideal means to facilitate crime, and the public’s lack of knowledge about crypto and its desire to get rich quick combine to create a great recipe for scams and frauds. Traders need to be aware of the risks they run when trading crypto and protect themselves from scams.
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