Crypto scams: common types and red flags

Crypto scams are frauds that use cryptocurrency as the bait or as the means of payment: fake investment platforms, coins that don't exist, pyramid schemes that pay for recruiting, or exchanges that spend their customers' money. The sums are enormous: in 2024, the FBI received complaints about cryptocurrency-related fraud totaling about $9.3 billion in the US alone. The technology is new; the tricks are more than a century old.

What is a cryptocurrency scam?

It's any deception in which the promise or the payment goes through crypto assets. Sometimes crypto is the product (a new coin “that will be the next bitcoin”); sometimes it's just the channel (they ask you to pay in crypto because it's fast and hard to trace). What changes compared with a classic investment fraud is the look of modernity, which makes many people afraid to ask questions in case they seem ignorant. That's exactly what the scammer needs.

What are the most common crypto scams? A list of seven

1. The fake investment platform. A website or app with charts that keep rising and an “account manager” who encourages you to deposit more. Your balance is just a number on their screen. When you try to withdraw, they ask for fees or taxes.
2. The coin that doesn't exist. A so-called cryptocurrency with no public blockchain, whose price is set by the company itself. That was OneCoin.
3. The crypto pyramid. You pay for a package to get in and earn by bringing in others. It's a pyramid scheme with new vocabulary.
4. The guaranteed yield. An arbitrage or trading “bot” that pays a fixed percentage every week. If the payouts come from newcomers' money, it's a Ponzi scheme.
5. The romance that ends in an investment. Someone makes you fall in love, or becomes your friend, and teaches you to invest on their platform. The US Treasury calls it pig butchering. We explain it in romance scams.
6. The pumped-up token. Promoters buy cheap, announce on social media that it's “about to explode” and sell when you buy in. It's a pump and dump scheme.
7. The exchange that uses your money. A real platform that, instead of holding your assets, lends them out or spends them. That was FTX.

How do you spot a crypto scam? The red flags to watch out for

• Fixed, high returns. No asset as volatile as a cryptocurrency pays a guaranteed 2% a week.
• It isn't on any register. In the UK, the FCA says almost all financial firms must be authorized or registered with it: check the FCA Register and the FCA Warning List. In the US, if someone offers you crypto as an investment and presents themselves as a broker or adviser, look them up on FINRA BrokerCheck and Investor.gov.
• You can only sell inside. If the coin isn't traded on independent markets, its price is whatever the company says.
• Commissions for recruiting. If you earn by bringing in others, the business is people, not technology.
• Paying to withdraw. No legitimate platform asks you for an up-front “tax” to give you back your own money.
• They contacted you. A message, a call, an ad with a celebrity's face or an “expert” who coaches you on WhatsApp or Telegram.
• You don't know who holds your assets. If you can't confirm they're still in your name, they aren't yours.

Run any offer through the scam checker before you send anything.

What real cases prove it?

OneCoin (2014–2017). Ruja Ignatova pitched it as “the bitcoin killer,” but it had no blockchain: the coins were entries on a company server. According to US prosecutors, millions of people put in more than $4 billion. Ignatova disappeared in 2017 and is on the FBI's Ten Most Wanted list; her partner Sebastian Greenwood was sentenced to 20 years in 2023. We tell the story in the case of Ruja Ignatova. Its Law of Deception is No. 5: “Sell the revolution, not the product.”

FTX (2019–2022). A real exchange, with its name on an arena and an ad in the Super Bowl. According to prosecutors, about $8 billion in customer deposits ended up at Alameda Research, its founder's trading firm, which invested it, lent it out and spent it. When it collapsed, it held 105 bitcoins against nearly 100,000 that customers were claiming. Sam Bankman-Fried was sentenced to 25 years in 2024. It's all in the case of Sam Bankman-Fried, with its Law of Deception No. 16: “Getting your money back doesn't mean it wasn't stolen.”

Why do crypto scams work?

Because they combine three levers: greed (returns that don't exist anywhere else), fear of missing out (“whoever bought bitcoin in 2010 is a millionaire today”) and the authority of someone who seems to understand a technology the victim doesn't. The Laws of Deception show it's the same trap as in 1920, on a different screen.

What should you do if you suspect a crypto scam?

1. Don't send any more funds, not even to pay withdrawal fees or taxes.
2. Check the register. In the UK, the FCA Register and the FCA Warning List. In the US, FINRA BrokerCheck and Investor.gov. Elsewhere, your own country's regulator.
3. Keep the evidence: wallet addresses, transaction IDs, screenshots of the website and the conversations.
4. Tell your bank or the exchange you sent the money from.
5. Report it. In the US, to the FBI's IC3, to the FTC at ReportFraud.ftc.gov and, if it was sold as an investment, to the SEC. In the UK, to Report Fraud, formerly Action Fraud.
6. Don't hire anyone who promises to get it back. The FBI warns that private recovery companies can't issue seizure orders for cryptocurrency. We explain it in the recovery scam.