Crypto Scams: Rug Pulls and Pump and Dumps

The most common crypto scams, from fake investment schemes to rug pulls and pump-and-dump schemes, and how to spot the warning signs.

The crypto world has been plagued by scams. Blockchain analytics firms estimate that billions of dollars are lost to crypto fraud every year.

Common scams

Rug pulls: developers launch a new token or project, attract investors’ money, then abandon the project and disappear with the funds, “pulling the rug” from under investors.
Pump and dump: organisers buy a little-known token cheaply, hype it on social media to drive the price up, then sell to latecomers at the peak, leaving them with large losses.
Ponzi schemes: promising high, steady returns paid from new investors’ money rather than real profits. In India, investigators have pursued several crypto-linked Ponzi schemes.
Fake exchanges and apps: websites or apps that look like real platforms but steal deposits.
“Pig butchering” scams: fraudsters build online relationships, often romantic, over weeks, then persuade victims to invest in fake crypto platforms. Many such operations have been linked to organised crime compounds in Southeast Asia, where trafficked workers are forced to run scams.
Giveaway scams: fake celebrity accounts promising to double crypto sent to them.

Why crypto attracts scams

Irreversible transactions: once crypto is sent, it usually cannot be reversed.
Anonymity makes tracking scammers harder.
Complexity makes it hard for newcomers to judge legitimacy.
Hype and promises of quick riches.
Limited regulation in some areas.

Warning signs

Guaranteed high returns.
Pressure to invest quickly.
Requests to move money to unfamiliar platforms.
Anonymous project teams.
Celebrity endorsements that cannot be verified.

The online friend

A person meets someone online who seems friendly and successful. After weeks of chatting, the new friend shares tips about a crypto trading platform showing large profits. The person invests, sees fake gains on the app, and invests more. When they try to withdraw, they are asked for extra "fees", and the friend disappears. This is a typical pig butchering scam.

Thinking blockchain transparency prevents fraud

Blockchain transactions are publicly recorded, but that does not stop scams. It can help investigators trace funds, but recovering stolen crypto is often very difficult.

Key takeaways

Billions of dollars are lost to crypto scams each year.
Common scams include rug pulls, pump and dumps, Ponzi schemes and pig butchering.
Irreversible transactions, anonymity, complexity and hype make crypto attractive to scammers.
Guaranteed returns and pressure to act quickly are major warning signs.