7 Most Famous Crypto Scams: How Do Criminals Steal Money?

Crypto crime continues to be a huge issue in our industry. According to reports from Chainalysis, over $54 billion was stolen through different tactics in 2024. That is over 0.20% of all the on-chain transaction volume – a massive issue that nobody can get rid of. 

In general, there are two main methods criminals use to steal someone’s crypto. They either hack someone’s wallet/exchange account and take the money, or create an environment where the person unwittingly gives them their crypto. It is the latter method – scamming – results in the most crypto losses. 

The market has certainly seen its fair share of crypto scams, especially in the early years when the infrastructure in the crypto sector was in its infancy and few people knew or even bothered to secure their holdings as the value of the tokens were very limited. Moreover, the authorities didn’t have the tools necessary to investigate crypto scams – making it even easier for criminals to hide their illicit gains. 

In this article, we’ll cover the seven most famous crypto scams in the last 10 years. Enjoy! 

OneCoin

OneCoin is the largest scam in Web3’s history. From 2014 to 2017, over $4 billion has been stolen from hundreds of thousands of investors worldwide. The clever Ponzi scheme was founded by Ruja Ignatova, now commonly known as the Crypto Queen. At first, Bulgarian nationals claimed that OneCoin was a legitimate crypto project, similar to Bitcoin or Ethereum. In reality, OneCoin failed to deliver an actual use case in over three years of existence.

To attract investors, the Crypto Queen created a massive multi-level marketing system. Early investors were encouraged to bring in others to receive additional benefits. To cover this fraudulent scheme, Ruja Ignatova created a semi-legit educational business that sold informational packages related to investing and Web3. The educational material was simply plagiarized, often from free sources like YouTube.

In the end, OneCoin’s token never went public and could only be traded on an internal exchange called xcoinx – a platform available to the high-tier users. Selling was also highly limited. With the company already under investigation in multiple countries, in early 2017, xcoinx shut down, and with all withdrawals no longer being processed. In 2018, Bulgarian authorities raided the company’s offices, seizing property and cryptocurrency. 

Ruja Ignatova vanished in 2017, and her whereabouts are still unknown. Her brother, Konstantin Ignatov, took over but was arrested in 2019, pleading guilty to fraud and money laundering. Co-founder Sebastian Greenwood was also arrested and is serving time in the US. Ultimately, OneCoin was never a legitimate cryptocurrency. It was a fraudulent operation that exploited the cryptocurrency boom to deceive investors and steal billions of dollars.

The FTX collapse

Just three years ago, FTX was the third biggest CEX in the world. Founded by Sam Bankman-Fried, FTX was competing with Binance to become the most trusted crypto trading platform in the world – lobbying political interests and spending hundreds of millions on marketing in the US and outside of it. Sam Bankman-Fried, or SBF as he was widely known, was bright, young, and rich – ending up as an industry darling. Unfortunately, the reality did not match up with the hype, as was revealed in an article published by CoinDesk in November 2022 showing that Alameda, the sister company of FTX, relied on FTX’s token (FTT) to cover almost 70% of its liabilities.

The article rattled the public, but for a few days, it looked like the storm had passed. The final blow came when Binance CEO, CZ (himself sentenced to four months in prison in 2024, having been convicted of violating US money laundering laws). The crypto billionaire announced that his company would sell its entire FTT bag to mitigate risks. After that, panic spread. FTX registered over $6 billion in withdrawals before going bankrupt. Binance even proposed helping FTX with the liquidity it needed, but its due diligence team raised too many red flags. In just three days, FTX was left with nothing but liabilities and a small portfolio of cryptocurrencies. On November 11, FTX filed for bankruptcy, and Sam Bankman-Fried resigned as CEO. A month later, he was arrested. At trial, he was found guilty of committing two counts of wire fraud and conspiracy to commit money laundering and was sentenced to 25 years in prison.

Fortunately, the return of the crypto bull market meant the “small” residual crypto portfolio held by FTX was worth over $11 billion – more than enough to cover all FTX’s liabilities. Less positively, because of how embedded FTX was within the crypto ecosystem, FTX’s collapse rippled across the entire industry, bankrupting several major platforms such as BlockFi, Genesis, and Voyager. Trust in crypto took a major hit, and regulators – who never like to let a crisis go to waste – around the globe called for stricter oversight of the world’s newest asset class. 

The Malone Lam scam 

The Malone Iam scam is the biggest social engineering scam we know of. Three young Americans – Malone Lam, Veer Chetal, and Jeandiel Serrano – stole over $230 million from a Genesis creditor. How? They ran a complex social engineering attack to capture their private seed phrase. They pretended to be Google and Gemini support to trick the victim into sharing his screen, which gave them all the information required to access his self-custody wallet. 

However, they made a massive mistake. Instead of hiding their loot and lying low for a while, the three young men started showing it off. They recklessly bought luxury cars and expensive watches. Malone even spent over $500,000 in a club one night and paid for signs with his name written on them.

Their eventual downfall came after they recorded the money-laundering process and posted the videos on Discord. Investigators used these recordings to track their activities. All this information and social media posts led to their eventual arrests. The police arrested Malone and Serrano on September 18, 2024. They froze over $9 million in stolen funds and successfully returned $500,000. 

BitConnect

Just two years after the launch of OneCoin, the crypto world was hit by another massive Ponzi scheme – BitConnect. But this time, the project came up with a “real” utility to attract even more investors on board. BitConnect claimed it could deliver up to 40% monthly returns using a trading bot. To get access to those returns, users just needed to deposit their Bitcoin on the platform. In return, they got BitConnect’s token and a promise that it would grow 1% per day through the platform’s real returns from the market. 

In reality, BitConnect just used the deposits of new customers to cover the “returns” of previous customers. Of course, the platform relied on a multi-level marketing scheme. Investors were encouraged to bring in friends and family members to receive interesting benefits. This helped the platform grow quickly, with BCC surging from a few cents to $400 in a few years. At its peak, BitConnect had a market capitalization of over $2.8 billion – one of the biggest Web3 projects at the time. Taking from OneCoin’s experience, BitConnect operated an internal exchange, limiting withdrawals based on investment tiers. BCC was never listed on other exchanges as well. 

Legal issues followed, with Texas and North Carolina issuing cease-and-desist orders. In January 2018, BitConnect shut down its lending and exchange services. The platform blamed a series of DDoS attacks. When the platform collapsed, BCC’s value dropped by 96%. This wiped billions of dollars in investor funds. In 2021, the SEC sued founder Satish Kumbhani, promoter Glenn Arcaro, and Future Money LTD, the legal entity behind BitConnect. The authorities alleged that BitConnect defrauded US investors of $2.4 billion. Arcaro restituted $24 million to over 800 victims in 2023. 

The PlusToken scam

PlusToken, a project launched by Chen Bo, is Asia’s biggest crypto scam. The project was advertised as a crypto wallet that would reward users for buying and holding PLUS. Investors could only purchase the token with Bitcoin or Ethereum. The rewards should’ve been generated by exchange profit, mining income, and referral benefits. In reality, it was a simple pyramid scheme. 

Chainalysis estimated that the team behind the project received over 180k BTC, 6.4M ETH, and 110k USDT during their activity. That portfolio would be worth around $30 billion in 2025. 

In 2020, a Chinese court charged the organizers with building a pyramid scheme that stole billions of dollars from members. The ruling on 14 people, including Chen Bo, was upheld in a second trial as final.

The platform had no actual operations or functions. The accused used the digital assets for expenses, including paying employees, and sold some to buy properties and luxury cars for themselves or relatives. Before the trial, the Chinese police seized some digital assets, including 194,775 BTC and 833,083 ETH. The rest have yet to be found. What’s interesting about PlusToken is that, at the time, the movement of funds from this Ponzi directly impacted Bitcoin’s price. The same Chainalysis report showed the liquidation of PlusToken’s BTC drove the cost down. The team was selling large chunks of their portfolio through OTC deals, significantly affecting the liquidity of the crypto market. 

The Squid Game rug pull

Back in 2021, Netflix’s Squid Game was the hottest topic in the world. Millions of people were discussing it on social media, and when the Squid Game Token came out, everybody started buying. The project promised to create a play-to-earn game based on Netflix’s series – offering a fascinating gameplay and massive rewards. The project was filled with red flags from the very beginning, but the chase of profits made investors blind. 

Perhaps the biggest thing that should’ve scared investors away is the fact that once purchased, SQUID tokens couldn’t be sold. To sell their SQUID tokens, investors must buy another token: marbles. This trap locked investors in and made them drop the idea of withdrawing. Using a part of the raised funds, scammers ramped up the media coverage – buying the KOLs and dismissing critics. The projects were everywhere, and users started flooding in with hundreds of thousands of dollars in investments.

In just a week, SQUID surged from pennies to over $2,500. When the token hit $2,860, the scammers cashed out, leaving with over $4 million in profits and dropping SQUID to less than $1. The team erased all online traces – deleting accounts and removing the website. To this day, no one has been held accountable for the scam. The Squid Game rug pull marked a turning point for the crypto world. Since 2021, the number of scams has increased tremendously, reaching a peak of $51 billion lost in 2024. 

The LUNA downfall

The Terra Luna crash will be remembered as the most catastrophic failure outside of FTX. Just weeks before the downfall, Terra’s ecosystem was considered one of the strongest in DeFi. Do Kwon, the founder of Terra, built its ecosystem around two tokens: LUNA and UST. UST was an algorithmic stablecoin pegged to the dollar. The peg was maintained through an algorithmic balance with LUNA: when demand for UST rose, new UST was minted by burning LUNA, and when demand fell, UST was burned to buy back LUNA. In theory, the system looked simple and almost impossible to break. In practice, Terra’s system broke down in hours. 

The system began to fail when a major withdrawal caused UST to depeg from the dollar. Many believe the withdrawal was orchestrated by Sam Bankman-Fried to drop the competition of Terra – but that is just a rumor. Another theory is that the creation of a Bitcoin reserve to back Terra created an attack vector for speculators to profit from attacking the algorithmic stablecoin, which made the entire project inherently more vulnerable. The eventual depeg – which is not supposed to happen with stablecoins – triggered public panic. Many investors rushed to redeem UST for LUNA, flooding the market with tokens. This led to hyperinflation and LUNA’s price plummeting from $80 to less than a cent.

The failure of Terra’s ecosystem led to a series of catastrophic events in the crypto market. Most tokens dropped in price, which led to the bankruptcy of many big companies and lenders. The summer after Terra’s collapse was marked by the downfall of Celsius, one of the biggest crypto lenders at that time. The company was run by Alex Mashinsky, who was sentenced to 12 years in prison for fraud just this month. In 2023, Do Kwon was arrested for fraud and market manipulation, marking the start of tighter regulation on stablecoins. The collapse of Terra was a harsh reminder that algorithmic stablecoins are not foolproof and that celebrity endorsements or hype can cloud judgment.

Closing thoughts

As we’ve seen, crypto scams have been the cause of massive losses, convincing people they could get rich quickly by investing in tokens. The truth is that getting rich overnight is nearly impossible. Instead, building a diversified portfolio that grows your wealth over time can help you get there as time passes.

If you’re unsure how to create such a portfolio, you’re not alone. That’s where Trakx comes in. Our indices, which are backed 1:1 with crypto held in secure accounts with market-leading custodians, are designed to help you get the most out of every asset category Web3 has to offer, from the top 10 cryptocurrencies to leading blockchains and beyond. Whether you’re risk-averse or more adventurous, Trakx has options for you. Choose a CTI based on EURO sovereign bond yields for stability, or take a more speculative route with memecoin CTIs. Whatever your strategy, Trakx makes investing wisely and growing your assets easy.