Cryptocurrency has emerged as a transformative financial innovation, with Bitcoin leading the charge as a decentralized digital asset. While many view crypto as a legitimate investment opportunity, the space is also rife with scams designed to exploit newcomers and seasoned investors alike. From fake coins tied to viral trends to phishing schemes and fraudulent exchanges, the risks are real—and growing.
Take the infamous Squid Game crypto scam, for example. Shortly after the Netflix series exploded in popularity, a cryptocurrency bearing the same name surfaced. Fueled by hype and the fear of missing out (FOMO), investors poured money into the token, driving its value skyward. But behind the scenes, scammers executed a classic “rug pull”—suddenly cashing out their holdings and causing the coin’s value to crash from over $2,000 to less than a penny. The result? Millions lost, and no recourse for victims.
This wasn’t an isolated incident. It’s a textbook case of how emotional manipulation, lack of regulation, and public ignorance converge to create perfect conditions for fraud.
Common Types of Bitcoin and Crypto Scams
As digital currencies gain mainstream traction, so do the tactics used by cybercriminals. Understanding these threats is the first step toward protecting your assets.
Initial Coin Offering (ICO) Scams
An initial coin offering (ICO) is meant to be a fundraising mechanism for new blockchain projects—similar to an IPO in traditional finance. However, scammers have hijacked this model to launch fraudulent tokens with no underlying technology or value.
The Squid Game token is a prime example: it leveraged a globally recognized brand to generate buzz, promised massive returns, and vanished once investors bought in. These scams often revolve around trending topics—celebrities, viral memes, or pop culture phenomena—to create artificial demand.
With over 10,000 active cryptocurrencies and thousands more inactive, it's clear that not all coins are created equal. In fact, 90% of the total crypto market cap is concentrated in just 20 assets, including Bitcoin and Ethereum. This means the vast majority of altcoins serve little to no real-world purpose—and many exist solely to deceive.
👉 Discover how to identify legitimate crypto projects before investing.
Fake Crypto Exchanges
Another red flag is the use of unregulated or proprietary trading platforms. In the Squid Game scam, investors could only buy the token through a single, obscure exchange—and couldn’t sell it afterward. This lack of liquidity is a hallmark of a phony exchange.
To avoid such traps:
- Stick to well-known, regulated exchanges like Coinbase, Kraken, or Binance (where legally available).
- Look for platforms audited by third parties and compliant with financial regulations.
- Read independent reviews from trusted sources like Investopedia, Forbes, or NerdWallet.
Additionally, traditional financial institutions such as Fidelity and Robinhood now offer crypto access, adding a layer of legitimacy and investor protection.
As of 2025, the U.S. Securities and Exchange Commission (SEC) has approved spot Bitcoin ETFs, which allow investors to gain exposure to Bitcoin through regulated brokerage accounts—without holding the actual asset. This marks a significant step toward safer, more transparent crypto investing.
Why Scammers Love Cryptocurrency
While cryptocurrency itself isn't inherently dangerous, its features make it ideal for fraudsters:
- Irreversible transactions: Once crypto is sent, it can’t be retrieved.
- Pseudonymity: Wallet addresses don’t reveal personal identities, making tracking difficult.
- Global reach: Funds can be moved instantly across borders.
Because of this, scammers increasingly demand payment in crypto for fake services, romance schemes, fake tech support, or fraudulent investment opportunities. If someone pressures you to pay in Bitcoin or another digital currency—especially via social media direct message—it should raise immediate suspicion.
That said, not all crypto payments are scams. Major brands like Nike, Apple, and PlayStation now accept cryptocurrency through trusted gateways. The key difference? These companies use secure infrastructure and clear transaction policies.
Always verify whether a merchant is on an official list of crypto-accepting businesses before sending funds.
7 Practical Tips to Protect Yourself from Crypto Scams
Investing in cryptocurrency carries high risk due to market volatility and security concerns. Use these strategies to reduce your exposure to fraud:
- Avoid direct transfers to unknown wallets
Never send money from your personal account directly to a private wallet address unless you fully trust the recipient. Always use reputable exchanges for purchases. - Stick to established cryptocurrencies
Focus on widely adopted coins like Bitcoin (BTC) and Ethereum (ETH). While still volatile, they have proven track records, active development communities, and broad market acceptance. - Be skeptical of meme-based coins
Tokens inspired by celebrities, TV shows, or internet jokes—like TrumpCoin or Shiba Inu—are often pump-and-dump schemes. Do thorough research before investing in any trend-driven project. - Check SEC registration
Legitimate ICOs must register with the SEC through its EDGAR database. If you can’t find documentation for a project, treat it as a potential scam. - Never share private keys or pay upfront fees
No legitimate project will ask for your private key—the password to your wallet. Similarly, requests for gift cards, wire transfers, or “processing fees” in crypto are dead giveaways of fraud. - Use cold storage wallets
Hardware wallets (like Ledger or Trezor) store your crypto offline, protecting it from online hacks. Unlike hot wallets on exchanges, cold storage gives you full control—but remember: if you lose the device or recovery phrase, your funds are gone forever. - Enable scam detection tools
Services like McAfee+ can help detect phishing websites, malicious links, and even AI-generated deepfakes promoting fake endorsements. Combine technical tools with healthy skepticism.
👉 Learn how secure crypto platforms verify legitimacy and protect users.
Frequently Asked Questions (FAQ)
Q: Can I get my money back if I fall for a crypto scam?
A: Unfortunately, most crypto transactions are irreversible. Unlike credit card payments, there’s no chargeback option. Prevention is your best defense.
Q: Are all new cryptocurrencies scams?
A: No—but many are. While innovative blockchain projects emerge regularly, always research the team, whitepaper, code transparency, and regulatory compliance before investing.
Q: Is it safe to buy crypto on apps like PayPal or Venmo?
A: Yes. These platforms operate under strict financial regulations and offer consumer protections not available on decentralized exchanges.
Q: What is a “rug pull”?
A: A rug pull occurs when developers abandon a project and withdraw all funds after attracting investor money—leaving holders with worthless tokens.
Q: Do legitimate companies ask for crypto payments?
A: Some do—but only through official channels. Never send crypto based on unsolicited messages or ads claiming affiliation with big brands.
Q: How can I spot a fake crypto exchange?
A: Warning signs include poor website design, lack of SSL encryption (https), no verifiable company address, inability to withdraw funds, and absence from reputable review sites.
Staying safe in the world of cryptocurrency requires vigilance, education, and smart habits. By focusing on established assets, using trusted platforms, and applying common-sense skepticism, you can navigate the space with greater confidence.
👉 Start your secure crypto journey with tools that prioritize safety and transparency.