Top 5 crypto scams to watch out as a trader or investor

Top 5 crypto scams to watch out as a trader or investor
Top 5 crypto scams to watch out as a trader or investor

Top 5 crypto scams to watch out as a trader or investor – The cryptocurrency industry is a wonderful innovation which have proven to become the currency and financial system of the future with minimal control of money by government fiats, it has enabled people all the world to own and move value in a decentralized manner without the hurdles of middlemen like banks and money transfer operators. Although crypto is solving problems but there is currently the issue of fraud and scams in crypto especially in the decentralized finance (Defi) space, Major crypto hacks, thefts, and frauds hit $432 million by April’s end this year alone. in this article we are going to explore various tactics bad actors use in parting way with people’s fortunes:

Exit scam – Crypto exit scam is the kind of fraud that involves running off with investors funds collected during an initial coin offering (ICO), the company may decide to initiate her exit immediately after the ICO or list on an exchange with low liquidity and then disappear. Exit scams started in 2017 following the ICO frenzy that began a new era of fraud especially in defi, the first exit scam happened when an escrow-related cryptocurrency startup called Confido disappeared overnight after collecting $375,000 ICO. Following the news of the Confido exit scam, the market cap of the cryptocurrency fell from about $6 million to $70,000 within a week.

Shortly after LoopX, another crypto startup whose ICO promised “guaranteed profits every week thanks to the most advanced Trading Software out there to date.” It abruptly shut down in February 2018 after raising $4.5 million from investors through a combination of Bitcoin and Ethereum.

Top 5 crypto scams to watch out as a trader or investor2
Top 5 crypto scams to watch out as a trader or investor2

In recent developments, hundreds of exit scam have happened too many to mention, In April, the founder of Thodex exchange allegedly fled Turkey with $2 billion in user funds; one thing common with exit scams is that it is always associated with ICOs and it is important to do your own research (DYOR) before investing in ICOs.

Hackinghackers have been wreaking havoc in traditional finance since inception, crypto being an unregulated and new field have proven to be a fertile ground for hackers to easily run-off of funds undetected. In 2021 alone, hackers have been able to steal $156 million from platforms like Yearn; platforms like PancakeBunny suffered a flash loan attack causing the value of its token to crash by more than 95%.

Rugpull – this is very popular in defi space and it is slightly different from exit scams where a company simply run-off with ICO funds, a rugpull however happens usually in an actively traded token in a decentralized finance exchange such as Uniswap and pancakeswap, a kind of exit scam where project developers drain liquidity from a protocol, leaving investors unable to trade. the project developer can at any point pull liquidity tokens instantly taking price to zero. It always feels like pulling a rug off the feet of investors unannounced and everything crumbles.

DeFi “rug pulls” and exit scams made up 99% of all crypto fraud schemes in the second half of 2020, according to data from blockchain analytics company CipherTrace.

Pump and dump – this is the oldest trick in the book for crypto fraudsters, crypto influencers especially on twitter, youtube and telegram buy large amount of tokens and then hype the project using their influence on social media so their unsuspecting followers will FOMO in and then dump on them. The most recent incarnation of Pump and dump scheme started in Polkastarter IDOs, they do this by raising funds for initial dex offering (IDO) and then launch trading on Uniswap, the first few minute buys are usually insiders purchasing a very large amount of tokens instantly pumping the price to about 20x and then dump few minutes later crashing the price by about 70%!

Unfair token distribution – it is always immoral even in the real world where a few privileged individuals hold 99% of money in circulation which creates huge gap in standard of living, in the crypto space any token where one or two holders account for morethan 51% of all tokens in circulation is bound for a swift crash. Before investing in any token it is very important to check holder structure and how tokens are distributed, failure to do so may result to losing your investment in a heartbeat.


The crypto space is still young and unregulated at the moment, as beautiful as decentralization sounds it has its own share of troubles, namely: SACM! The crypto space seriously need an urgent regulation that will hold everyone accountable for any wrongdoing. Until this regulation of crypto happens expect to see more scammers walk free with billions of dollars in stolen funds.

This article is for information purposes only and should not be taken as a financial advice, consult your financial advisers for professional financial advice.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Financial Watch. Every investment and trading move involves risk. You should conduct your own research when making a decision.

About Sam Gabriel 1696 Articles
Samson Gabriel a graduate of mass communication from Auchi Polytechnic, he is a passionate writer with experience in radio scrip writing. He brings his experience from the broadcast media into play here as he continues to enjoy his passion as a journalist. He can be contacted via whats-app on: +234701105670

1 Comment

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