Special Report

20 of the Biggest Cryptocurrency Scams of the Past Year

Source: Cooper Neill / Stringer / Getty Images North America

20. Was the FaZe-hyped SaveTheKids token a rug pull
> Amount: Unknown

Just like they love promoting anything else, influencers also love promoting cryptocurrencies, though many such promotions end up being pump-and-dump schemes. Still, one influencer-involved scheme stood out in the past year, and it had to do with influencers from the popular esports and content organization FaZe Clan. Several group members, notably FaZe Kay, started in June 2021 promoting a charity-based cryptocurrency called SaveTheKids, promising a good return on investment while also helping raise money for children’s charities.

Except, this was an extreme case of pump and dump or perhaps a rug pull – a scheme where the creators of a coin intend to run away with investors’ money. Within hours of launching the SaveTheKids token, the altcoin jumped in price only to immediately tank, and basically become worthless. The allegation was that pre-sale investors, including some of the other promoters and FaZe Kay, dumped their tokens as soon as the price shot up. Though it is unclear the extent of his involvement, FaZe Kay was kicked out of the group. FaZe Clan itself denied involvement in its members’ activities. It is also not fully clear how much money was lost by investors or how much was gained by those who sold at the height or the token creators.

Source: Mario Tama / Getty Images News via Getty Images

19. NFT scams and hacks, from apes to OpenSea
> Amount: $2.7 million

Just like cryptos, there have been numerous scams and hacks exploiting systems that facilitate trading in NFTs. In December 2021, about 615 ETH (about $2.3 million) worth of NFTs, primarily Bored Apes and Mutant Apes were stolen. Another infamous scam this January involved scammers leveraging a flaw in NFT marketplace OpenSea to purchase valuable NFTs at a much lower price than their current listing. Cryptocurrency analysis firm Elliptic estimates that NFTs with a market value of $1.1 million have been purchased in this way in January and sold for much more.

NFT collector larrylawliet claims he lost his apes and mutant JPEGs (the NFTs) to hackers. According to cybersecurity experts, the scammers tricked larrylawliet into approving interactions with what he may have thought was a dAPP, or distributed app, only it was an actual wallet. The hacker then proceeded to drain larrylawliet’s wallet of NFTs, according to Vice, and sell them – including the Bored Ape – for nearly $700,000. Larrylawliet claims the stolen NFTs could have been sold for 1,000 ETH, or $2.7 million.

Source: Chung Sung-Jun / Getty Images News via Getty Images

18. Squid Game token rug pull
> Amount: $3.36 million

If someone missed on the phenomenon that was the hit series “Squid Game” they fortunately likely also missed on the phenom that was Squid Game token. And just as the series was a smash, so was the unauthorized crypto … well, until it wasn’t.

First, the series never gave permission to use its name. And similar to other such schemes (see SaveTheKids token at No. 20), the creators and promoters likely got rich before the token lost its worth, while retail investors got duped of course. The scam was discovered in late October, when buyers of the token noticed they could not resell them. Then the over $3.3 million that was invested in the tokens got pulled by the creators, according to Wired. Before the classic rug pull scheme was revealed, major news outlets reported on the meteoric rise of the token, which reached over $2,800, without mentioning it was not affiliated with the series, thus giving it an air of legitimacy.

Source: Courtesy of Indexed.Finance

17. Indexed Finance scam – the fight over ‘code is law’
> Amount: $16 million

Indexed Finance, a decentralized finance platform, or DeFi, built on ethereum that produces tokens that track market indexes, was hacked for $16 million in October. Unlike most cases where the hackers remain anonymous, this time the hacker was identified as 19-year-old Andean “Andy” Medjedovic of Canada, a math prodigy who refuses to return the funds, “potentially setting the stage for a groundbreaking legal confrontation,” according to CoinDesk. Many in the self-regulating DeFi world see him as a champion of the “code is law” ethos as he claims he should be allowed to keep the funds.

Law enforcement has rarely been involved in hacks and attacks, and being self-regulated, it is often up to the goodwill of hackers to return the funds. That has also led to the mindset, “code is law.”

At 19, Medjedovic has apparently already earned a master’s degree in mathematics and has written mathematical research papers. He wrote complex code for the hack but did not cover his tracks well and was identified. After failing to appear at court, a judge issued an arrest warrant against Medjedovic. As of late March, Medjedovic has not been found. “The civil case will be heard in Toronto if he can be located,” according to The Record.

Source: Public Domain / Wikimedia Commons

16. Bitfinex pays $2.3M for a $100K transaction
> Amount: $23 million

As noted, computing power for the mining process consumes a great deal of electricity. Gas fees are the amount of ether (ETH) — the native cryptocurrency of ethereum — required to interact with the network. These fees are used to compensate ethereum miners for the energy required to verify a transaction and for providing a layer of security. But gas fees are calculated using a variable formula and can be expensive when the network is congested, according to CoinDesk.

While gas fees can be expensive, crypto exchange Bitfinex paid a ridiculously large sum to complete a transaction. On Sept. 27, 2021, Bitfinex sent $100,000 of the stablecoin tether (USDT) to the the non-custodial exchange DeversiFi. For that, Bitfinex paid 7,626 ETH, equivalent to $23.7 million, possibly the largest gas fee ever recorded on the ethereum blockchain. This was even more erroneous considering that DeversiFi promotes access to DeFi protocols “without paying gas fees” and that the average transaction fee on the ethereum blockchain stood at 0.013 ETH, or $39.96, at the time, according to Cointelegraph.

DeversiFi said it was investigating the cause to determine how this occurred. The miner returned the funds to the exchange, however.

Sponsored: Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.