Cryptocurrency Has Long Been Associated With Frauds and Outright Scams

Cryptocurrency has long been associated with frauds and outright scams, dating back to at least the massive loss of Bitcoin from the Mt. Gox crypto exchange in 2014.

Cryptocurrency has long been associated with frauds and outright scams, dating back at least to the massive loss of Bitcoin from the Mt. Gox crypto exchange in 2014. In many ways, crypto is an ideal vehicle to commit fraud because of its broad adoption by criminals, the anonymity of transactions and a gullible public that views cryptocurrencies as lottery tickets to riches.

While cryptocurrency really hit the mainstream with the run-up in Bitcoin in 2017, it’s exploded in popularity since 2020, when the Federal Reserve dropped interest rates to zero, encouraging a flight to risky assets. Even U.S. President Donald Trump now has a cryptocurrency ($TRUMP) and First Lady Melania Trump has her coin, too ($MELANIA). President Trump has become a notable crypto supporter and introduced the U.S. Strategic Bitcoin Reserve.

The recent emergence and explosion of cryptocurrency into the mainstream has also brought along with it a raft of fraud, blowups and rug pulls, where crypto creators simply leave with the money that’s been invested in their crypto project. Here are five of the largest crypto scandals.

5 huge crypto scandals

The many, many crypto scams are testament to the danger of investing in cryptocurrency.

1. FTX

FTX was one of the world’s largest crypto exchanges and one of the biggest blowups, following the slump in cryptocurrency markets in 2022. FTX was supposed to hold $11.3 billion in clients’ assets at Alameda Research, the company’s hedge fund arm. However, just $2.3 billion of those funds could be found, as FTX had moved funds out of customer accounts and used them for its own purposes — embezzlement, according to the U.S. Department of Justice. FTX filed for bankruptcy in November 2022. FTX founder and CEO Sam Bankman-Fried was convicted of fraud and conspiracy to launder money, and was sentenced to 25 years in prison in March 2024.

2. Binance

Binance Holding, the name behind the huge Binance crypto exchange, pled guilty in November 2023 to a variety of crimes, including violations of the Bank Secrecy Act and failure to register as a money-transmitting business. The company agreed to pay more than $4 billion as part of the charges. At the same time the company’s CEO, Changpeng Zhao, pled guilty to failing to maintain an effective anti-money laundering program, and then resigned as CEO. “Its willful failures allowed money to flow to terrorists, cybercriminals, and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen at the time. Binance was launched in 2017 and quickly became the world’s largest cryptocurrency exchange.

3. Terra USD cryptocurrency

The year 2022 was rough for cryptocurrency, as rising rates drove risk-averse traders away from the sector. And that lack of confidence helped blow up Terra USD, a stablecoin pegged to the U.S. dollar. In May 2022, traders began selling the stablecoin and, for technical reasons, it had trouble maintaining its peg with the dollar. After that initial break from the peg, the coin spun out of control and plummeted, becoming virtually worthless over a few days. It was one of the first crypto blowups in 2022 as the Federal Reserve rapidly raised interest rates to fight inflation.

4. Squid Game

The Squid Game coin was launched in 2021 to piggyback on the popularity of the Netflix series “Squid Game,” promising an “play-to-earn” online game based on the series. Unfortunately, the coin’s developers treated its investors every bit as badly as the contestants on the series were treated. Squid coin was a classic rug pull operation, with the project’s founders absconding with clients’ funds just a few days after launching the project. The coin skyrocketed in its few days of existence, peaking around $2,861 per coin, but investors had trouble selling the tokens. Days after the launch, the project’s founders cashed out $3.36 million put up by investors and disappeared. In minutes the coin plummeted to less than a cent in price. While small in total value, the fraud was a media sensation, with many crypto traders learning what a rug pull is.

5. LIBRA

Javier Milei, the president of Argentina, promoted a cryptocurrency called $LIBRA in February 2025 posts on social media outlets. “This private project will be dedicated to encouraging the growth of the Argentine economy by funding small Argentine businesses and startups,” said a message on X in translation. Following the message, millions poured into the coin. But just hours later insiders, who owned most of the cryptocurrency, sold out and took an estimated $250 million with them, and the crypto’s price crashed by 9