Beware the Dark Side of Crypto: Scammers, Rug Pulls, and Deceptions
The world of cryptocurrency is changing fast. New projects and digital coins pop up all the time. But be careful, Because these days more Crypto scams are happening too. Some people and groups are trying to trick investors out of their money.
The Different Types of Crypto Scams
There are many different ways in which crypto founders can steal investors’ money. Some common methods include:
- Rug pulls: This is where the founders of a cryptocurrency project abandon the project and take all of the investors’ money.
- Pump and dump schemes: This is where the founders of a cryptocurrency project artificially inflate the price of the token, then sell their own tokens and make a profit.
- Exit scams: This is where the founders of a cryptocurrency project close down the project and take all of the investors’ money.
These crypto scams caused big problems in the cryptocurrency world and for investors. They made the industry look bad and made it harder for real projects to get funding. Plus, many investors lost a ton of money because of them.
Crypto Scams: Betrayed Trust by Crypto Founders Who Stole Investors’ Money
As digital currencies grow, so does the bad stuff that comes with them. Hackers, scammers, and even some trusted founders have grabbed billions of dollars from this space through crypto scams.
In 2022 alone, data from Chainalysis shows that bad actors made off with more than $3.8 billion in crypto, most of it stolen from decentralized finance (DeFi) protocols by North Korea-linked attackers such as the Lazarus Group.
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In the first quarter of 2023, 57 cases of Crypto Scams were reported, with extrapolations of those figures suggesting there could be as many as 228 incidents by the end of the year.
Hacks account for a large portion of the money lost in the digital asset industry, but cases of crypto founders and developers absconding with users’ funds have become quite prevalent.
Such Crypto Scams usually take the form of rug pulls, where developers abandon projects midway and flee with investor funds. Ponzi schemes are also popular for malicious crypto founders to steal money from unsuspecting crypto investors.
Crypto Scams: The Notorious 9 Faces of Betrayal
These betrayals often manifest as rug pulls, where developers abandon projects midway and vanish with investors’ funds, or as Ponzi schemes that deceive unsuspecting crypto enthusiasts. Let’s delve into some chilling cases of Crypto Scam where those entrusted with safeguarding user funds succumbed to temptation and vanished with millions in crypto.
Faruk Fatih Özer (Thodex)
Faruk Fatih Özer, founder and former CEO of Turkey’s Thodex cryptocurrency exchange, earned notoriety on the global crypto stage. Starting in 2017, Thodex evolved into one of Turkey’s largest exchanges, expanding globally in 2020.
Özer’s abrupt disappearance in April 2021 left Thodex’s nearly 400,000 users in the lurch, with investments worth almost $600 million locked up. Despite vague explanations of a “temporary shutdown” due to cyberattacks, Özer’s subsequent silence fueled suspicions that he had fled to Albania with $2 billion of users’ funds.
An international arrest warrant led to Özer’s arrest in Albania and extradition to Turkey in 2023 for Crypto Scams. He got in trouble for creating a criminal group, committing fraud, and laundering money. People say the losses were between $24 million and a huge $2.6 billion.
In September 2023, Özer, along with two siblings, received a sentence of 11,196 years in jail for the Crypto scam, including other charges.
Stefan He Qin (Virgil Sigma)
Stefan He Qin, founder of Virgil Sigma and VQR Multistrategy Fund LP, orchestrated the vanishing of $123 million belonging to investors. Qin, a 19-year-old Australian college dropout, lured investors with promises of up to 500% profits from arbitrage opportunities in the crypto market.
But his plan fell apart when he couldn’t give people their money back, so he tried taking money from another fund he controlled, the VQR Multistrategy Fund LP. Living the high life, including having a fancy condo in Manhattan, didn’t do him any favors. He confessed to committing securities fraud and ended up with a prison sentence of seven and a half years for the Crypto Scams.
Paul Vernon (Cryptsy)
Paul Vernon, the guy who started Cryptsy, was in charge of one of the worst Crypto scams in the crypto world. Cryptsy, once a prominent exchange, descended into chaos when users reported withdrawal issues in 2016.
Vernon said the exchange got hacked, but it turned out that millions in crypto had disappeared. Six years after Cryptsy’s fall, Vernon was charged with Crypto Scams, and multiple crimes, including running a plan to swipe over $1 million worth of crypto.
Ruja Ignatova (OneCoin)
Ruja Ignatova, known as the Cryptoqueen, masterminded one of the largest crypto scams in history. OneCoin, founded in 2014, promised high returns but was a fraudulent scheme that defrauded people of over $4 billion.
Despite her disappearance, investigations continue for the Crypto Scams
AnubisDAO: A Rug Pull-in Disguise
AnubisDAO was a cryptocurrency project that gained attention in October 2021. It presented itself as a decentralized finance (DeFi) project with a dog-themed concept. One of its primary features was the sale of its native cryptocurrency, the ANKH token, which became immensely popular and raised around $60 million within a single day. However, the jubilation
The situation surrounding the project quickly turned sour when it lost control of its liquidity pool, leading to a staggering loss of $60 million. This incident was widely perceived as a “rug pull,” (Crypto scam), where the founders, in this case, allegedly made off with 13,556 ETH (Ethereum) from crypto investors. AnubisDAO operated without an official website or whitepaper, and its developers used pseudonyms, making it challenging to hold anyone accountable.
StableMagnet: Exploiting a Blindspot
StableMagnet was an automated market maker (AMM) project in the cryptocurrency space. It came into the spotlight in June 2021, when it was revealed that the project’s creators had stolen more than $27 million from users. What’s fascinating about this case is how the developers took advantage of a weakness in blockchain tools like Etherscan and BSCScan.
They hid a sneaky way to steal users’ money in their smart contracts. Surprisingly, one person who got ripped off found the scammers and got back a lot of the stolen money. This person followed the Crypto Scams trail all the way to a group in Hong Kong and got the police in Manchester involved. They caught two of the scammers and got back the stolen money.
Squid Game: Capitalizing on Popularity
his is also one of the famous Crypto Scams. it has used the huge popularity of the South Korean TV show “Squid Game” to its advantage. The scammers started a crypto project with the same name, taking advantage of the show’s fame to get people interested.
They aggressively marketed their SQUID token as a play-to-earn (P2E) cryptocurrency with the potential for significant growth. SQUID’s value initially skyrocketed, raising approximately $3.3 million from 43,000 users.
However, the project was soon exposed as a Crypto scam, and on November 1, 2021, the creators made off with $3.3 million, causing SQUID’s value to plummet by nearly 100%. Several signs pointed to the project being a Crypto Scam, including website errors and the inability to exchange SQUID for fiat or other cryptocurrencies.
Aurelien Michel (Mutant Ape Planet): NFT Deception
On January 5, 2023, the Department of Justice (DoJ) revealed a criminal complaint against a 24-year-old French citizen living in Dubai. He was accused of taking $2.9 million from the people who joined an NFT community he started. This person, named Aurelien Michel, was the one who came up with Mutant Ape Planet (MAP). It was basically a copycat version of the well-known Mutant Ape Yacht Club (MAYC) NFT series that Yuga Labs had created.
Aurelien Michel tricked people by promising them great things when they bought MAP NFTs. He said they’d get prizes, chances to win in lotteries, special access to digital stuff, and even a shared wallet with money for marketing. But after he sold the NFTs, Michel took the money and moved it into wallets he controlled.
Then, he admitted in the community Discord that he had pulled off a rug, which is a kind of scam. He blamed the community for what he did.
Michel wasn’t just involved in this Crypto Scam; he was also connected to other projects like Fashion Ape NFT and Crazy Camels. In those cases, the developers also stole a lot of money from users.
So, to put it simply, Aurelien Michel created a fake NFT project called Mutant Ape Planet, made people buy it with false promises, took their money, and even confessed to doing something wrong. He did similar bad stuff in other projects (Crypto Scam) too.
The Cajee Brothers (Africrypt Scam): A High-Stakes Disappearance
The Cajee brothers, Ameer and Raees, were behind the Africrypt scam. They operated a cryptocurrency platform that targeted high-net-worth individuals in South Africa, promising high returns from Bitcoin investments. Between 2019 and 2021, they reportedly managed to accumulate a Bitcoin portfolio worth $3.6 billion.
However, on April 13, 2021, users began complaining about being unable to access their funds, and the Cajee brothers claimed the platform had been hacked, urging users not to involve law enforcement.
The brothers disappeared, making it challenging for authorities to investigate. In April 2023, reports suggested that the Cajee brothers had resurfaced in Zurich, Switzerland, sparking an investigation for suspected money laundering.
These stories are strong warnings about the dangers in the crypto world. Investors need to be careful, do their homework, and stay alert to steer clear of these kinds of scams.. Trust, once shattered, can be challenging to restore in the world of digital currencies.
Protecting Yourself from Crypto Scams and Scandals
The cryptocurrency world is filled with opportunities, but it also has its fair share of scams and scandals. Safeguarding your investments and avoiding potential pitfalls is crucial. Here are practical steps to help you stay secure:
Extensive Research: Never rush into any crypto investment. Thoroughly research the project, its team, and its goals. Look for transparency and a proven track record.Stick to Trusted Platforms: Use well-established cryptocurrency exchanges and reputable NFT marketplaces. These platforms often have robust security measures in place.Beware of Unrealistic Promises: Be skeptical of projects that promise guaranteed high returns with minimal risk. If it sounds too good to be true, it likely is.Secure Your Wallets: Store your cryptocurrencies and NFTs in secure hardware or software wallets. Enable two-factor authentication whenever possible.Stay Informed: Keep up with the latest crypto news and developments. Trustworthy crypto news sources can help you spot potential issues early.Guard Your Private Keys: Never share your private keys or sensitive information with anyone. Scammers often use phishing attempts to target individuals.Verify Contracts and Projects: Before investing, verify the legitimacy of smart contracts and projects. Use tools like Etherscan to confirm authenticity.Trust Your Instincts: If something feels off or if you encounter suspicious behavior within a community, trust your gut and consider stepping back.Seek Legal Guidance: If you suspect you've fallen victim to a scam, consult with legal experts or authorities for advice on potential recourse.Report Suspected Crypto Scams: Don't hesitate to report any suspected scams to the appropriate authorities or organizations. Your actions could help prevent others from becoming victims. While the crypto space offers exciting possibilities, it also demands vigilance and caution. By following these guidelines and staying informed, you can reduce the risk of falling prey to crypto scams and scandals.Frequently Asked Questions (FAQs)
Q1: What is an NFT community, and who is Aurelien Michel?
A1: An NFT community involves people who trade and collect non-fungible tokens. Aurelien Michel is the person behind Mutant Ape Planet (MAP), a project related to NFTs.
Q2: What is the Mutant Ape Planet (MAP)?
A2: Mutant Ape Planet (MAP) is a copycat version of the Mutant Ape Yacht Club (MAYC) NFT series created by Yuga Labs.
Q3: How did Aurelien Michel trick people with MAP NFTs?
A3: Michel enticed buyers with promises of prizes, lotteries, exclusive access to digital assets, and a communal wallet with marketing funds.
Q4: What did Aurelien Michel do after selling MAP NFTs?
A4: After selling the NFTs, Michel moved the profits into wallets he controlled and confessed to a rug pull, essentially admitting to a scam.
Q5: Did Michel’s scams end with Mutant Ape Planet?
A5: No, Michel was also involved in other projects like Fashion Ape NFT and Crazy Camels, where the developers stole significant amounts of user funds.
Q6: What action was taken against Aurelien Michel?
A6: The Department of Justice (DoJ) unsealed a criminal complaint against Michel, accusing him of stealing $2.9 million from the NFT community he had created.
Q7: What lesson can we learn from Aurelien Michel’s actions?
A 7: Aurelien Michel’s actions serve as a warning to always be cautious in the world of NFTs and cryptocurrency, emphasizing the importance of due diligence and skepticism when considering investments in such projects.
Crypto Scams: Conclusion
Venturing into the world of cryptocurrency investments can be an exhilarating journey filled with opportunities, but it’s vital to navigate it with caution. To safeguard your financial interests from any Crypto Scam and maintain a secure foothold in this ever-evolving landscape, consider the following strategies:
- Awareness of Scams: Arm yourself with knowledge about the various scams that can potentially ensnare investors in the crypto realm. This includes understanding rug pulls, pump-and-dump schemes, and exit scams that dishonest actors may employ.
- Vigilance: Stay on the lookout for telltale red flags when assessing the viability of a new cryptocurrency project. Often, extravagant promises are a warning sign of foul play. Trust your instincts.
- Research: Prioritize comprehensive research and due diligence before committing your funds to any crypto venture. Knowledge is your most potent shield against deception and fraudulent schemes.
- Regulation: Recognize the essential role of regulatory bodies in the crypto space. Regulators can play a pivotal role in keeping the crypto landscape safe by cracking down on fraudulent projects and educating investors about the inherent risks.
In the dynamic world of cryptocurrencies, staying well-informed and exercising caution should be your foremost strategies for protecting your investments from Crypto scams or any other scandals and your financial well-being. Always remember that if something appears too good to be true, it most likely is. Keep yourself safe as you navigate this exciting financial frontier!
