Late last year the cryptocurrency Squid burst on to the scene with much fanfare and ended up spraying a lot of red ink.
Inspired by the Netflix series “Squid Game”, Squid began trading at a price of just one penny and surged to $2,856 before sinking to the bottom of the crypto sea, after its anonymous founders cashed out.
More than 40,000 people still held the token after the crash and analysts believe Squid's developers made off with $3.8 million.
The Squid scam has been described as a rug pull, where developers of a cryptocurrency project — typically a new token — abandon it unexpectedly, taking users’ funds with them.
In June 2021, self-made billionaire and Shark Tank star Mark Cuban took a hit on Titan cryptocurrency, which spectacularly lost all its value in a day.
Rug pulls were a big factor in 2021, accounting for 37% of all cryptocurrency scam revenue in 2021, compared with 1% in 2020, the data firm Chainalysis said.
Kim Kardashian Sued For Promoting An Alleged Scam
Many social media influencers, celebrities and even executives have been paid to pump tokens or projects online. But that doesn’t mean it’s valuable or a good investment. Feeding into social media hype will often result in money lost, experts say.
Kim Kardashian, boxer Floyd Mayweather, and basketball player Paul Pierce were sued earlier this week by investors, who accuse them of collaborating with the cryptocurrency EthereumMax to deceive them.
The class action claims EthereumMax operated a "pump and dump" scheme - where misleading marketing is used to inflate the price of an asset then sold to unwitting investors at a profit.
As the SEC warned in 2017, “it is never a good idea to make an investment decision just because someone famous says a product or service is a good investment.”
TheStreet Recommends: Crypto Investing Strategies In 2022
Cryptocurrency-based crime hit a new all-time high in 2021, according to Chainalysis, with illicit addresses receiving $14 billion over the course of the year, up from $7.8 billion in 2020.
On Monday, the North American Securities Administrators Association (NASAA) said that investments related to cryptocurrencies and digital assets is the top investor threat "by far."
The association warned about crypto investment scams that guaranteed high returns with no risk.
"If it sounds too good to be true, it probably is," the association said.
Fake prizes, Giveaways, Sweepstakes
Fake prizes, giveaways or sweepstakes are another brand of ripoff, where a scam page could be mistaken for a real philanthropic campaign.
Email phishing attacks are another source of crypto crime where consumers receive a message from what appears to be a prominent crypto investor and click on to an attachment.
And then there are bogus initial coin offerings (ICO). Indian authorities believe at least 900 people were recently cheated in a fake ICO scam.
In all fairness, Chainalysis said things on the crypto crime front are actually getting better.
The report noted that the growth of legitimate cryptocurrency usage is far outpacing the growth of criminal usage, and that illicit activity’s share of cryptocurrency transaction volume has never been lower.
Though it’s impossible to find a sure bet, experts recommend investors fully understand the risks surrounding cryptocurrency, before buying in.