Cryptocurrency Scams
Since cryptocurrency operates in a decentralized and digital ecosystem, security awareness is crucial for investors and traders. Understanding the risks helps prevent financial losses and scams. Avoid Becoming a Victim of Crypto Scams!
Rug Pulls and Scams
A rug pull occurs when developers of a cryptocurrency project or DeFi (Decentralized Finance) protocol withdraw all the funds from the liquidity pool after attracting investors. Many new tokens and DeFi projects are unregulated, and malicious actors can exploit this by creating high-yield promises to attract unsuspecting investors, only to disappear once the funds are collected.
Pump and Dump Schemes
Fraudsters often manipulate the prices of low-volume cryptocurrencies by artificially inflating their value (pump) and then selling off their holdings (dump), leaving other investors with worthless assets. These schemes are common in smaller, less-regulated markets.
Classic Rug Pulls Example (Developers Exit with Funds)
Squid Game Token (SQUID) in 2021 is a classic example of a rug pull scam. Inspired by the hit Netflix show Squid Game, this token gained massive hype, and the price skyrocketed. Sadly, users soon realized they couldn’t sell their tokens. The developers drained liquidity and disappeared, taking off with over $3 million. The SQUID token reached an all-time high of $2,861 per token on November 1, 2021, before crashing to nearly zero within minutes when the developers executed the rug pull.
Scams Stats:
In 2024, cryptocurrency scams resulted in significant financial losses worldwide. According to Chainalysis, approximately $9.9 billion was lost to various crypto scams, with high-yield investment scams accounting for over half of this amount. According to The Motley Fool, Americans reported losing $3.9 billion to investment fraud and scams, with 78% of these cases involving cryptocurrency transactions.
Stay Informed, Stay Safe! Stay Tuned for My Upcoming Book: "Cryptocurrency Basics: A Beginner's Guide"
Contact Us: Support@potestassolutions.com