Five Major Cryptocurrency Frauds and Scandals Investigation

Cryptocurrency has been plagued by significant frauds and scams, including high-profile collapses like FTX and Binance, alongside instances such as Terra USD and Squid Game. Factors contributing to such vulnerabilities include a lack of public understanding, the get-rich-quick mentality, and the semi-anonymity of transactions. Ultimately, caution is advised for investors in the cryptocurrency space, given its inherent risks.

Cryptocurrency has a longstanding reputation for fostering fraud and scams, a trend highlighted by the notable collapse of the Mt. Gox exchange in 2014. The anonymity of crypto transactions, coupled with a public eager for potential riches, has created an ideal environment for fraudsters. Since hitting mainstream consciousness in 2017, its popularity surged, particularly during the low-interest-rate environment initiated by the Federal Reserve in 2020. Notably, figures such as U.S. President Donald Trump have even launched their own cryptocurrencies, bringing further attention to the market.

As cryptocurrency’s presence expanded, so too did the incidence of fraud and financial disasters. The massive failures in the sector include five high-profile scandals: FTX, Binance, Terra USD, Squid Game, and LIBRA. Each reflects the vulnerabilities and risks inherent in cryptocurrency investments, demonstrating how quickly fortunes can vanish.

1. FTX: This large exchange faced a significant collapse amid a cryptocurrency market downturn in 2022. Although it was reported to hold $11.3 billion of client assets, only $2.3 billion was retrievable. FTX’s misappropriation of funds led to its bankruptcy declaration in November 2022, with its founder, Sam Bankman-Fried, sentenced to 25 years in prison for fraud.

2. Binance: In November 2023, Binance pleaded guilty to crimes, including violating the Bank Secrecy Act, and agreed to pay $4 billion in fines. Its CEO, Changpeng Zhao, admitted to failing to enforce robust anti-money laundering processes. The exchange’s failures reportedly facilitated criminal activities, raising significant regulatory concerns.

3. Terra USD: This stablecoin faced a dramatic collapse in May 2022 when it failed to maintain its peg to the U.S. dollar. The combination of rising interest rates and a loss of confidence among traders caused it to plummet swiftly to near worthlessness amid a challenging market environment.

4. Squid Game: Launched in 2021 to capitalise on a trending Netflix series, Squid Coin turned out to be a rug pull, with developers absconding with $3.36 million shortly after launch. The coin’s price surged to $2,861, before plummeting once investors lost access to sell their tokens, exemplifying the risks of speculative investments.

5. LIBRA: Promoted by Argentine President Javier Milei in 2025, this cryptocurrency attracted millions in investment but crashed as insiders sold their holdings, resulting in a 90% price drop. The marketing team behind the project is connected to other fraudulent ventures, including that of Melania Trump’s cryptocurrency.

The prevalence of cryptocurrency-related scams can be attributed to several factors, including the attractive=get-rich-quick mentality, widespread public ignorance about the workings of crypto, the lack of backing for many cryptocurrencies, and the ease of creating new cryptocurrencies. Additionally, the semi-anonymous nature of transactions facilitates criminal activities while the irreversibility of crypto transactions leaves investors vulnerable to losses.

In conclusion, cryptocurrency presents significant risks for investors, exacerbated by a lack of understanding and a prevalence of fraud. Vigilance and research are essential for anyone looking to engage in the crypto market to protect themselves from potential scams.