$100M+ Lost due to Crypto Scams and Only $36M Recovered by US Regulators. How to Protect Yourself?

As reported by the Wall Street Journal, US regulators have filed over 90 cryptocurrency fraud cases in the last two years and have little to show for it.

The report states that US regulators at both the federal and state level could recover just $36 million of investor’s funds lost to fraud.

$100s of Millions Lost to Crypto Fraud

This number is just a drop in the bucket when you take the amount of money lost because of crypto scams over the past two years into consideration.

While it’s difficult to estimate the sheer amount of money lost to fraud, Bitcoin.com estimates it’s $100s of millions over the past 2 years. According to their data, they even went as far to say the amount of money lost equates to $23 million a day if you include the 3 largest crypto scams of Coincheck, Bitconnect, and Bitgrail.

Crypto Fraud Lawsuits

According to the Wall Street Journal report, US regulators had a difficult time tracking down lost funds because of the anonymous and borderless nature of cryptocurrencies. The Journal also noted that the number of filed cases has exploded since the crypto markets took a downturn.

In 2017 when crypto prices were going parabolic, people filed only 4 cases of fraud in the entire year. In 2018, just last month alone, the Securities and Exchange Commission (SEC) saw 5 cases of fraud filed. It appears people have more time on their hands during this bear market and are trying to recover losses.

While the SEC and other US regulators could not recover a substantial amount of lost funds, state regulators have brought in over 70 cryptocurrency-enforcement actions this year and have dramatic increases the number of lawsuits against cryptocurrency fraud schemes.

While these actions may help to reduce fraud and penalize those responsible, most investors are out of luck in getting their money back.

Prevent Yourself from Falling Victim to Crypto Fraud

As seen from the facts and data mentioned above, crypto scams run rampant in the space.  As a crypto investor, it’s important that you understand how to spot scams and avoid them at all costs.

Initial Coin Offerings (ICOs)

One of the most common scams of 2017 and beginning of 2018 came from initial coin offerings (ICOs). There are a number of ICOs that launched just to collect investors’ money and had no intentions on building a viable product or delivering what they promised.

Also, some genuine ICOs managed their projects poorly and had unrealistic goals and expectations. Therefore, many investors lost money in this space when fraud wasn’t even the initial goal.

Social Media and Fake Websites

Many fraudsters create fake Twitter profiles, Telegram accounts, email addresses and even fake websites to trick people into sending them cryptocurrency or providing them with private keys, personal information, etc.

This is why many prominent Twitter users have (Not Giving Away ETH) or (Not Asking for ETH) in their Twitter names. To avoid social media scams, users should never send ETH or any crypto and provide no entity or service with your private keys.

Users should always check the website address to ensure it’s spelt correctly and check the top left corner of a web page to see if the site has a valid security certificate.

Pyramid Schemes and Pump and Dump Groups

A pyramid scheme is the textbook example of a Ponzi scheme or scam. Investors should avoid any project that actively encourages the recruitment of new investors to maximize profits. Also, schemes that promise massive returns and other unrealistic incentives are most likely scams.

Pump and dump groups are another highly popular scam that people fall for. These groups use social media channels such as Telegram, Discord, Slack, etc. and get people to invest in certain coins only to pump it up and then dump it on them later.

The creators of these types of groups allow the price to build up by convincing investors to buy more, and then they sell all their coins to the members who are buying.


The scams and types of fraud mentioned here only scratch the surface. Investors in the cryptocurrency industry must remain diligent in their awareness and understanding of the space as crypto fraud runs rampant.

Whenever there is opportunity and money involved, scammers will exploit unsuspecting individuals. People have already lost millions of dollars and people will lose millions more, just make sure you don’t contribute to this number.

Do you think the SEC and other regulators will soon develop frameworks to help prevent crypto fraud? Would increased regulation even help prevent crypto fraud? Let us know what you think in the comment section below.