Historically, rallies in cryptocurrency prices have often resulted in a rise in scams as market activity intensifies. However, the main driver behind this trend is the fear of missing out, which has led some victims to lose tens of thousands of dollars.
It is, therefore, imperative for investors to stay alert and exercise caution during periods of heightened excitement, analysts say.
Rising prices always attract new, inexperienced investors who look to capitalise on the momentum. The driving force is the fear of missing out, says Stanford Cardoz, anti-money laundering director at virtual assets trading platform BitOasis.
“Because of this, fraudsters exploit this environment and target individuals who lack sufficient knowledge about virtual assets."
MB, a Dubai-based crypto investor who prefers to stay anonymous, remembers being scammed in 2021. “A lot of new projects had come out and you could participate in a non-fungible tokens project through minting,” he says.
NFT minting is the process of creating non-fungible, or unique, tokens on a blockchain through smart contracts. “I saw one of these mints on Twitter [now called X], which looked legitimate. However, maybe these accounts paid to get verified on Twitter and bought fake followers. I decided to mint an NFT but ended up clicking a phishing link instead, which analysed all assets in my wallet and stole them. I lost almost $60,000."
Bitcoin surged to a record high above $108,000 on December 17 after president-elect Donald Trump suggested plans to create a US Bitcoin strategic reserve.
The value of cryptocurrencies stolen in 2024 has hit about $2.2 billion, with more than 60 per cent of that coming from North Korea-affiliated attacks, a study from blockchain data platform Chainalysis found last week.
That figure is a more than 21 per cent leap from last year and marks a fourth consecutive year of breaching the billion-dollar mark, the New York blockchain company said in a preview of its 2025 Crypto Crime Report.
From June 2011 to March 2024, almost $19 billion has been reported stolen globally, comprising more than $6 billion in security system breaches, slightly less than $5 billion in decentralised finance hacks, and almost $8 billion in fraud, according to a report by Crystal Intelligence, a blockchain analytics, compliance and risk-monitoring company.
The investor MB fell victim to another crypto scam at the beginning of this year. He wanted to participate in a crypto project called Ethena, which helps generate yields on money. But the scammer had created a website that looked identical to the real portal, except with the smart contracts changed.
“I failed to look at the website URL accurately. The scammer may have web developers who helped build the UI similar to the legitimate website. I lost $5,000 in the process,” he says.
“Now, I exercise more caution and use Pocket Universe, a browser extension that protects users from Web3 scams. When I visit a crypto-related Twitter page, I make sure the followers are legitimate. There are many scam Twitter pages out there.”
Referring to another sophisticated scam, he cites how people approach you to collaborate on projects. You get on a Zoom call after verifying them and they eventually send a link to update your Zoom or Discord account.
This turns out to be a scam link and by clicking it, you potentially give them access to scan your computer for information. Some people make the mistake of saving their crypto seed phrases on their laptop. The scanner delivers information to the fraudster, who is able to steal your wallet holdings as a result, MB explains.
“In another instance of attempted fraud in 2022, someone reached out to me on Discord wanting to write about me and requested access to my Discord community,” he recalls. "I was a novice back then and granted access.
“The person was able to become an administrator of my Discord community, which had about 6,000 people in it. He put a scam link in the channel promoting a new project. Unfortunately, a few members in my community ended up minting this project, which was a scam and they all lost money.”
Similarly, Fazlur Rehman, a 69-year-old Indian who ran a business in the UAE for six years, lost $90,000 in a crypto scam. "I'm scared to invest in crypto again after losing 90 per cent of my life savings," he says.
In 2023, a stranger approached him with a promising investment opportunity in a decentralised crypto exchange. He was added to a WhatsApp group, which allegedly comprised other investors on the platform who shared their "investment success stories" and "trading wins". Starting with small amounts, Mr Rehman gradually increased his investment.
When he later grew suspicious, he tried to withdraw all his money from the trading account, but the platform blocked him and asked to pay an additional $10,000 to reactivate his account. All his attempts to contact the exchange have been futile. When he tried to file a police complaint in India, it was unsuccessful and the officer questioned his decision to trade in cryptos.
Navin Gupta, chief executive of Crystal Intelligence, says it is a cat-and-mouse game trying to prevent digital crime on the technology side. Every day, scammers come up with new ideas and they are highly sophisticated individuals and organised groups, he says.
Mr Cardoz from BitOasis says scams, especially in Web3 and the crypto ecosystem, are agnostic of jurisdiction.
However, what probably differentiates this region from the rest of the world is fleshed out, granular regulatory frameworks which look at consumer protection. In jurisdictions that are not regulated, there's no recourse for customers who fall for these scams.
“The UAE is one of the very few jurisdictions that have introduced comprehensive regulatory frameworks specifically for virtual assets and the governance around it,” Mr Cardoz says. "Because of the guardrails, there’s an enhanced consumer protection framework around it."
“Our regulator, the Virtual Assets Regulatory Authority, makes sure that virtual asset service providers are responsible for communicating risks, especially for vulnerable clients like retail customers."
Most law enforcement departments in each emirate have their own virtual asset crime division. The Ministry of Interior also has a similar division, he adds.
Public-private partnerships are also crucial in the crypto world, such as the bond between BitOasis and Crystal, and the partnership the two companies have signed individually with Dubai Police. This helps pass on information to law enforcement quickly.
However, despite law enforcement and crypto companies placing safeguards and requirements to minimise damage, investors must stay alert as the industry is still difficult to regulate.
Smarter scams
Similarly to how fraud in the fiat world has developed, crypto fraudsters have evolved on the blockchain, according to the BitOasis executive.
“They now impersonate applications that are very similar to the real thing, especially in the DeFi world,” Mr Cardoz explains. "They combine social engineering and website takeover. Some of them have used deep fake technology to take over accounts.”
"The most common forms of crypto scams are impersonation, investment scams and romance scams, which could be like pig butchering, where fraudsters take you into confidence over months and eventually take your money and run. The lure of quick profits often clouds judgment, and this typically makes investors forget critical due diligence."
Mr Gupta warns people to make sure that crypto is not being used to launder money or move funds in and out of the banking system, he says.
Customers in the crypto field should exercise the same due diligence that they would apply in the fiat world, too.
If you're new to this world, do your research and sign up only to licensed and regulated VASPs, Mr Cardoz recommends. Once you sign up, secure your account by using multifactor authentication, don't share your private keys and avoid unsolicited offers.
If a crypto customer is scammed, they must first inform their existing digital asset provider. If they are not working with one, they can go directly to Dubai Police, who have smart police stations where they can file a complaint, Mr Gupta explains.
