On May 22nd, a crypto finance project called DeFi100 posted a message to its website: “We scammed you guys and you can’t do shit about it. HA HA. All you moon bois have been scammed and you can’t do shit about it.”

Screenshots of the message immediately went viral on crypto Twitter (always anarchic, easily risible). A popular anonymous crypto-tracking Twitter account called Mr. Whale estimated that DeFi100 had run off with $32 million. Cryptocurrency news outlets, as well as Yahoo Finance, ran with the number. The project owners denied any foul play, and it soon became clear the message was a website hack rather than a serious warning — but by then, it was too late. Panic had set in, and the price of the underlying coin was in free fall.

“We never stole any funds,” a representative for the project told The Verge. “DeFi100 was a very small project, and we were not holding any investors’ funds, so there are no questions of scamming people or running away with their funds.”

DeFi100’s problems are a small part of the picture, but they’re a reminder of the dangers of the ongoing crypto boom. Despite billions of dollars pouring into the space in recent months, there’s still little recourse when investments turn out to be scams. Most importantly, the radical decentralization of the blockchain means there is simply no way to get your money back — and few assurances that an unproven vendor will keep their promises once the transaction goes through. The result is a new gold rush in crypto scams, as speculators seek ever more obscure opportunities and riskier bets.

The DeFi100 project’s website is now back online, but rumors persist about what actually happened. Certik, a popular blockchain security leaderboard, does currently list DeFi100 as a “rug pull,” which is a term for a scam where the founders of a project raise investment money and run. (The project owners say a rug pull would be impossible since they never held investor funds.) It’s just one of a string of scams that today’s crypto holders need to watch out for, along with sketchy altcoins, Discord pump-and-dumps, Elon Musk impersonators, and more malicious forms of cybercrime.

According to Maren Altman, a TikTok influencer with over a million followers who creates videos about cryptocurrency and astrology, there are three kinds of risk that crypto holders should be wary of: bad investments, collapsing projects, and outright scams.

The first and most common kind of risk is simple bad investments in obscure coins. Outside of major players like Bitcoin and Ethereum, there are thousands of smaller coins built on the blockchain technology, promising huge rewards if the coin ever comes to prominence. Subreddits like r/cryptocurrency are awash with accusations of “scam coins.”

“I mean, I’m in a handful of those myself, where it’s just the investment, it was a promise, the development didn’t go through, and I’m still waiting,” she said.

Trying to research obscure altcoins can be confusing for inexperienced traders. Links to cryptocurrency Discord servers often pop up on Twitter, promising an easy pump-and-dump of a smaller crypto coin. Or more confusingly, Twitter bots will accuse Discord servers that don’t exist of pump-and-dumps, hoping to drive up value for a separate coin. But while they promise easy money, the reality is less enticing.

Another risk is the oftentimes innocent but unfortunate mismanagement of funds. In a bullish crypto market, everyone thinks they have a revolutionary idea involving cryptocurrency. And, obviously, a lot of them don’t pan out.

“Things not being clarified, errors in contract, or just a weak link in the development circle,” Altman explained, “leading to mismanagement of money and people not having their investment turn out as expected.”

One extremely well-known example of this was the DAO project. It launched in the spring of 2016 to huge fanfare, only to be completely defunct by the fall of the same year. The project was created by the Decentralized Autonomous Organization and was an attempt to build a venture capital fund on the Ethereum blockchain. Only a month or two in, a hacker found a vulnerability in the token’s code and made off with $50 million. Traders started selling off DAO tokens en masse and the price never recovered.

Sometimes this chaos can end in outright fraud. According to the Federal Trade Commission, crypto-based financial scams are at an all-time high thanks to the surging interest in cryptocurrency. And the line between well-meaning blunder and crypto Ponzi scheme is blurry. Just ask investors of OneCoin or PayCoin.

OneCoin launched in the mid-2010s and was billed as an educational crypto trading service. It turns out the OneCoin tokens being purchased by investors weren’t actually on the blockchain. It was accused of being a Ponzi scheme and its founders ran off with close to $4 billion. It has been called one of the biggest financial scams in history. One of its founders, Ruja Ignatova, is still missing.

In 2019, PayCoin founder Homero Joshua Garza was sentenced to 21 months in prison and ordered to pay restitution after he created his own cryptocurrency and offered it to investors with the assurance that he had secured a $100 million reserve of capital. There was no reserve, and the whole project ended up losing $9 million.

But even with May 2021’s sizable dip in value for big coins like Bitcoin and Ethereum, cryptocurrency is more popular than ever, and legions of inexperienced traders are learning the hard way what a peer-to-peer financial service actually means.

Neeraj Agrawal, the director of communications for Coin Center, one of the US’s biggest cryptocurrency advocacy groups, told The Verge that wildly speculative coins (known colloquially as “shitcoins”) are now a permanent part of the cryptocurrency space.

“The insane speculative garbage coins are not going to go away,” Agrawal says. “That’s just part of the world now. And it sort of remains to us to show that the really good projects are worth their existence, that there is actual value here.”

That’s particularly hard when crypto celebrities like Elon Musk are driving interest toward the wackier end of the crypto space. Musk recently fueled the massive spike in interest around Dogecoin, a failed crypto coin invented as a joke that’s named after the famous Shiba Inu meme. Musk’s tweets have also been blamed for this month’s massive market downturn. It’s still unclear what effect Musk has on the market, but his recent branding as the main character of crypto has led to a litany of Musk-themed scams. According to the FTC, people impersonating Musk have managed to scam at least $2 million from traders this year.

“Maybe that’s the biggest risk to crypto users — your own stupidity,” joked Meltem Demirors, the chief strategy officer of digital-asset investment firm CoinShares. “I think people just aren’t accustomed to taking responsibility for their financial lives.”

In fact, I was asked by both a family member and a close friend this month about an obscure cryptocurrency called Dogelon Mars. It’s currently worth $0.00000016 USD, but the two people close to me were considering buying a bunch of it because they mistakenly believed that, due to the name and its frankly confusing description, it was a coin launched by Musk himself.

Demirors told The Verge that Dogelon Mars was actually one of her favorite meme coins. “We have to remember, right, the whole point of a lot of this is permission-less financial innovation,” she says. “And a market really only requires two things. It requires a seller and a buyer.”

She said this was the main explanation behind the recent NFT explosion. People had crypto coins on hand and wanted to see what they could spend them on. Turns out what they wanted to buy was surreal internet art for millions of dollars.

“I always think it’s really funny when people are all about crypto and permission-less financial innovation, but then the minute they lose money, they become like the most statist people imaginable,” Demirors said. “You really can’t have it both ways. Like you bought this shitcoin. You now need to make your bed and lie in it.”