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Abstract

There is a distinct lack of criminological research examining victimisation experiences in emerging cryptocurrency frauds. At the same time, online cryptocurrency communities have become a key part of the social milieu of the cryptocurrency ecosystem where scams are commonplace. Using Reddit forum data from the subreddit r/CryptoCurrency, this exploratory qualitative study investigates how users in an online cryptocurrency community share knowledge and experiences of cryptocurrency scams. Thematic analysis revealed how online cryptocurrency communities discuss scams by (1) arming the community (e.g. newcomer guides, personal disclosures of scam victimisation, and reflections on the technological affordances in scams); and (2) establishing community norms in response to cryptocurrency scams (e.g. protecting the community, ‘scambaiting’ practices, normalising scams as an outcome of ‘decentralisation’). Gaining a deeper understanding of cryptocurrency scam experiences provides timely insights into the intersections between victims/offenders in digital environments, how we can respond to the recent growth in cryptocurrency scams, and the variegated ways that victims seek assistance following experiences.

Keywords

Cryptocurrency scams online community cyber fraud Reddit victims

Cryptocurrency adoption has risen exponentially in recent years. Recent estimates, for example, suggest that there are approximately 300 million cryptocurrency users worldwide.¹ Bitcoin, the first popularised cryptocurrency, was developed to enable peer-to-peer digital transactions without the requirement of a third-party institution (e.g. bank). Cryptocurrencies facilitate transactions via the blockchain: an open-source, immutable, and distributed digital ledger that records information about transactions between wallets. Although Bitcoin has dominated public discourse on cryptocurrencies, there are currently just under 10,000 cryptocurrencies listed on the popular exchange platform CoinMarketCap.² Cryptocurrencies have also developed to accommodate a variety of use-cases beyond just being a digital currency, as gaming companies and other businesses increasingly consider integrating blockchain technology into their practices (Lee, 2019; Serada et al., 2020). The adoption of cryptocurrencies has taken place in many regions worldwide as users are drawn to alternative approaches to the traditional financial systems, the pseudonymous nature of digital transactions, technological curiosity, and the ability to make payments without the requirement of a third-party mediator (Alzahrani and Daim, 2019; Bhimani et al., 2022; Saiedi et al., 2020).

Despite the increasing diffusion of cryptocurrencies, criminological research in this area is surprisingly lacking. The bulk of criminological research exploring intersections between cryptocurrencies/crime has thus far mostly focussed on how cryptocurrencies facilitate the sale of illicit goods and services (Gundur et al., 2021; Martin, 2014) or other financial crimes (e.g. money laundering) (Braaten and Vaughn, 2021; Kethineni and Cao, 2020). This paper explores the recent significant growth in cryptocurrency scams, and specifically, how cryptocurrency users navigate an ecosystem rife with fraud by participating in online communities. This paper starts with an overview of the development of fraud and scams in the digital era to situate the rise in cryptocurrency scams as further evidence of the continued diversity of scam types in digital environments. The paper then reviews extant research on cryptocurrency scams, including an overview of the various types of cryptocurrency scams and how online cryptocurrency communities have become an integral part of cryptocurrency subcultures in order to disclose scam victimisation and avoid falling victim to fraudulent cryptocurrency projects. A richer understanding of cryptocurrency scam victimisation can be achieved by directly studying online cryptocurrency communities, and this can therefore enable more appropriate appraisal of how victims are responding to cryptocurrency scams and how to curb the rapid growth of cryptocurrency scam victimisation.

Scams and frauds in the digital age

An abundance of research exploring the various types of scams, their prevalence, and the psychological/financial impacts of online fraud victims provides the foundation for examining cryptocurrency scams. As daily interactions with digital technologies continues to increase, accelerated in some ways with changing routines throughout COVID-19, the scale and financial losses from online frauds likewise continues to accelerate (Australian Competition and Consumer Commission (ACCC), 2022). While there is not scope in this paper to discuss every type of fraud, some helpful typologies have been proposed (see Beals et al., 2015; Button and Cross, 2017; Levi, 2017) that unpack the differences in common fraud types as either against individuals (e.g. investment frauds, employment frauds, charity frauds, and romance frauds) or against organisations (e.g. fraud against governments including welfare fraud and insurance fraud).

Corresponding to the many different types of scams listed above there is also recognition that a one-size-fits-all explanation of victim characteristics is limiting (Whitty, 2020). Namely, there may be a combination of factors explaining victimisation, including general psychological and dispositional factors (e.g. impulsivity and self-control, risk-taking, and compliance) (Whitty, 2013); behavioural factors (e.g. increased web use) (Chen et al., 2017); and situational characteristics related to the scam itself (e.g. persuasion messages) (Dove, 2020; Norris et al., 2019; Taodang and Gundur, 2023). This complexity of online fraud victimisation also extends to understanding victims’ help-seeking strategies following victimisation. Fraud victims’ reporting via formal channels, such as government reporting mechanisms, or informal channels, such as friends/family, can vary based on factors like monetary loss, the psychological after-shocks of fraud victimisation (e.g. guilt, shame, and embarrassment), and misconceptions from victims about who to report to (Cross, 2020b; Cross et al., 2016; Fonseca et al., 2022). In order to further develop responses to online scams it is therefore critical to seek out differences and new trajectories in scam methodologies, as well as how this affects victims and their reporting strategies. This paper attends to the growth of cryptocurrency scams in recent years as an example of an unexplored community that is often subject to financial frauds.

Cryptocurrency scams

Cryptocurrency scam victimisation has historically not received similar attention from criminologists as other forms of investment scams despite their marked increase in recent years. A recent report from ChainAlysis (2021) highlighted that cryptocurrency scams remain the highest-grossing form of cryptocurrency-based crime and that in the most recent reporting year reported scam victimisation rose by 48%. Furthermore, the Federal Trade Commission estimated that in the United States, since the start of 2021, over 1 billion dollars has been reported as lost from victims in scams (Fletcher, 2022). In multiple jurisdictions worldwide (e.g. Australia, United Kingdom, and United States), financial regulators have acknowledged the exponential rises in cryptocurrency scams and are increasingly seeking to regulate cryptocurrencies and associated digital assets (e.g. non-fungible tokens (NFTs)) (Knight and Ranamukhaarachi, 2022; Oliver, 2022; Yellen, 2022).

Criminological literature on cryptocurrency scams is nascent but has nevertheless shown the continued growth and evolution of cryptocurrency scams. For example, a recent meta-analysis by Trozze et al. revealed 47 unique types of cryptocurrency scams, detailing how pump-and-dump frauds, in particular, appear to be the most profitable scams. The usual script for a pump-and-dump cryptocurrency scam is where an operator attempts to convince investors to buy the particular asset by spreading misinformation about its attributes (pump) before selling the inflated asset once others have been duped into boosting the price (dump). Further research into cryptocurrency scams shows how cryptocurrency scams are continually diversifying: fake smartphone applications are being made that pretend to be cryptocurrency exchanges, phishing methods hijack cryptocurrency wallets, and the types of cryptocurrency scams are diverse (e.g. initial coin offering scams and ponzi schemes)³ (Bartoletti et al., 2021; Kamps et al., 2022; Mackenzie, 2022; Xia et al., 2020). While there is growing research on the mechanisms of these new types of online frauds, there is a lack of research on victimisation experiences.

Online cryptocurrency communities

As victims of financial fraud frequently under-report their victimisation experiences (Cross, 2018; De Kimpe et al., 2021; Van de Weijer et al., 2019) this can have subsequent effects in how to engage scam victims in criminological research (Cross, 2020a). Online communities have become a critical part of the contemporary world as they allow individuals to assemble in digital spaces with similar interests and experiences (Malinen, 2015). Moreover, it has been shown that online communities have also become important spaces for helping individuals feel comfortable in disclosing sensitive experiences (Bogen et al., 2019; Griffith and Stein, 2020; Holtz and Kanthawala, 2020). Watkins (2022), for instance, explores how ‘gig-workers’ (e.g. ride-sharing company workers) would use an online community to discuss scams. Likewise, online cryptocurrency communities, often on social media platforms such as Reddit, Discord, and Telegram, have become a key part of social life in the cryptocurrency scene (Caliskan, 2022; Dodd, 2014; Mackenzie, 2022). These discussions between online communities are critical in cryptocurrency ecosystems to inform decisions on various aspects of purchasing cryptocurrencies including learning where/how to buy cryptocurrencies and knowing what coins to invest into (Jahani et al., 2018). The development of vibrant online cryptocurrency communities is also associated with the underlying ideologies of cryptocurrency and blockchain technologies that influence members in cryptocurrency subcultures. Blockchain technology is underpinned by aspects of technological libertarianism that states how technologies (e.g. blockchain and cryptography) are essential in the governance of systems rather than third-party mediators such as state-actors or financial institutions (Karlstrøm, 2014). There are clear benefits in understanding marginalised or ‘hidden’ groups as they assemble in online communities (Bhandari and Sun, 2023; Kaufman and Tzanetakis, 2020), and in the current context, cryptocurrency communities provide valuable insights into the emergence of, and responses to, cryptocurrency scams.

The current research

There is a lack of criminological research examining emerging victimisation experiences of cryptocurrency scams. This exploratory qualitative study addresses this gap by exploring: (1) how data from online communities can assist in developing an understanding of emerging cryptocurrency scams, and (2) the dynamics of community member forum posts into online cryptocurrency communities and how knowledge and experiences of cryptocurrency scams are shared.

Methods

Digital platforms provide new opportunities for qualitative research (Salmons, 2016). This study uses online text data from an online cryptocurrency community, and in doing so, contributes to the burgeoning use of online forum data for studying criminological issues (see Holt, 2015). Online data have also shown to be fruitful for exploring perceptions of online fraud (Lazarus and Button, 2022). The online cryptocurrency community under investigation in this study, the subreddit⁴ r/CryptoCurrency,⁵ is hosted on the social networking website Reddit. Reddit has become one of the most popular social networking spaces and can generate insights into online communities (Proferes et al., 2021). Although there are several cryptocurrency-related communities on Reddit (r/Satoshistreetbets, r/Cryptomoonshots, r/CryptoMarkets, and r/Bitcoinbeginners, to name a few), this study focuses on r/CryptoCurrency due to its position as the largest cryptocurrency community on Reddit. At the time of writing there are 5.3 million members and the subreddit has a broad focus on cryptocurrency news and general discussions between community members.

This study used a purposive sampling strategy to obtain the sample of user-generated posts on r/CryptoCurrency to understand the dimensions and topics of scam posts into the cryptocurrency community. First, guided by previous research studying online Reddit communities, the search function was used to identify relevant posts to subsequently include in the analysis (Lyons and Brewer, 2022; Moore and Abetz, 2019). In this study, this was achieved through a keyword search for the word ‘scam’ in the top posts⁶ of all time into the r/CryptoCurrency community. Next, the top 200 posts were selected and extracted with the assistance of RedditExtractoR.⁷ The number of posts selected were determined as it was similar to existing qualitative analyses of online Reddit communities (Alaggia and Wang, 2020; Curtis et al., 2022; Moore and Abetz, 2019; O’Neill, 2018), and there was sufficient breadth and depth among the forum posts. Reddit creates threaded conversations, comprising both the original post and responses, but this paper only collected the initial posts in order to centre the original contributions by a forum poster in the analysis and to capture the immediate reactions to events. When collecting the data from forum posts I also included images and hyperlinks that accompanied forum posts. The collected posts ranged significantly in text length and date of post (2018–2022). Following the collection of forum posts, the collected posts were then imported in NVivo to assist with the thematic analysis. The analysis is explained in more detail below.

Reflexive Thematic Analysis (Braun and Clarke, 2018; Byrne, 2022) was adopted for the qualitative study of scam posts in this online cryptocurrency community. Following the general guidelines of this approach, I first read through the collected posts to familiarise myself with the collected data and trawled through both the threads where posts originated and the online cryptocurrency community to understand the contexts of posts and the use of the community by individuals. This initial phase was helpful to begin the ‘building blocks’ of the analysis in generating initial codes. I then shifted from an interpretation of individual posts by aggregating themes and developing meaning across the range of forum posts. Reflexive Thematic Analysis requires a reflexive researcher, arguing that subjectivity and continual reflection on findings are vital tools for this qualitative approach rather than weaknesses (Braun and Clarke, 2021). Correspondingly, the development of overarching themes for this study was both theory-driven/deductive (e.g. informed by the aims of this research to explore sensemaking processes of individuals sharing experiences and knowledge in the cryptocurrency community, informed by the researchers’ experience in studying digital communities and familiarity with the use of cryptocurrency) and data-driven/inductive to remain open to unanticipated findings in the data. The reported themes in this study focus on two themes that emerged in cryptocurrency scam postings: (1) arming the community and (2) establishing norms and processes in response to cryptocurrency scams.

This study uses publicly available data on an open web forum, but ethical guidelines from both previous research studying online Reddit communities (Caplan and Purser, 2017) and from the Association of Internet Researchers (Franzke et al., 2020) were followed where appropriate. The usernames and other potentially identifying information (e.g. blockchain wallet addresses) associated with any posts have been removed, and some reported quotations in the findings sections have been altered slightly to reduce identification following the publication of this study.

Findings

Arming the community

The first section of the findings – arming the community – discusses how users posted into the online cryptocurrency community to share information and construct community knowledge on the diverse range of cryptocurrency scams. The role of community members in this context was to educate the online cryptocurrency community about scams. These posts were often tailored towards educating newcomers into the cryptocurrency space where general guides and summaries of crypto coins were provided (‘For the newcomers: the top 50 cryptocurrencies, each explained with one sentence’). Within these ‘how-to’ guides a wide range of cryptocurrency scams and hacks was discussed. Crypto rug-pulls and pump-and-dump schemes were the most commonly discussed forms of scams for newcomers to be cautious of, which reflects wider academic research into the prevalence of particular forms of cryptocurrency scams (Kamps and Kleinberg, 2018). In the post below, the community member describes the general features defining a cryptocurrency rug-pull whereby a cryptocurrency project is abandoned by the developers after taking the funds of investors. Symbolic language is used to assist newcomers in understanding the general mechanisms behind this type of scheme:

Imagine you’re standing on a carpet. You’re safe because the carpet is your support. Now, this evil guy comes along and pulls out the rug underneath your feet. That’s a rugpull … It’s usually that moment when your coin’s value drops from maybe $0.0034823 down to $0.0000000 or $0.0000002’.

These resources and guides aimed at newcomers into the cryptocurrency scene were generally preceded with an introduction of the forum-posters credentials to establish authenticity behind the knowledge. This may have included discussing how long they have been investing in cryptocurrencies and the various coins they have invested in that have now increased in significantly in value (‘Tips for Young/New Crypto Investors from a Real Grandma into Cryptocurrency …’).

While many of these posts would include generic descriptions of the features of cryptocurrency scams, some posts also provided clear details of the mechanisms that facilitate emerging cryptocurrency scam operations. First, human errors have consistently been associated with increasing the likelihood of scam victimisation, as cybercriminals may seek to exploit psychological weaknesses in attempts to influence decision-making for vulnerable victims (Jansen and Leukfeldt, 2016; Nurse, 2018). This was clearly reflected in the analysis of scam posts. First-person narratives of victimisation self-disclosures demonstrated how victims would blame themselves for experiencing cryptocurrency scams:

To put it succinctly, the above is a very short overview of the financial hole I have found myself in due to greed, arrogance, and stupidity over the past few years. Hopefully a warning to others.

Normally I am hypersensitive to security and very wary of online support from strangers. However, due to a rare combination of sleep deprivation from staying up too late to watch the Euro 2020 final, and not paying attention when I should have, I made a fatal error of falling for what is now obviously an elaborate con. I’m so used to clicking ‘approve’ on Defi [decentralized finance]⁸ sites to connect to wallets that my guard has been down and this looked genuine enough.

Virtual environments provide comfortable spaces for individuals to disclose sensitive information (Lyons and Brewer, 2022). Sharing personal experiences was therefore part of a therapeutic process for victims of cryptocurrency scams and had secondary functions in providing important knowledge to other community members in the hopes that others would not repeat their own mistakes. However, given the nature of crypto environments in recent years with the exponential increases in scams, even the disclosure of victimisation experiences could be interpreted as a form of a charity scam, as it might be ‘scammers themselves hoping for donations and you should not send them any money’.

As explored above, human errors and individual vulnerability to cryptocurrency scams (e.g. tiredness, inattention, and rushed decision-making) appeared to be critical components of understanding how cryptocurrency scams are performed. At the same time, it is also essential to recognise the digital environments associated with cryptocurrency scams and some of the technological elements facilitating cryptocurrency scams. In recent years, social media spaces and other digital environments have become the epicentre of cryptocurrency scamming operations (Fletcher, 2022; Mackenzie, 2022). When community members would share information on cryptocurrency scams, there was an implicit recognition of how the features of diversified digital platforms (e.g. YouTube, Twitter, Reddit, and TikTok) could be fostering cryptocurrency scams:

Before the removal of the dislike count, people like me rely on the ratio between the number of thumbs-up and thumbs-down to spot scams, fake reviews, or bad content overall. Those days are gone now that YouTube has removed the dislike count. Now scammers are just out on YouTube and scam people so blatantly because all people see is the number of thumb-ups . . . This is exactly why I had always told people to avoid finding crypto advice on Tik Tok in the first place, because all you see is the number of hearts, and many just fall for the scams if the number of hearts is high.

Understanding technological affordances can be useful for exploring how technological design features assemble with human actors. Technological affordances are not considered the intrinsic characteristics or features of a digital technology, but rather, affordances emerge as humans and technologies intersect to enable or constrain particular actions (Davis and Chouinard, 2017; Hutchby, 2001; Leonardi and Vaast, 2017). Better understanding technological affordances facilitating cryptocurrency scams in digital environments could help situate the various victim pathways into cryptocurrency scams. As reflected in the quote above, the various technology platforms, and their variegated approaches to facilitated user-to-user interactions (e.g. like/dislike buttons, comments, and visual features), provide unique sets of opportunities for cryptocurrency scammers. In the following excerpts, details are provided about an emerging type of cryptocurrency scam involving fake ‘giveaways’ of cryptocurrencies. The technological features of YouTube (e.g. video streaming, a live chat that accompanies videos) were reflected on in the discussions of the technological affordances associated with cryptocurrency scams:

It’s usually a YouTube live video of a conference where Elon Musk, Jack Dorsey or Vitalik Buterin with 12k to 20k live viewers which are bots with a flashing sign with a wallet QR code saying ‘if you send crypto to this address, we’ll send double back’. These conferences are so old that a simple Google image search of these conferences would be enough to know for a fact that it is a scam.

Scammers download an old online event from a reputable company (eg. Apple) or an interview with a respected crypto personality (e.g. Vitalik, Charles, and other crypto founders).⁹ They stream this on YouTube or Facebook with their own overlay text or graphics, and pretend it’s an official or new event that’s happening right now. But it’s a honeypot¹⁰ where they use the live chat to get victims from the people who are watching. They use the legitimacy and star power of the content they’re streaming to lure you in one of the scams in the list, because surely Apple wouldn’t scam you right?

In the discussions of how digital environments provide mechanisms for scams, a common topic among the community members was how social media influencers are increasingly advertising scam coins. In one well-publicised example, the cryptocurrency community took issue with the ‘Hollywoodization’ (McKenzie and Silverman, 2021) of cryptocurrencies, as some well-known celebrities such as Kim Kardashian (an American media personality) and Floyd Mayweather (a former professional boxer) historically promoted the coin Ethereum Max to their large base of followers on Twitter and Instagram, which has subsequently widely been perceived as a scam coin (see Browne, 2022).

Emerging cryptocurrency scams are clearly a multi-faceted issue. As is clear from the review of posts described above, community members sought to post into scam posts to arm the community by sharing knowledge and resources on cryptocurrency scams. A combination of generalised ‘how-to’ guides, in conjunction with first-person self-disclosures, was important in circulating up-to-date knowledge of cryptocurrency scam variations and mechanisms in the online cryptocurrency community. In the analysed posts on cryptocurrency scams, it becomes clear that understanding (and therefore addressing) burgeoning forms of cryptocurrency scams require insight into the variety of human factors (e.g. individual susceptibility to cybercrime victimisation) and technical factors (e.g. technological affordances in diversified digital environments) assembled into these scamming operations.

Establishing community norms and processes in response to cryptocurrency scams

The following section describes the various ways that users posted into cryptocurrency scam discussions to actively construct the community by establishing norms and processes in response to cryptocurrency scams. A primary feature of this cryptocurrency community was the way members would protect each other by responding to cryptocurrency scams through accusations of potentially fraudulent cryptocurrency projects. These accusations were important in rapidly disseminating a warning signal to the online community that a scam was unfolding. As part of these accusations, posters would provide accompanying information to authenticate their claims via Twitter posts, mobile phone screenshots of private messages with scammers, and cryptocurrency coin graphs. In the examples below, conducting investigations into recorded blockchain transactions was essential in verifying claims following accusations:

Here is the ETH [Ethereum] transaction that opened the sale [copied blockchain address].

Fortunately nobody fell for it yet, the last transfer to that address was 47 days ago.

In wider research on online communities, Pantumsinchai’s (2018) exploration of armchair detectives suggested that sharing links and information obtained from elsewhere facilitates ‘connections and affect change within the network’. In the current context, proving that a cryptocurrency scam was unfolding relied on various nonhuman actors to enhance the authenticity of accusations. The benefits of blockchain technology are also worth highlighting here. In conventional cyberfrauds, establishing information such as the total financial costs and the number of individuals involved in scams can be difficult due to some of the tactics employed by scammers (e.g. requesting payment via PayPal and Western Union, see Cook and Smith, 2011; Sorell and Whitty, 2019; Whitty, 2023). However, blockchain records were useful in providing evidence of transactions between wallet addresses and understanding the costs associated with some of these scams (‘I found the scammer’s wallet address and found that the scammer has received a whopping total of 87 BTC worth a total of 3.6 mil’).

Accusing cryptocurrency projects of being scams played a central role in establishing the outsiders that were threatening to the development of the cryptocurrency community:

We owe it to ourselves as a community to point this out and try to ensure that this cancer and abhorrent community does not spread any further.

Time to step up and protect this community.

We need to communicate with them [a fraudulent cryptocurrency operation] as a community, this is not acceptable. We will not tolerate innocent people being scammed.

External forces often serve as a means to enhance group solidarity in online communities (Ladegaard, 2019). Although cryptocurrency scammers were clearly not wanted in the space, they were also vital in forming attachments between members in the cryptocurrency community through the identification of common enemies. Scammers were a threat to the function of the community, but several other outsiders helped construct this crypto community, including other cryptocurrency communities that focus on quick financial success from cryptocurrency (‘Stay the fuck out of Moonshot¹¹ subreddits/Discord servers’) and wider portions of society that were critical of the utility of cryptocurrency and blockchain technology.

Scam posts established clear norms for users to abide by. The most common strategy suggested to other users to protect themselves against cryptocurrency scams was to employ self-protective behaviours. Emphasising self-protective behaviours to minimise involvement in financial cybercrimes has been highlighted in a wide array of criminological literature and has, more broadly, become a pillar of educational strategies and policies to reduce victimisation in cyberfraud (Drew, 2020; Drew and Farrell, 2018). Likewise, ‘doing your own research’ (colloquially known as DYOR in crypto subcultures) has become a fundamental part of knowing what cryptocurrency coins to invest in to avoid becoming a victim to a cryptocurrency scams:

Doing your own research is not only heavily advised, but it can also save you from investing in projects doomed to fail.

Do your research before you buy into a project, not after. This seems to be becoming less of a norm in crypto.

In the current cryptocurrency climate of limited regulation, scammers are able to develop new projects rapidly and acquire money from investors with ease, and as such, the established norm is for investors to ‘DYOR’ to determine the legitimacy of a cryptocurrency project. In practice, as indicated in this post where norm-setting occurred, this involved researching the various attributes that might make a cryptocurrency project seem authentic: an active online community on Discord and/or Telegram, a ‘whitepaper’ that outlines the technical features of the coin, a ‘roadmap’ providing company milestones, and a trustworthy project team (i.e. attachment to previously successful cryptocurrency projects).

Given the recent surges in cryptocurrency scams, the emphasis on self-protective behaviours as opposed to regulatory bodies and policing agencies was perhaps not surprising. Among the posts sharing personal experiences with cryptocurrency scams, there was scant reporting of experiences to relevant authorities. Underreporting experiences is a common theme of online fraud involvement as there may be confusion about who exactly to report to in contexts of overlapping regulatory bodies (Button and Cross, 2017). In the example provided below, even in instances where the relevant regulatory bodies are known to scam victims, similar perceptions to other cyberfrauds (i.e. that nothing can be done to recoup losses) are also reflected in the cryptocurrency space:

Although it won’t help me personally, I’ve gone ahead and filed with local police station, FBI internet crimes, and the FTC [Federal Trade Commission].

Rather than approaching police or other victim services that can assist in fraud victimisation, the more immediately preferred response in cryptocurrency scams was to make reports via social media platforms. Social media platforms frequently struggle to completely filter out all content that breaches community guidelines, and as a result, are increasingly relying on users of the platform to ‘flag’ content as a form of governance (Crawford and Gillespie, 2016). Although technology platforms encourage those who witness content that breaches community guidelines to report the behaviour, flagging systems are black-boxed by virtue of the lack of transparency processes in regard to how complaints are moderated and dealt with (Gillespie, 2017). In the cryptocurrency space, although there was a clear recognition by the cryptocurrency community that scams are ubiquitous on digital platforms, users sometimes struggled with these reporting processes:

Unfortunately Reddit doesn’t have a ‘scam’ option to report and the closest one I found was ‘impersonation’. Now Reddit just answered all of them saying ‘the content doesn’t violate Reddit’s content policy’. Hmmm …

In response to frustrations with the inability of policing agencies and social media platforms to respond to scammers, some members discussed how they take matters into their own hands. Scambaiting has evolved as a form of vigilantism to counter the widespread nature of Internet scams (Ross and Logi, 2021). In essence, scambaiting involves giving scammers ‘a taste of their own medicine’ (Sorrell, 2019) and engaging in protracted communicative exchanges to waste their time to limit the spread of communicating with potential victims. In this online cryptocurrency community, scambaiting practices were a way of dealing with the ineffectiveness of traditional mechanisms to protect the online community and had performative aspects in the way it entertained the community and made light of the current situation where scammers are flourishing in digital environments.

The final point of discussion in this theme relates to how the online cryptocurrency community normalised the presence of scams in their postings. In wider cyberfraud experiences, victimisation has significant financial and emotional impacts on victims (Modic and Anderson, 2015), but this can also vary significantly across fraud types (Borwell et al., 2022). In the collected posts on cryptocurrency scams, scams were acknowledged as a common experience associated with being involved in the cryptocurrency scene (see also Mackenzie, 2022). Community members were encouraged to see the greater ideological visions associated with cryptocurrencies beyond this temporary market context that is infiltrated by scammers. For some, engaging in cryptocurrency scams was also a normalised process of market engagement and indeed part of the fun of making high-risk investments in cryptocurrencies:

I know there are a lot of pump and dump groups out there and that they are scams. I’ve been into crypto for a long time now and I have a very decent portfolio with solid projects such as BTC and ETH. But hodling [a colloquial term for ‘holding’ an investment indefinitely] is boring as fuck. I need to find a token I can put $20 in and experience some emotions watching the roller coaster because I’m dead inside and nothing brings me joy on these days.

Yesterday I made a post about scam coins with no real value. I expected to see common sense and critical thinking … Unfortunately, what I saw was a universal love for shitcoins and how people see them as their winning lottery tickets.

The ability to place trust in emerging virtual currencies is suggested to be a significant factor that will drive future growth in the adoption of cryptocurrencies (Corradi and Hofner, 2018; Vasek and Moore, 2015). Scams did not always appear to disrupt the willingness to trust cryptocurrencies, but rather, interacting with scam projects was a natural progression of the growth in popularity of cryptocurrencies and the fun of engaging in the cryptocurrency subculture. Community members predicted that scams would naturally decrease over time and that ‘in their ashes, good solid technology projects’ would take over. A final aspect of the normalisation and acceptance of cryptocurrency scams is related to the tension between increasing regulations while trying to achieve an end-goal of decentralisation via blockchain technologies (i.e. being detached from conventional financial systems and institutions). Here, there was a need to achieve a balance between much-needed regulation in this space while simultaneously being allowed to let the market naturally develop. Surrendering to cryptocurrency scams, and being aware of the political ideologies that underpin cryptocurrencies, one poster suggested: ‘I guess that’s the price of decentralisation …’.

Discussion and conclusion

This study has shed light on the dynamics of scam posts in an online cryptocurrency community. Two key themes were explored in relation to the online cryptocurrency community: (1) arming the community and (2) establishing community norms and processes in response to cryptocurrency scams. The key findings from this study and their practical and theoretical implications are discussed in more detail below.

The online cryptocurrency community was used to arm users to protect the community from scams and establish norms in response to scams. Understanding these community practices is important as bottom-up initiatives, where fraud victims seek satisfaction through unconventional pathways, are becoming more common in response to cyberfrauds (Button and Whittaker, 2021). This research has shown that some communities develop their own processes for understanding and preventing frauds. This is particularly striking in cryptocurrency communities where traditional avenues for victim protection and/or compensation (e.g. police and victim services) are eschewed for community-driven responses and norms. These community-driven responses are facilitated through a combination of shared experiences of the lack of support from existing regulatory bodies, the unique features of digital platforms that provide new methods for reporting frauds through social media platforms and the ways that online communities can rapidly spread information on scams, and the ideologies of engaging in cryptocurrency subcultures where users are purposely seeking a shift away from state-actors.

The development of cryptocurrency communities can have benefits for users to more proactively respond to fraud risks because knowledge can be disseminated more rapidly in online communities. In this study, and in wider research (Mackenzie, 2022), it was clear that protection from cryptocurrency scams is emphasised by the personal need to DYOR (do your own research). While this might be an established norm in crypto communities, there are clear limits to the DYOR mentality for protecting users from cryptocurrency scams. For instance, research exploring cybercrime victimisation suggests that there might be a gap between ‘knowing’ and ‘doing’ self-protective strategies, and in some cases, overconfidence can explain cybercrime victimisation (see Drew and Farrell, 2018). An emphasis on DYOR has the potential to shift the onus of safety too far onto individuals rather than acknowledging some of the ways that financial regulators and technology platforms can implement strategies to protect users from cryptocurrency scams.

The online cryptocurrency community also provided a space for self-disclosures. Similar to wider research on how digital spaces might facilitate disclosures of sensitive information for potentially stigmatising issues (Alaggia and Wang, 2020; Bhandari and Sun, 2023; Lyons and Brewer, 2022), this study also found that self-disclosures of scam victimisation experiences were common in this online cryptocurrency community. This has broader ramifications for understanding how digital spaces and online communities are used by financial fraud victims. These findings provided by scam posts advance timely insights into cryptocurrency scams, including the diverse array of cryptocurrency scams and the complex pathways into scam victimisation shared by community members. This research showed how cryptocurrency scams are assembled with a combination of human factors (e.g. individual susceptibility to cyberscams) and technological factors (e.g. technological affordances on social media platforms for scammers).

These findings also demonstrate the utility of web data from digital communities to examine and understand emerging crime problems such as cryptocurrency scams, but some limitations of this study should be noted. First, the sample size of the collected posts could be considered small considering the total number of posts made into the r/CryptoCurrency subreddit each day. There may also be several individual factors that shape the willingness to post into an online community, meaning that the collected posts are not entirely representative of the experiences of the entire online cryptocurrency community. Despite these potential limitations, this study provided an exploration of how an online cryptocurrency community constructs and communicates knowledge of emerging cryptocurrency scams. In addition, while this study relied on the posts from ‘all time’ in the online community, the mechanisms in Reddit allow for varied approaches which could be fruitful for researchers wishing to analyse the cryptocurrency community’s response to specific events and how discussions evolve over time.

Cryptocurrency scams continue to increase and evolve at a rapid pace. Surprisingly, criminological research into this burgeoning phenomenon is lacking given the recent government and industry recognition of these challenges. As cryptocurrencies and blockchain technologies gain further potential adoption by end users, the scope of crime/justice issues associated with cryptocurrencies and how victims/offenders intersect will also likely increase. Taking inspiration from the critiques and limiting scope of the term ‘cyber’ crime (Stratton et al., 2017), perhaps it is useful to position developing research in the area of cryptocurrencies and criminology as cryptocriminology. Doing so would enable further research on current challenges in understanding the varying ways that crime/cryptocurrency overlap (e.g. cryptocurrency scams and the use of cryptocurrencies in illicit markets) while also attending to future crime and justice challenges brought forward by shifts into ‘Web3’ (see Mackenzie, 2022).

Footnotes

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‘I guess that’s the price of decentralisation… ’: Understanding scam victimisation experiences in an online cryptocurrency community

Abstract

Keywords

Scams and frauds in the digital age

Cryptocurrency scams

Online cryptocurrency communities

The current research

Methods

Findings

Arming the community

Establishing community norms and processes in response to cryptocurrency scams

Discussion and conclusion

Footnotes

Notes

References