Why smart people fall for crypto scams

In short: people do not fall for scams because they are stupid, but because scammers are very good at pushing a handful of psychological buttons – greed and FOMO, urgency, authority, social proof and sunk cost. Research by the FINRA Investor Education Foundation (2006) found that investment fraud victims were on average more financially literate, more educated and better off than non-victims. In 2025 alone, the FBI received reports of about 11 billion dollars lost to crypto-related fraud.

If you have read the cases in this course and thought "I would never fall for that", congratulations: you are thinking exactly what the victims thought. Scammers love that sentence. It is the welcome mat at their front door.

Do only naive people fall for scams?#

No. A study for the FINRA Investor Education Foundation (then the NASD Foundation) listened to hundreds of recorded scam calls and compared confirmed victims with non-victims. Investment fraud victims understood basic finance better than non-victims, were more often men, more educated and had higher incomes. What they had in common was something else: they were more willing to listen to a sales pitch from a stranger, and many had recently lived through a hard life event.

The crypto cases tell the same story:

• FTX raised money from some of the most respected investors in the world – venture funds such as Sequoia Capital and Singapore's state investor Temasek wrote their FTX stakes down to zero after the collapse in November 2022. They had teams of analysts. Sam Bankman-Fried was later convicted of fraud.
• OneCoin sold a "cryptocurrency" that had no real blockchain at all, and according to US prosecutors it took in about 4 billion dollars from more than 3.5 million people around the world. The OneCoin lesson shows how polished it looked.
• Pig butchering does not attack your knowledge at all; it attacks your trust, patiently, over weeks or months (how it works).

Being smart even has a downside: smart people trust their own judgement, so once they decide something is legitimate, they argue the doubts away more skilfully.

Which buttons do scammers press?#

Greed and FOMO. A high, steady return switches off the part of your brain that asks how. BitConnect, according to US prosecutors, advertised returns of up to 40 % a month; it ended as a textbook Ponzi scheme. Terra's Anchor protocol paid almost 20 % a year on a "stable" coin until the whole system collapsed in May 2022.

Urgency. A study by Stanford researchers with the FINRA Foundation and AARP found that putting older adults into a state of high emotional arousal – excitement or anger – made them more willing to buy from misleading ads. Excitement does not have to make you believe the offer; it just makes you act before you check it. That is why scams always come with a countdown.

Authority. Uniforms, titles, logos, a polished website, a celebrity in an ad, a "lawyer" with an official letter. FTX paid famous athletes and comedians to advertise it – which said a lot about its marketing budget and nothing about its accounts.

Social proof. Social proof is the instinct that if many people do something, it must be fine. OneCoin filled stadiums. Telegram groups show a stream of happy "members" – many of them bots or accomplices. A crowd is a crowd, not an audit.

Sunk cost. The most cruel button. Once you have put money in, the sunk cost fallacy whispers that walking away would make the loss "real". Pig butchering and fake exchanges exploit it directly: your balance shows a huge profit, but to withdraw it you must first pay a "tax", then an "unlock fee", then an "anti-money-laundering deposit". Every payment makes the next one feel more reasonable. There is never a last fee.

Why do victims stay silent?#

Because they are ashamed – and scammers count on it. The same FINRA Foundation study found that victims dramatically underreport fraud: many either did not realise they had been defrauded or were too embarrassed to admit it even in an anonymous survey. AARP and the FINRA Foundation later warned that words like "duped" or "fell for it" shift the blame onto victims and make them even less likely to report.

Silence helps only the scammer: no report means no investigation, no frozen funds and no warning for the next person. If it happens to you, the next lesson but one, I've been scammed – what now?, walks you through the steps.

How do you protect yourself from your own brain?#

• Name the button. "This is urgency." "This is social proof." Naming the trick takes away much of its power.
• Add a delay. A rule like "nothing above 100 euros on the same day" beats any amount of willpower.
• Ask someone outside. A friend who is not excited will see in a minute what you cannot.
• Decide your stop in advance. If a platform asks for a fee to release your own money, you stop. No exceptions, no "just this once".

Common myths#

• "Only greedy or stupid people get scammed." Research and the cases in this course show the opposite: educated, careful people and professional investors get fooled too.
• "I would recognise a scam." Good scams do not look like scams. That is their whole job.
• "I have already put in so much – one more payment and I'll get it all back." That is the sunk cost talking. Stop paying.

Sources#

• FINRA Foundation (NASD): Investor Fraud Study Final Report (2006) (opens in a new tab)
• FINRA Foundation, AARP and Stanford: Heightened emotional states increase susceptibility to fraud (opens in a new tab)
• AARP: AARP and FINRA Foundation team up to address victim blaming (2022) (opens in a new tab)
• FBI IC3: 2025 Internet Crime Report (opens in a new tab)