Cryptocurrency trading and investing can be profitable. However, it has been established over time that crypto assets like Bitcoin and Ethereum are risky. Besides the market being volatile, cryptocurrency scams are other significant risks in the industry.
These scams come in various forms with one goal – to steal your crypto funds. So, you must understand how they work to know when a potential scam looms and what you can do if you suspect that you’re being targeted by crypto scammers.
This detailed guide covers everything you need to avoid crypto scams and protect yourself from cybercriminals. Now, let’s get into it!
What Are Cryptocurrency Scams?
Crypto scams are the different methods cybercriminals use to trick unsuspecting traders and investors into losing their money. These scams are usually orchestrated online by experts who want to steal people’s crypto assets by any means possible.
Bitcoin scams are more popular today because of the rising value of cryptocurrency assets. While everyone tries to invest in the bull market for potential profits, some scammers lurk around to steal the profits through various crypto investment scams.
According to a Chainalysis report, the total cryptocurrency value that fraudsters stole through fake addresses and crypto hacks in 2023 was over $24 billion.
Considering that the crypto market has experienced an upward trend in 2024, with top assets like Bitcoin (BTC) and the Binance Coin (BNB) reaching new all-time highs, the value of crypto crimes will increase.
This is because many investors – especially beginners – are focused on making gains, and many scammers will capitalize on their inexperience. Many also don’t put adequate security measures in place to protect their crypto investments
Common Types of Crypto Investment Scams
Before learning how to protect yourself from potential scams in the crypto space, it’s crucial to know how these scams work. What are the common ways fraudsters carry out cryptocurrency scams? We highlight them below.
Phishing
Phishing scams are solely online. They target software wallets that usually store users’ private keys online by sending compromised links through email and SMS. Once you click the link, you’ll be redirected to a fake website and they can access your private keys (similar to your wallet’s password) that encrypt your assets.
After they’ve gained access to your wallet, they can move out your funds and leave it empty.
Fake Apps and Websites
Another way scammers prey on crypto users is through fake websites and apps. Sometimes, they build fake cryptocurrency exchanges or dummy versions of legitimate exchanges with similar URLs.
Since their fake websites and apps either look real and investors are also familiar with the user interface of their favorite trading platforms, they may not detect that they are on a fake site or mobile app early.
The fraudsters collect all the details entered on the website, including login credentials and wallet passwords, ultimately using them to withdraw funds to scam wallets.
Rug Pulls
Scammers often leverage investors’ fear of missing out (FOMO) to perpetrate rug pulls. Also known as pump-and-dump schemes, rug pulls involve a crypto or non-fungible token (NFT) developer promoting a fake project online to attract investors.
Usually, these new tokens are hyped on social media to make them more popular, and traders who don’t want to miss out quickly invest in them.
After the coin’s demand and price increase (pumping), the scammers quickly sell off their holdings (dumping) and disappear, leaving investors with valueless coins.
Fake Giveaways
If you’re familiar with the crypto space, you must have seen celebrities endorse a crypto project that eventually turned out to be a scam. Such crypto projects leverage the popularity of public figures, especially entertainment celebrities and crypto influencers to create awareness.
They also promise to give away some freebies to early investors, causing more people to quickly carry out the required activities since the celebs make them seem authentic. However, while some use real celebrities, many impersonate them through fake social media accounts.
After you transfer funds to their wallets or other provided channels for the giveaway, you’ll never get your money back.
Cloud Mining Scams
With the growing popularity of decentralized finance (DeFi) platforms, many crypto investors now use cloud mining platforms to mine Bitcoin and other proof-of-work (PoW) cryptocurrencies.
Instead of owning individual mining hardware, cloud mining platforms allow miners to rent for a fee and get a share of the total mining profits. However, while cloud mining helps you save costs, many companies offering remote mining services are run by scammers.
Once you pay the subscription fee to rent mining hardware, you lose your money and may not earn any mining returns.
Fake Initial Coin Offerings (ICOs)
An initial coin offering (ICO) helps investors access new crypto projects early at a discounted rate. But more importantly, they are used by the project owners, usually startups, to raise funds to continue building the project.
However, while ICOs are not necessarily scams, they can be used by scammers to defraud investors. For instance, some ICOs are fake projects with no use cases or roadmap. They only raise money and exit the market.
Similarly, some ICOs promise customers a reward when they send other cryptocurrencies like Bitcoin to a particular wallet. After sending the crypto, your money is gone.
Ponzi Schemes
Ponzi schemes go way back, but they are still effective crypto scamming tactics. Scammers use such investment schemes to deceive users by promising them lots of money (ROI) with no risks and within a short period.
Usually, these scammers can pay you the expected returns the first few times to build trust and lure you into investing more money. However, the scam operators ultimately pocket most of the funds and the scheme collapses when there are no new investors to fund the next disbursements.
Romance Scams
Romance scams are also age-long fraud tactics that scammers use to defraud unsuspecting victims. In the crypto world, these malicious actors operate dating websites to connect with people seeking relationships.
They build trust over time through constant communication, but the goal remains to get money from the victims. Usually, the scammers introduce their victims to lucrative crypto investments and ask them to transfer funds to a fake crypto account or wallet.
Crypto Blackmails
Blackmails are not new, and crypto scammers often use them to get money off investors. Usually, they reach out to the individuals through email or direct messages, claiming to know the adult sites they visit or have their lewd photos.
Afterward, they threaten to expose the information unless the victim bribes them with crypto or sends their private keys. Ultimately, the victim usually complies out of fear and gets extorted.
Fake Jobs and Job Sites
More recently, scammers have started targeting people looking for crypto jobs. Some of them pretend to be recruiters for Web3 startups, but these jobs require you to apply through compromised job sites and links.
Similarly, others require you to pay a fee in cryptocurrency before starting the job. Some may even set up interview sessions with other company “stakeholders” to seem more convincing. Once you send them money with the hope of securing a job, it’s gone.
How to Spot Crypto Scams
Considering that scammers are devising smart ways to defraud crypto investors, how can you spot these scams so you don’t fall victim? Here are some red flags to look out for:
They promise guaranteed and unrealistic returns
Cryptocurrency prices are unstable, so any project offering you guaranteed profits or advertising that you’ll certainly make money is likely a scam.
They have poor or no whitepaper
Legitimate crypto projects, especially those at the ICO phase have whitepapers explaining how they work and their roadmaps. A project without a whitepaper or one with inexplicable plans or lots of grammatical errors needs a careful look.
There’s so much hype around them
It’s normal for companies to engage in marketing activities, but excessive advertising, especially in the crypto space, is a red flag. Many scam crypto projects execute successful rug pulls through excessive marketing. After raising money, they exit the market.
They promise free money
Any investment scheme that says there’s a free giveaway is likely fake. Usually, scam projects use the possibility of getting free money to lure users and defraud them.
They provide limited or no information about the project’s team members
You should be able to find out the people behind a crypto project, especially a new one. These include their LinkedIn and social media profiles to verify their authenticity and track record.
How to Avoid Crypto Investment Scams
Though cryptocurrency scams can be well-planned, you can protect yourself using the tips below.
Get a Hardware Wallet
A crypto hardware wallet saves your private keys offline, making it difficult for hackers to access your assets. Though hardware wallets come at a cost, you can find affordable options on the market to safely store your assets.
Prioritize Strong and Unique Passwords
Having a password is the most basic security rule, but you can make your password stronger and unique to make it hard to guess. For instance, instead of using easy passwords like your date of birth, combine upper and lower case letters, special characters, and numbers.
Use Two-Factor Authentication
You can take your app and wallet security a notch higher using two-factor authentication (2FA). Enable 2FA on your devices, wallet apps, and crypto exchange accounts to protect them from unauthorized access.
Avoid Unknown Emails and Links
If a random person sends you an email about a particular crypto project or investment, it’s best to ignore them. These can be investment managers saying they can help you grow your money or celebrities contacting you. A real celebrity won’t ask you to send them crypto or contact them via a link.
Get Apps From Official Platforms
Downloading mobile apps from official platforms like the Google Play Store or the Apple App Store is safer because they scrutinize applications before they go live. You can also glance through the app reviews and ratings before downloading to determine its legitimacy.
Avoid Companies Promising You Money
Anyone promising that you’ll make lots of money or guaranteed profits is likely a scam. Whatever is too good to be true is likely too good to be true. So, avoid such people or businesses as much as possible.
Research
You should only invest in things you understand, and the best way to understand cryptocurrencies is by adequate research. When you hear of a new project, read through its whitepaper to understand who’s behind it and how it works.
Also, do a bit of research on Google and social media platforms to see what others are saying about it.
Conclusion
Cryptocurrency scammers will continue to come up with new and sophisticated tactics to defraud people, but you can stay ahead of them using the various tips we’ve provided in this guide.
Remember to report cryptocurrency scams to law enforcement agencies like the US SEC, CFTC, and the FBI.
Besides these measures, it’s imperative to only invest in legitimate projects like the $Zypto Token, with real-world use cases and a solid roadmap. The community-driven token is available on reputable exchanges and platforms like MEXC, Uniswap, and CoinMarketCap.
You can read the Zypto White Paper for more information on the project’s vision, current realities, and potential.
As a crypto investor, what measures do you take to protect yourself from scammers and other malicious actors? Share your hacks below for others to learn.
FAQs
How do cryptocurrency scams work?
Cryptocurrency scams often involve fraudulent schemes where scammers trick victims into sending crypto to fake investment platforms, phishing sites, or impersonation scams. Common tactics include promises of guaranteed returns, fake giveaways, and pump-and-dump schemes.
How can you tell if someone is a crypto scammer?
Signs of a crypto scammer include unsolicited messages offering investment opportunities, promises of high or guaranteed returns, requests for private keys or sensitive information, and poorly designed or unverified platforms.
Can a crypto scammer be traced?
Tracing a crypto scammer can be challenging due to the pseudonymous nature of blockchain transactions. However, blockchain analysis tools can sometimes track the flow of funds, and law enforcement agencies increasingly collaborate with crypto experts to investigate and trace scammers.
Can you get money back from crypto scams?
Cryptocurrency payments typically are not reversible. Once you pay with cryptocurrency, you can only get your money back if the person you paid sends it back. But contact the company you used to send the money and tell them it was a fraudulent transaction.
A great article and important reminder for experienced crypto investors as well as an essential read for newcomers.
Another nice article. I’m enjoying the series of blogs so far.
Great info on scams! Theyāve got me and I learned so much when they did! Worst feeling ever is when you realize youāve been scammed!
Everybody should read this, share share share!