Unfortunately, the popularity of the cryptocurrency market and the opportunities it presents have attracted scores of scammers who prey on inexperienced beginners. The 24/7 nature of this market and the technological advancements in the crypto sphere have made cryptocurrency scams more efficient. Each year, digital asset holders lose billions of dollars to scammers, but what types of crypto scams exist, and how can you protect yourself and avoid crypto scams altogether?
Please read my cryptocurrency scam review below and learn about the most common crypto cons and how to evade them.
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Common Types of Crypto Scams
Many crypto scams exist, although they tend to follow a few well-established formats that have worked exceptionally well to trick victims. Therefore, almost every cryptocurrency scam falls under one of the following categories.
The main types of crypto scam are:
Bitcoin Investment Schemes
Scammers contact victims pretending to be seasoned investment managers who made millions in the cryptocurrency market. They offer their expertise and request an upfront fee. They may also ask for personal information from the victim, claiming to conduct regulatory-mandated AML/KYC procedures to establish investment accounts and handle deposits and withdrawals.
Fake Websites
Scammers create fake cryptocurrency exchanges or identical copies of legit exchanges with slightly different URLs. All deposits flow directly to scammers, who often honor the first few small withdrawals to establish trust before rejecting further withdrawals or demanding more money under an excuse to facilitate the pending withdrawal. Therefore, always check the URL.
Fake Apps
Scammers create fake cryptocurrency apps and distribute them via the Google Play Store and the Apple App Store. While both companies police their stores and find fake apps, scammers always find sufficient victims to rinse and repeat the process after a ban.
Blackmail and Extortion Scams
Scammers send e-mails or social media messages claiming they have hacked victims’ devices, recorded audio and video of them visiting adult content online, joke about how they look and sound, and threaten to release the content online and post it on the victim’s social media accounts unless they receive cryptocurrency ransoms within a short period.
Rug Pull Scams
Scammers will use excellent marketing to hype a fake cryptocurrency project or non-fungible token (NFT) to collect funding. Once the scammers have milked the rug pull as much as possible, they disappear and shut down the website or app. Fake initial coin offerings (ICOs) are highly popular rug pulls, and the coding prevents victims from cashing out.
Romance Scams
Scammers use online dating apps to nurture online-only relationships with victims. After gaining their trust, scammers offer investment advice or claim unexpected hardship to receive money from their victims. Once they receive money, they disappear and move to the next victim. The scam is known as “pig butchering,” and can last for months.
Phishing Scams
Scammers primarily target private keys to access online cryptocurrency wallets. They lure victims by sending e-mails or social media messages and asking them to visit a fake website that mirrors a legitimate company. Victims enter their private keys, which scammers use to swiftly empty wallets before victims realize what has happened.
Man-in-the-middle Attacks
Scammers intercept public Wi-Fi traffic on trusted networks, receiving all the data that victims enter, including private keys, passwords, and relevant account information. It happens without the victim’s knowledge. Virtual private networks (VPNs) encrypt data and can prevent man-in-the-middle attacks.
Social Media Cryptocurrency Giveaway Scams
Scammers rely on social media and their victims' eagerness to gain something for free. Some scammers use fake celebrity endorsements to lure victims to websites where they ask them to enter personal information and to make a small payment to verify their identity and receive free cryptocurrencies.
Ponzi Schemes
Scammers pay older investors with the funds they receive from newer investors. No product or service exists, and scammers encourage investors to onboard more people to receive additional income. The scam runs for as long as new investors sign up, lured by the promise of massive returns with little risk. Some Ponzi schemes can operate for years before collapsing.
Fake Cryptocurrency Exchanges
Scammers create fake cryptocurrency exchanges and offer superior trading conditions, deposit bonuses, rewards, and giveaways to active traders. Like most scams, scammers will honor several withdrawal requests until they grow their user base with sufficient deposits. It may take months before the fake cryptocurrency exchange vanishes.
Employment Offers and Fraudulent Employees
Scammers pose as job recruiters with exciting opportunities and offer job training for a cryptocurrency fee. Another version targets the remote work market, where scammers present impressive resumes to gain employment. During the interview, they submit documents for recruiters to review, which contain malicious code to access the company’s system to launch bridge attacks.
Flash Loan Attack
Scammers offer short-term loans that may last a few seconds. They are popular among cryptocurrency traders who take a flash loan to buy crypto on one exchange and sell it a few seconds later on another for a small profit. Scammers enter fake orders on the exchange to simulate demand and push prices higher, then cancel them, causing the asset to drop in value.
AI Scams
Scammers have exploited the emergence of AI chatbots. They use them to contact victims and engage them in conversation to build trust, offer advice, and promote fake cryptocurrencies and NFTs. They also use deep-fake technology to impersonate celebrities and rely on AI-assisted tools to inflate proof-of-work concepts.
Bitcoin ATMs (or BTMs)
Scammers contact victims and impersonate well-known companies. They claim fraudulent activity and assist victims in regaining lost funds or unfreezing accounts if victims deposit cash in Bitcoin ATMs and use a QR code.
How to Protect Your Crypto and Avoid Scams
The best method to protect your crypto and your data is through in-depth education to understand crypto trading, while the best way to avoid scams is to stay clear of social media. I have compiled additional steps everyone should take to avoid joining the ever-growing list of crypto scam victims.
Recommendations to Protect Your Crypto
- Never share your private keys with anyone (no legit company will ask you for them)
- Store your private keys offline in a secure location (avoid any online storage, regardless of how secure it may appear)
- Download crypto apps from official platforms (I advise going to the app developers’ website, ignoring those without one, and only downloading apps from the Google Play Store or Apple App Store)
- Only transfer a small amount of money to a new wallet app to confirm it is a legit wallet and firm, then monitor what happens, and uninstall it if you detect suspicious behavior (I recommend repeating this step a few times over a few months)
- Never invest in something you do not understand (if you cannot explain it to a five-year-old, you do not understand it)
- Ignore time-sensitive offers and opportunities that promise you bonuses or discounts if you act now (take your time, conduct your due diligence, and make an informed decision)
- Never invest money you cannot afford to lose (cryptocurrency is volatile and speculative, and most participants lose money due to a lack of knowledge and not to scams)
Recommendations to Avoid Crypto Scams
- Conduct research and read the white papers of new cryptocurrency projects (understand who launched the cryptocurrency, how it operates, learn about its road map, and avoid opaque or secretive projects)
- Check the cryptocurrency against up-to-date and credible fake cryptocurrency lists (others may have reported the scam)
- Ignore social media and mobile apps (the preferred communication channels of scammers)
- Never answer cold calls from anyone (never provide personal information or transfer money to someone who contacts you, as it is a guaranteed scam)
- Avoid anyone who promises you substantial profits (including self-proclaimed investment managers)
- Ignore celebrity endorsements or anyone contacting you as a celebrity (a celebrity will never contact you, and their endorsements are often fake)
- Use common sense and ignore offers that appear too good to be true (tread carefully, as this is a major red flag)
- Avoid free giveaways, promotions, or cash offers (always conduct your due diligence)
- Ignore job listings for cash-to-crypto or crypto miner openings (only accept offers from well-established companies)
- Always meet a romantic interest you have met online or via a dating app in person, and never send them money, personal details, or rush into something. Also, you should always share your interactions with one close friend or family member to receive impartial, constructive advice.
- Ignore e-mails or text messages from well-known companies claiming they froze your account with assistance to unfreeze it (if you have an account with the company, contact customer support to verify normal operations and report the scam)
- Report communications about explicit material a scammer claims to possess and release unless you pay a cryptocurrency ransom (this blackmail scam is highly popular)
- Contact law enforcement if you receive communication from someone pretending to work for a government, law enforcement, financial, or utility company claiming they froze your assets (never respond to the initial e-mail, text, or social media message, but connect to the official channel of the involved agency)
My Take
The two best ways to spot and avoid cryptocurrency scams are education and avoiding social media for anything related to money, finance, and investments. All the various types of crypto scams rely on inexperienced and vulnerable victims, whom they find on social media platforms and mobile apps. Before trading or investing in cryptocurrencies, you must understand the cryptocurrency market and assets. It takes time, and beginners cannot accomplish it in just a few days or weeks.
