Crypto Scammers Hard at Work: 8 Types of Scams to Look Out For
As the popularity of cryptocurrencies like Bitcoin and Ethereum continue to grow, so does the number of scams targeting users. Whether you’re looking to invest in a new cryptocurrency or use one for transactions, it’s essential to be aware of the different types of scams out there. This blog post will discuss eight common types of cryptocurrency scams and how to avoid them. Stay safe out there!
What are the types of cryptocurrency scams?
Cryptocurrency wallets are used to store your coins and track your transactions. While some say cryptocurrency may be the future of money, it’s important to remember that not all crypto wallets are created equal. Unfortunately, plenty of scammers out there are more than happy to take advantage of unsuspecting investors. So, beware of fake or malicious wallets that can steal your coins.
Here are a few tips to help you avoid fake crypto wallet scams:
- Do your research. When choosing a crypto wallet, be sure to do your homework and only select one that comes from a reputable source.
- If a wallet seems too good to be true – for example, if it offers unusually high-interest rates – it probably is.
- Keep your private key safe and secure. Your private key is what allows you to access your cryptocurrency, so you must keep it safe and secure. Avoid sharing it with anyone and only store it in a secure location.
In the cryptocurrency world, these are emails or messages sent by hackers impersonating a cryptocurrency exchange or wallet service and asking users to click on links or download attachments that contain malware designed to steal login information and private keys. In addition, these emails often come with urgent requests for immediate action or threats of account suspension if the user does not comply with their request within a specific timeframe.
Be very careful when clicking on links or providing personal information online.
Phishing prevention tips are the same for crypto scams as typical scams:
- Make sure that you are only visiting websites that you trust. If you’re unsure about a website, do some research to ensure it’s legitimate before entering any information.
- To steal your private key, scammers often try to trick you into clicking on a malicious link or downloading a fake wallet app. Be vigilant and never click on links or download files from unfamiliar sources.
- Never give out your personal information or login credentials to anyone online. No reputable company will ever ask for your private keys. If you receive an email that asks for this information, it is almost certainly a scam.
An ICO (initial coin offering) is when someone sells a cryptocurrency to investors in exchange for money or other cryptocurrencies. The person doing the ICO usually has a project they want to fund, and if they get enough money, the project will be successful.
But beware of fake ICOs that are nothing more than scams. These scam artists often promise guaranteed returns or use other marketing tactics to lure you in.
There are a few key things to look for when trying to avoid fake ICOs:
- First, be sure to do your research on the team behind the project. Is the team experienced in the space? Do they have a good track record? The more you know about the team, the better.
- Second, look at the project itself. Is it solving a real problem? Does it have a strong use case? Avoid projects that seem too good to be true.
- Lastly, pay attention to red flags. If an ICO seems overly complicated or if there is little information available about it, it’s best to steer clear.
Pump and dump schemes
In a pump and dump scheme, scammers artificially inflate the price of a cryptocurrency through false and misleading statements. They also use crypto influencers to advertise the new cryptocurrency they created to their social media followers in hopes they will buy in. Once the cryptocurrency reaches the desired value, the scammers coordinate, and they then “dump” their coins on unsuspecting investors at a higher price. This leaves investors with worthless coins and can cause the currency’s value to crash.
These scams are simple to manufacture with cryptocurrencies because it is relatively easy to find crypto assets that barely trade on exchange platforms. They can also easily create a new crypto asset themselves. All they need is basic coding knowledge and a few hours of research.
So, what should you look out for to spot early on a pump-and-dump scheme?
- As always, do some research. Start by looking at the coin’s whitepaper through the Whitepaper Database. A cryptocurrency whitepaper should contain technical, financial, and commercial information to explain what they plan to do with their project and to attract investors. Don’t hesitate to compare new projects with well-established ones like Bitcoin and Ethereum to understand better what a good Whitepaper should look be. After reading through the whitepaper, you should have a better sense of the long-term potential for the cryptocurrency to go up in value.
- Look at who and what kind of person is talking about that cryptocurrency and promoting it. If it’s a random traveling influencer, it’s probably best to assume that it’s not a legitimately sound investment.
- Social media platforms are remarkable for their advertisement capabilities. Scammers have been using them to their advantage for a while now, and there is no indication they will stop. If you come across a potential crypto asset investment on social media, always double-check if it’s a legitimate project. Look for a website and social media page on your own. Never trust adds.
- You should check the trading volume to see if it has increased recently. If it has, be careful because it might signify that someone is trying to manipulate the price. You might also see big groups of buyers or sellers, which means that a big group is trying to control the asset’s price.
Ponzi and pyramid schemes
Ponzi and pyramid schemes have been around for centuries. They are nothing new. However, with the rise of cryptocurrency, these schemes have taken on a new form. In a traditional Ponzi scheme, investors are promised high returns with little risk. In a Ponzi scheme, scammers use money from new investors to pay out old investors. This method creates a “pyramid” structure, with the early investors getting paid off by the new investors.
While some legitimate investments use this structure, most of them are scams. These schemes eventually collapse when there are not enough new investors to keep paying out the old ones, which leaves many people losing their money.
Crypto Ponzi schemes work similarly. However, instead of using traditional investments, they use cryptocurrency. This can be anything from Bitcoin to lesser-known altcoins. These schemes often promise high returns with little to no risk. They may also claim to offer “investment opportunities” that are too good to be true.
Anonymous people often run these schemes. They may have a website or social media account, but tracking them down is challenging, making it even harder to get your money back if you invest in one of these schemes.
The best way to avoid crypto Ponzi and pyramid schemes is to be very careful about who you give your money to. It is probably a scam if someone is promising you high returns with little to no risk. Also, be sure to do your research before investing in any cryptocurrency-related project. There are many reputable exchanges and wallets, so be sure to use them.
Cloud mining scams
Cloud mining scams have been around for a while now and are only becoming more common. These scams promise big profits for little to no work, but they steal your money.
Cloud mining scams work by promising big profits for little to no work. These scams often promise tremendous returns for a small investment, but in reality, they steal your money. The scammer will often ask you to send them money to start mining, but once you do, you will never see that money again. They will also likely promise to pay you back with profits from the mining, but again, this is just a way to steal your money.
There are a few ways to avoid these scams:
- Be very careful about who you’re sending money to. If you don’t know the person or company well, it’s best not to send them any money.
- Do your research before investing in any mining operation. Make sure that the company is legitimate and has a good reputation.
- Don’t invest more money than you can afford to lose.
If something sounds too good to be true, it probably is.
‘Pig Butchering’ Crypto scams
Pig butchering is a new scam that is going around. This type of fraud is a mix of a romance scam and an investment scheme. It is a type of fraud in which the scammer poses as a potential love interest on social media or dating websites. This trend started in Southeast Asia, where it got its name from how hogs are “fattened up” before being killed. In this case, the victims get “slaughtered” when the fraudsters convince them to invest in a phony cryptocurrency platform and disappear with their money.
So how does this scam work, exactly? Well, it all starts when the victim meets their perpetrator online—usually on a dating site or social media platform. They will often begin by saying flattering things to their victim. The two build up a relationship over time, and eventually, the fraudster convinces their mark to invest in a new cryptocurrency they’ve heard of or that they’re developing. They might even go so far as to set up a fake website or whitepaper to make the scam seem more legitimate.
While this type of scam might seem like a long shot, it’s surprisingly common. Numerous reports have been of people being taken for hundreds of thousands of dollars by pig butchers posing as potential romantic partners. A Bay Area man lost $1.2 million in a cryptocurrency scam that’s targeting Silicon Valley investors.
So how can you protect yourself from this type of scam? The best way to avoid being duped is to be aware of the red flags that indicate you might be dealing with a fraudster. For example, be wary of anyone who:
- Asks you for money or investment advice
- Pushes you to make decisions quickly
- Seems too good to be true
- Refuses to video chat or meet in person
- Asks for personal information like your address or Social Security number
If you suspect you might be dealing with a fraudster, the best thing to do is to cut off all communication immediately.
Crypto recovery services scams
A new type of scam has targeted cryptocurrency users in recent months. This scam, known as a “crypto recovery scam,” tricks users into sending money to scammers to recover their lost or stolen cryptocurrency.
Crypto recovery scams typically involve the scammer contacting the victim and offering to help them recover their lost or stolen cryptocurrency. The scammer will often claim to be a member of a recovery team or an expert in blockchain technology. They will then ask the victim to send them a small amount of money to cover the costs of recovering the lost cryptocurrency. Once the victim sends the money, the scammer will disappear, and the victim will never hear from them again.
There are a few red flags to watch out for if you think a crypto recovery scam may have targeted you:
- The scammer contacts you out of the blue – If you receive an unsolicited message from someone offering to help you recover your lost cryptocurrency, this is a major red flag.
- The scammer asks for a fee – Recovery teams or experts should not charge you a fee for their services upfront.
- The scammer promises guaranteed results – No one can guarantee that they will be able to recover your lost cryptocurrency. If someone claims that they can, this is a scam.
The best way to avoid any scam is to be well-informed and vigilant. Do your research before investing in any cryptocurrency, and only use trusted sources of information. If something sounds too good to be true, it probably is. Finally, always be cautious when sharing your personal information or financial details online.
Cryptocurrency scams are becoming more and more common as the popularity of Bitcoin, and other cryptocurrencies continue to grow. But by being aware of the different types of scams, you can protect yourself from becoming a victim. Stay safe out there!
If you think a cryptocurrency scam may have targeted you, there are a few things you can do:
Report the scam to the authorities – If you have been scammed, you should report the incident to your local law enforcement, regulation entities, and other bureaus using these links:
- The FTC: ReportFraud.ftc.gov
- The Commodity Futures Trading Commission (CFTC) at CFTC.gov/complaint
- The U.S. Securities and Exchange Commission (SEC) at sec.gov/tcr
- You can also go to the FBI if the fraud involves extortion or blackmail.
Warn your friends and family: If you know someone a cryptocurrency scam has targeted, warn them about it and tell them how to avoid it.
Also, don’t forget to report the fraud to whatever crypto exchange you used to complete the crypto transaction whenever you suspect or have evidence that bad actors are at play.
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Thanks for reading!
I’m Akim Laniel-Lanani. I am the cofounder and Director of the Clinique de cyber-criminologie, as well as a holder of a bachelor’s degree with a specialization in financial crime. For more than a year now, I have been working in the fight against cybercrime. My primary focus is on frauds that target individuals.
What drives me is my passion to help my community better defend itself against crime. I work actively to train passionate students to help in the fight against cybercrime and raise awareness about the various crimes committed with the use of the Internet and technology.