Cryptocurrency is a new, exciting way to interact with money. However, scammers are looking to take advantage of people who don’t know how to navigate this new and often complex world. Cryptocurrency scams have become the new fraud of choice for cybercriminals looking to make a quick buck.
Read on to learn about the most common types of crypto scams and how you can protect yourself against them.
What are Cryptocurrency Scams?
Cryptocurrency scams are a form of financial fraud that uses cryptocurrencies as bait to lure people into scamming schemes.
Crypto scams can take many forms, but they all have one thing in common: they use the promise of getting rich quickly with cryptocurrency to convince people to send money and personal information.
Scammers often create fake websites or social media accounts that impersonate legitimate companies and individuals, such as crypto exchanges, DeFi platforms, or celebrities.
Crypto scammers are increasingly using social media and email to target victims, who they believe to be ripe for a pitch. They’re also targeting people with low knowledge of crypto, or those who have been affected by a recent price drop in their investments and are looking to recover.
The aim is simple: get your money and run.
Unsurprisingly, these types of scams have recently become more prevalent because of how easy it is for criminals to manipulate content online through bots and other means. Many investors have lost hundreds of thousands or even millions of dollars.
While there are legitimate ways to invest in cryptocurrency and earn profits, there are also countless scams that attempt to steal your hard-earned money. Due to the prevalence of these scams, you need to be aware of how these schemes work now more than ever, so you don’t become a victim.
Types of Crypto Scams
There are many types of crypto scams, and it’s important to know how to spot them so you can avoid being scammed. Here are some examples.
Crypto pump-and-dump schemes
Also known as ‘Rug Pull Scams,’ pump-and-dump scams involve artificially inflating the price of an asset before selling it at a profit. In the case of cryptocurrency, this could mean artificially inflating the price of one coin by promoting it on social media channels or in chat groups using false information about its potential, use cases, etc. The scammer(s) will buy up large amounts of the cryptocurrency at artificially low prices, then sell it later at higher prices to make a quick profit once investors have been lured in by the hype.
Phishing scams are a type of fraud whereby a cybercriminal sends out fake emails or messages posing as a reputable company to trick people into clicking on links that will take them to a phishing website.
The aim is for victims to enter their details, such as private keys, which are then stolen and used by the scammer. The emails are often very well-made, so it can be hard to tell that they’re fake. They may also include a logo or other official branding from the real company to make them more convincing. In recent years, there has been an increase in phishing schemes targeting cryptocurrency users. These scams usually involve an email asking for private keys or promising free coins that don’t exist.
Crypto Ponzi schemes
Ponzi schemes are investment opportunities that promise high returns on investments, but in reality, they take money from new “investors” to pay off existing “investors.”
Crypto Ponzi schemes (or pyramid schemes) often take the form of “staking” or “cloud mining” systems where users are asked to deposit coins into an account and are promised a high return on their investment as soon as they reach a minimum threshold. In reality, these projects don’t exist, and they can’t generate profits because they don’t own any assets. These schemes rely on attracting more and more people with promises of higher returns, which quickly become unsustainable and collapse when it becomes impossible to meet those promises.
There are a few different types of giveaway scams that target crypto users.
The first type is where someone pretends to be a well-known figure in the space and offers to give away a large amount of cryptocurrency if you send them a smaller amount first.
The second type is related to phishing, where someone creates a fake website or social media profile that looks like a legitimate exchange or wallet service and asks you to deposit funds into it to receive a larger amount of cryptocurrency.
The third type is where someone promises to double your cryptocurrency if you send them half of what you own. These scams are common because they prey on people who are new to the space and may not be aware of how these things work. They also target people who are eager to get their hands on some free cryptocurrency.
Be sure to do your research before sending any funds to anyone, regardless of who they claim to be.
Blackmail or extortion crypto scams
If you’re being blackmailed or extorted, chances are the scammer is demanding payment in cryptocurrency.
They may threaten to release sensitive information or damage your reputation unless you pay up. These scams can be especially effective because they exploit our natural fears and desires to keep our secrets hidden. However, crypto extortion emails are typically a scam, and the supposed information they possess about you isn’t, in fact, real. So you can just ignore these emails, and don’t send them any crypto.
How to Spot a Crypto Scam
Cryptocurrency scams are common and not always obvious to spot. Nonetheless, there are some red flags that you should look for when deciding whether or not to invest in a cryptocurrency.
Here are some tips!
If it is too good to be true, it probably is.
The first sign of a scam is when a company offers an investment opportunity that seems too good to be true—like paying out returns weekly or offering returns of up to 100%. These are classic signs of Ponzi schemes, where people pay money in return for nothing at all. If the website looks too good to be true, it probably is. This could be because they’re using fake reviews and ratings from real people who have been paid by the company behind the cryptocurrency scheme.
Watch out for red flags!
Certain red flags may indicate you’re dealing with a crypto scam. For example, if someone promises guaranteed returns or tries to pressure you into investing quickly, that’s a major red flag. Other warning signs include unrealistic claims, promised bonuses for referring others, and pressure to keep your investment a secret. If you see any of these red flags, it’s best to steer clear and find a more reputable investment opportunity.
Research the project’s team.
There are a few key things to look for when researching a team. Firstly, are the team members real people with verifiable identities? Secondly, what is their track record? Have they been involved in successful projects in the past? Thirdly, do they have the necessary skills and expertise to pull off the project they are proposing?
Look at the project in detail.
Is there a whitepaper that outlines the goals and roadmap of the project? Does the project have a working product or prototype? Are there clear use cases for the token that is being created? Is there a community around the project? All of these factors can help you assess whether or not a project is worth investing in.
Be wary of anonymous projects and developers.
When investing in cryptocurrency, be wary of projects and developers who remain anonymous. While there are legitimate reasons for anonymity, it can also be used to hide shady activity. Do your research to make sure the project is legitimate before investing.
How to Protect Yourself from Crypto Scams
Be wary of investment opportunities that seem too good to be true. Cryptocurrencies are still relatively new and haven’t been around long enough for anyone to have any real expertise in them—so if someone claims they do, run!
Do your research before investing in cryptocurrencies. It only takes one bad experience with crypto scams to cause lasting damage to your finances. Don’t let this happen by not doing anything at all!
To avoid being caught out in a phishing scam, it’s important to check the URL of the website you are visiting and make sure that it is legitimate. If you receive an email from your crypto exchange or another company asking for personal information, be sure to contact them directly before entering any details into a third-party site.
Ignore urgent requests. If someone associated with a project is constantly urging you to send them money or take some other action right away, it’s a sign that they’re trying to scam you. Legitimate projects will never put pressure on you to invest quickly or take any other actions without giving you time to research and make an informed decision.
Don’t respond to unsolicited contact. If you receive unsolicited contact from someone claiming to be a crypto expert or promising incredible returns on your investment, it’s likely a scam. Don’t respond to these requests, and never give out your personal information or financial details. Delete any suspicious emails or messages, and report the scammer to the authorities if you can. By being aware of the common signs of a crypto scam, you can protect yourself and your money.
Report suspicious activity immediately. If you think something might be a crypto scam, report it to the relevant authorities. Scams can be hard to spot, but there are some common red flags to look out for, such as promises of guaranteed or overly high returns, pressure to invest quickly, and vague or nonexistent investment risks. If you’re not sure whether something is a scam, err on the side of caution and report it if you feel the need to.
It’s important to be aware of the signs that someone may be trying to scam you. If that’s the case, don’t panic. Just follow the steps listed in this article to ensure your crypto funds stay safe, and you won’t fall victim to crypto fraud.
The best way to avoid getting scammed is by educating yourself and conducting your own research before making any investment decisions. This will allow you not just to evaluate whether or not an offer sounds right but also to make sure that the company behind it has what it takes when it comes time for the execution of its promises (or lack thereof).