Most Popular Cryptocurrency Scams & Guide On How To Avoid Them

Cryptocurrencies attract many investors due to the decentralized nature of the assets, which makes transactions faster and cheaper. However, for the same reason that digital assets are not regulated by any authorities, they become vulnerable to scams and attacks. There are hundreds of such cases every day, which is why it is so important for users to protect their funds and personal data.

In this article, we will tell you about the most common types of cryptocurrency scams and give you recommendations on how to avoid them and what to do if you encounter such a problem.

What Is A Crypto Scam?

Let's first understand the nature of the cryptocurrency scam. So, it is a type of fraud where intruders steal digital assets from their holders and do it fraudulently. The scammer is a person who does it, remaining under a pseudonym or unknown.

Every crypto scam is based on fraudulent schemes aimed at gaining the trust of the victim. If the criminals succeed, they move on to the next step: for example, induce a person to share personal information or transfer crypto to an unknown wallet. As a result, the crypto owner loses most or all of funds.

Types Of Scams

Crypto-scamming takes many forms. As a rule, these actions are aimed at gaining access to a person's digital wallet or transferring crypto directly to scammers. In this case, there are several main scenarios in which criminals operate:

1. Promise of high profits without risks. That is the most common scenario when scammers offer to invest large amounts in cryptocurrency, guaranteeing their safety. As a rule, people are impressed by stories about successful crypto millionaires who really managed to get rich on digital investments. Nevertheless, it is worth remembering that there are always risks of losing money because the crypto market is very unstable. Therefore, such “excellent” offers should be wary.

2. Requesting or demanding money. This method is similar to the previous one, but in this case, the scammers ask the person to transfer the crypto to a certain wallet. They explain that they will help with investing using techniques of emotional persuasion that strongly influence the potential victim.

3. Impersonation of a legitimate company. Criminals pretend to be some trustworthy person, for example, a representative of a famous crypto exchange or even a celebrity. In this way, they get the person comfortable with them and start sending them advertisements or emails encouraging them to provide personal information or transfer crypto. In this case, scammers often use a strategy of intimidation, which makes the person act without thinking.

These are just a few of the main strategies used by scammers to steal funds from their owners. They are embedded in various schemes that are the most common in the crypto field. We go into more detail about them further.

Most Popular Crypto Scams

Cryptocurrency scams come in different forms and types, which are increasing every year. We will tell you about the most popular and common scam schemes known to date.

Pyramid Schemes

Otherwise known as "Ponzi" schemes. It is a prototype of a financial pyramid, where scammers offer "their investors” the opportunity to earn large amounts of money by attracting new participants. Payouts are made from the newcomers' funds, not from real profits. In this case, participants are recruited into this kind of fraudulent project, but often the scammers disappear forever as soon as a new investor deposits money.

ICO

A type of scam related to initial coin offerings where several types of deception are practiced. Firstly, so-called cryptocurrency promoters raise funds for an ICO and then disappear. Secondly, developers can cheat investors by launching ICOs on fake exchanges. Thirdly, there are reward scams where allegedly there are not enough funds to pay project promoters money for their work. These are the most common types of ICO-related scams.

Rug Pulls

This type of scam is adjacent to ICOs. In "rug pulls", intruders create a new cryptocurrency or DeFi project, attract investors, wait to accept funds, and one day withdraw everything. The project and its creators then become completely unavailable and investors lose their money.

Phishing

In this case, fraudsters send emails to people that contain malicious links. They disguise themselves as websites with profitable investment offers that attract users. After users click on them, the fraudsters obtain the user's personal data, such as the cryptocurrency wallet address, keys or PIN codes. Once the funds are stolen, the wallet itself often disappears.

Pump-And-Dump

This scheme is mainly focused on small crypto amounts. The essence is that fraudsters artificially increase the value of assets, misinforming potential investors about the low value of coins (pumps). This way, they put pressure on the fear of missing out on such a unique offer. After that, the attackers sell coins initially bought favorably at a higher price (dumps).

Fake Exchanges

Cryptocurrency exchanges are the most popular platform for trading digital assets. That is why scammers often take advantage of this and create fake websites. The key feature is that, as a rule, such sites have unusually favorable conditions — for example, the absence of any transaction fees and the necessity to register.

Cloud Mining

This type is related to fake exchanges, as it can be found exactly on fake platforms. Scammers who are engaged in cloud mining offer users the option to rent equipment for work and receive part of the profits. In reality, they do not own any equipment, and after accepting the funds, they disappear classically.

Social Media Scams

Scammers use social media to spread false information, such as fake ads or fake promotions about cryptocurrencies. To gain trust, they create fake accounts or even pretend to be famous people. Most often, they write private messages to users offering increased profits for a small down payment, after which they send nothing.

Livestream Scams

Intruders create fake live streams on video hosting sites such as YouTube, impersonating well-known opinion leaders. During the broadcast, they advertise new cryptocurrency promotions and opportunities, which, of course, are fake. They encourage viewers to send crypto to a specified address, promising that they will receive a large amount in return. But in reality, they take all the funds received for themselves without giving viewers anything.

Pig-Butchering

In this type of scam, the intruder builds a long-term relationship with the victim, most often through dating apps. Once trust is established, the scammer convinces the victim to invest a small amount in a fake crypto platform that shows positive returns. As soon as the user invests a larger amount, the scammer interrupts the relationship, and withdrawal of funds from the platform becomes impossible.

Crypto Scams Within Different Apps

There are many apps and services on the Internet that are becoming convenient platforms for crypto scams. Their main focus is on payment systems, messengers and social networks. Let's take a look at how intruders operate in different applications using examples:

• PayPal. In this payment service, scammers have come up with several methods to deceive users. For example, they pretend to provide legitimate services and convince victims to buy crypto due to great investment opportunities. Of course, after sending the payment, the scammers disappear. Phishing emails posing as messages from PayPal are also common here, in which scammers force users to provide account details.

• Cash App. In CashApp, the most frequent crypto fraud schemes are similar to those in PayPal, when fraudsters pretend to be Cash App representatives and send phishing emails demanding account data. It is also popular here to pretend to be famous personalities or the same CashApp representatives and advertise fake promotions. In this case, scammers convince application’ users to send them crypto with the promise to double the amount and disappear after receiving the funds.

• WhatsApp. In the popular messenger, crypto scammers send unsolicited messages containing phishing links or fake investment schemes. They may also impersonate celebrities or representatives of large companies. As usual, the scammers ask for private keys and to send funds, then leave victims with nothing. They can do the same using group chats, creating a sense of legitimacy and urgency.

• Telegram. On Telegram, scammers create fake groups or channels pretending to be famous people or legitimate crypto projects, just like on WhatsApp. Here they advertise fake stocks and investment opportunities, demanding to transfer funds to them, which they will then steal. They may also use a pump-and-dump strategy here, artificially increasing the value of the coin and then leaving victims with tokens of almost no value.

• Instagram. On the popular social network Instagram, scammers hack into celebrity profiles or create fake ones from where they post messages about false cryptocurrency stocks. In these posts, they encourage subscribers to send cryptocurrency with the promise of doubling their investment. Sometimes, they use direct messages to lure each individual into fraudulent schemes.

• Dating Apps. On dating apps, scammers establish romantic relationships with victims, which takes some time. When they manage to gain trust, they offer their "partners" the opportunity to invest in cryptocurrency by sending them fake cryptocurrency platforms to sign up. Once the funds are transferred, the scammers disappear and the victim loses money forever. This is a classic pig-butchering scheme.

How To Avoid Scams?

When working with cryptocurrencies, as with finance in general, you need to be vigilant. Learn tips on how to avoid scams in the crypto space:

• Educate yourself. Follow the market news: you can find major cases of scams and new fraud schemes. You can also consult with experts or friends who have experience in the cryptosphere.

• Be careful with suspicious messages. Do not follow links sent to you by unfamiliar users to email, messengers or social networks. Never respond to messages that offer you a quick and high income, as it is a classic scheme of all scammers.

• Do not share personal information. Never send to anyone your personal data, such as your wallet key and password. Remember that legitimate services never ask for such information.

• Use trusted crypto platforms. Choose only reliable and safe wallet providers and exchanges with high ratings. Additionally, you can study user reviews about the platform and expert recommendations. An example of a reliable crypto platform is Cryptomus, where you can work with crypto with peace of mind. Data and wallets here are protected by encryption technology, and all users undergo verification and KYC procedures before starting work, so the risk of encountering scammers is minimized.

• Use additional protective measures. Even on the safest platform, you have to be vigilant and double-protect your assets. For this purpose, enable two-factor authentication, which will secure your wallet from hacks. Also, try to work from a personal computer and use a wired connection, as using public Wi-Fi can be unsafe.

How To Report Scams?

If you have been victimized by scammers or think you are at risk of such a situation, you need to know where you can go for help in such cases. Although it is difficult or even impossible to recover money lost due to fraudulent transactions, but with timely contact, you can target the intruders or limit the damage.

We have prepared a list of the actions you have to take in such a situation. Study it to know how to get out of it with fewer losses:

• Gather all the information about the situation. Prepare a report about the scam, including all the details of the transaction and communication with the fraudsters. It will be useful in tracking down the intruders and may serve as your evidence in a court of law.

• Contact the crypto platform you used. The platform where you register is responsible for your data safety because you are giving it access to some confidential information. Therefore, write or call the platform's customer support first so that the site's security team can begin their work regarding your situation.

• Alert the bank you use. Report the fraud to your financial authorities as well, if you have a card or account from that organization linked to your cryptocurrency wallet. These companies usually know if your information has been compromised and can help you block your accounts to avoid any further losses.

• Tell the authorities. Among the organizations that help fight crypto scams are local authorities, so reporting your case to them is also necessary. Provide them with all information, including the scammers’ contact details, the platform you registered on at their request, and their appearance if you had direct contact with them. This information will help the authorities in their further investigation.

• Share your experience. Tell your story to your friends or other users of cryptospace: for example, on special forums or in your social networks. This way, you will help other people not to fall victim to scammers, and you may also hear stories similar to yours and hear some new and useful information for yourself.

There is never a guaranteed defense against scam attacks, so it is essential to take care of your own safety. We hope our article has helped you learn more about the types of crime in this diverse sphere, and now you know how you can protect yourself from scams and how to act if such a situation happens to you. Share your experience in the comments, if you have encountered scams, or tell us your thoughts about this topic.