Common Crypto Scams and How to Avoid Them

by Aug 30, 2023Blockchain Technology0 comments

Cryptocurrencies operate without the involvement of any central authority or intermediary, which is one of their key characteristics. While this decentralization makes cryptocurrencies appealing, it also exposes them to risks such as scams, frauds, and hacks. Scammers exploit Common Crypto Scams like the anonymity, irreversibility, and volatility of cryptocurrencies to deceive innocent individuals and cause them financial loss or compromise their personal information.

According to a report by CipherTrace, a blockchain security firm, crypto-related crimes amounted to $1.9 billion in 2020, down from $4.5 billion in 2019. However, this does not mean that the threat of crypto scams has diminished. On the contrary, scammers are constantly evolving and adapting their tactics to exploit new opportunities and loopholes in the crypto space.

Therefore, it is crucial for crypto users, especially beginners, to be aware of the common types of crypto scams and how to avoid them. In this article, we will explain seven kinds of crypto scams and provide some tips on how to protect yourself from them. After reading this article we encourage you to read our article on “What Is a Honeypot Crypto Scam and How to Spot It.”

1. Fake Platforms and Apps

Fake Platforms and Apps

One of the most common ways that scammers trick crypto users is by creating fake platforms and apps that mimic legitimate ones. These platforms and apps may look identical or similar to the real ones, but they are designed to steal your money or personal information.

For example, scammers may create fake websites that resemble popular crypto exchanges, wallets, or mining services. They may also create fake mobile apps that imitate reputable ones. They may use phishing emails, social media posts, or online ads to direct you to these fake platforms and apps.

Once you enter your login credentials, payment details, or private keys on these fake platforms and apps, the scammers can access your accounts, funds, or wallets and transfer them to their own addresses. You may not realize that you have been scammed until it is too late.

How to avoid fake platforms and apps:

  • Always verify the URL of the website or the name of the app before using it. Check for spelling errors, extra characters, or unusual domains. For example, a fake website may use coinbase.pro instead of pro.coinbase.com.
  • Always download apps from official sources, such as Google Play Store or Apple App Store. Avoid downloading apps from third-party websites or links.
  • Always check the reviews and ratings of the app before downloading it. Look for negative feedback or complaints from other users.
  • Always use a secure internet connection when accessing crypto platforms and apps. Avoid using public Wi-Fi or unencrypted networks.
  • Always use a reputable antivirus software and firewall on your devices. Scan your devices regularly for malware or viruses.

2. Ponzi Schemes and Pyramid Schemes

Ponzi Schemes and Pyramid Schemes

Another common way that scammers lure crypto users is by offering them unrealistic returns on their investments. These schemes are known as Ponzi schemes or pyramid schemes.

A Ponzi scheme is a fraudulent investment scheme where the scammers pay existing investors with the money from new investors, rather than generating profits from legitimate sources. The scheme relies on attracting more and more investors to sustain itself until it collapses.

A pyramid scheme is a fraudulent business model where the scammers recruit new members to join the scheme and pay fees to the existing members. The scheme relies on creating multiple levels of members who earn commissions from recruiting more members until it collapses.

Both schemes are illegal and unsustainable. They often use cryptocurrencies as a way to attract investors who are looking for high returns and low risks. They may also use cryptocurrencies as a way to evade regulation and detection.

How to avoid Ponzi schemes and pyramid schemes:

  • Always do your own research before investing in any crypto project or platform. Look for credible information about the team, the technology, the roadmap, and the financials.
  • Always be skeptical of any offer that promises guaranteed or unrealistic returns on your investment. If it sounds too good to be true, it probably is.
  • Always be wary of any offer that requires you to pay fees upfront or recruit more members to join the scheme. These are red flags that indicate a scam.
  • Always check the reputation and legitimacy of the project or platform before investing in it. Look for reviews, testimonials, ratings, or complaints from other users or experts.
  • Always diversify your portfolio and invest only what you can afford to lose. Do not put all your eggs in one basket.

3. Fake Giveaways and Airdrops

Fake Giveaways and Airdrops

Another common way that scammers trick crypto users is by offering them free cryptocurrencies or tokens as part of a giveaway or an airdrop. A giveaway is a promotional event where the organizers distribute cryptocurrencies or tokens to participants for free or for a small fee. An airdrop is a distribution of cryptocurrencies or tokens to existing holders of another cryptocurrency or token.

However, not all giveaways and airdrops are genuine. Some of them are fake and are used by scammers to collect your money or personal information. For example, scammers may create fake social media accounts or websites that claim to be associated with a famous person, a reputable project, or a popular platform. They may then announce a giveaway or an airdrop and ask you to send them a small amount of cryptocurrency or provide your wallet address, private key, or personal details to participate.

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Once you do that, the scammers can either take your money or access your wallet and steal your funds. You may not receive any cryptocurrency or token in return, or you may receive worthless ones.

How to avoid fake giveaways and airdrops:

  • Always verify the source and authenticity of the giveaway or airdrop before participating in it. Check the official website, social media accounts, or email address of the organizer. Look for spelling errors, grammar mistakes, or inconsistent information.
  • Always be cautious of any giveaway or airdrop that asks you to send money or provide sensitive information to participate. These are signs of a scam.
  • Always use a separate wallet address for each giveaway or airdrop that you participate in. Do not use your main wallet address or the one that holds your funds.
  • Always check the value and liquidity of the cryptocurrency or token that you receive from a giveaway or airdrop. Do not assume that it is worth anything until you verify it on a reputable exchange or platform.

4. Fake ICOs and IEOs

Fake ICOs and IEOs

Another common way that scammers exploit crypto users is by launching fake initial coin offerings (ICOs) or initial exchange offerings (IEOs). An ICO is a fundraising event where a new project or platform sells its own cryptocurrency or token to investors in exchange for another cryptocurrency or fiat currency. An IEO is similar to an ICO, but it is conducted on a crypto exchange platform rather than on the project’s own website.

However, not all ICOs and IEOs are legitimate. Some of them are fake and are used by scammers to raise money from investors without delivering any product or service. For example, scammers may create a fake website, whitepaper, roadmap, team, or social media presence for their project or platform. They may then launch an ICO or an IEO and ask investors to send them money to buy their cryptocurrency or token.

Once they receive the money, the scammers may either disappear with it or issue worthless tokens that have no value or utility. The investors may not be able to recover their money or sell their tokens.

How to avoid fake ICOs and IEOs:

  • Always do your own research before investing in any ICO or IEO. Look for credible information about the project, the team, the technology, the tokenomics, and the legal aspects.
  • Always be skeptical of any ICO or IEO that promises high returns, low risks, or guaranteed profits. These are indicators of a scam.
  • Always be careful of any ICO or IEO that has no clear roadmap, no working product, no transparent communication, or no reputable partners. These are signs of a lack of professionalism and credibility.
  • Always check the reputation and legitimacy of the exchange platform that hosts the IEO before investing in it. Look for reviews, ratings, licenses, security features, and customer support.
  • Always use a secure wallet to store your cryptocurrencies or tokens that you buy from an ICO or IEO. Do not leave them on the exchange platform unless you plan to trade them.

5. Ransomware Attacks

Ransomware Attacks

Another common way that scammers target crypto users is by launching ransomware attacks. Ransomware is a type of malware that infects your device and encrypts your files, making them inaccessible. The attackers then demand a ransom in cryptocurrency to decrypt your files and restore your access.

Ransomware attacks can affect anyone who uses a device connected to the internet, such as a computer, a smartphone, a tablet, or a smart TV. The attackers can infect your device through various methods, such as phishing emails, malicious links, infected attachments, fake software updates, or compromised websites.

Once your device is infected, you may see a message on your screen that tells you how much ransom you need to pay and how to pay it. The message may also threaten to delete your files permanently if you do not pay within a certain time limit.

How to avoid ransomware attacks:

  • Always backup your files regularly on an external hard drive or cloud storage service. This way, you can restore your files in case of an attack.
  • Always update your operating system and applications with the latest security patches and updates. This can help you prevent malware infections and vulnerabilities.
  • Always use a reputable antivirus software and firewall on your device. Scan your device regularly for malware and viruses.
  • Always avoid opening suspicious emails, links, attachments, or pop-ups from unknown sources. These could contain malware that can infect your device.
  • Always use strong passwords and encryption for your device and files. This can help you protect your data from unauthorized access.

6. Fake Customer Support and Impersonation

Fake Customer Support and Impersonation

Another common way that scammers target crypto users is by pretending to be customer support agents or representatives of legitimate projects or platforms. They may contact you via email, phone, social media, or chat and offer to help you with your issues or queries. They may also claim to be someone you know or trust, such as a friend, a family member, or a celebrity.

However, their real intention is to trick you into giving them your money or personal information. For example, they may ask you to verify your identity, password, wallet address, private key, or payment details. They may also ask you to send them a small amount of cryptocurrency to confirm your account, resolve your problem, or claim a reward.

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Once you do that, the scammers can either steal your money or access your wallet and transfer your funds to their own addresses. You may not receive any help or solution from them, or you may realize that you have been talking to a fake person.

How to avoid fake customer support and impersonation:

  • Always verify the identity and authenticity of the person or entity that contacts you before giving them any information or money. Check their email address, phone number, social media profile, or chat name. Look for spelling errors, grammar mistakes, or inconsistent information.
  • Always contact the official customer support or representative of the project or platform that you use through their official website, email address, phone number, or social media account. Do not rely on any links, numbers, or accounts that are provided by the person who contacts you.
  • Always be cautious of any unsolicited or unexpected contact from someone who claims to be customer support or a representative of a project or platform. Do not click on any links, attachments, or pop-ups that they send you. Do not call back any numbers that they give you.
  • Always be careful of any contact from someone who claims to be someone you know or trust, but asks you for money or personal information. Verify their identity by calling them directly or asking them questions that only they would know.
  • Always use a secure wallet and password manager to store your cryptocurrencies and passwords. Do not share them with anyone.

7. Crypto Romance Scams

Crypto Romance Scams

A crypto romance scam is an online scheme where a cybercriminal forges romantic relationships through online platforms to trick people into handing over crypto assets. Conversations may begin on social media platforms or dating apps.

The scammer may pretend to be interested in the victim, share personal stories, send photos or videos, and express love or affection. The scammer may also claim to be a crypto expert or investor who can help the victim make money with cryptocurrencies.

However, the scammer’s real intention is to get the victim to send them crypto assets or reveal their wallet credentials. The scammer may use various excuses or tactics, such as:

  • Asking for money to pay for an emergency, a medical bill, a travel ticket, or a visa.
  • Asking for money to invest in a promising crypto project or platform.
  • Asking for money to claim a prize, a reward, or a grant.
  • Asking for the wallet address, private key, seed phrase, or password to verify the identity, secure the account, or transfer the funds.
  • Sending a phishing link or attachment that installs malware or redirects to a fake website.

Once the scammer receives the money or information, they will cut off contact with the victim and disappear. The victim will be left with no way to recover their funds or access their wallet.

How to Avoid Crypto Romance Scams:

  • Be wary of anyone who contacts you online and professes love or interest quickly.
  • Do not send money or crypto assets to someone you have never met in person.
  • Do not share your wallet credentials or personal information with anyone online.
  • Do not click on any links or attachments that are sent by strangers or look suspicious.
  • Do some research on the person you are talking to. Check their profile picture, social media accounts, and online presence. Use reverse image search tools to see if their photos are stolen from someone else.
  • Report any suspicious activity or behavior to the platform where you met the person and to the FTC at ftc.gov/complaint.

8. Social Media Scams

Social Media Scams

Social media scams are any type of fraudulent or malicious activity that involves a bad actor trying to get or use another person’s information (or getting them to do something they shouldn’t) using social media and social networking platforms.

Scams in Social media can target both individual users and businesses. They can also leverage various features and functions of social media platforms, such as ads, posts, messages, groups, pages, events, live streams, stories, etc.

Some of the most common social media scams are:

  • Fake giveaways: Scammers create fake accounts or pages that impersonate celebrities, influencers, brands, or projects and offer giveaways or contests that require users to send crypto assets, follow certain accounts, share certain posts, or provide personal information.
  • Fake customer support: Scammers create fake accounts that pretend to be customer support agents or representatives of legitimate platforms or projects and contact users via messages or comments. They may offer to help users with their issues or queries but ask them to verify their identity, password, wallet address, private key, payment details, etc.
  • Fake investment opportunities: Scammers create fake accounts or pages that promote fake or dubious crypto projects or platforms and promise high returns or guaranteed profits. They may use fake testimonials, reviews, ratings, logos, websites, etc. to lure users into investing their money.
  • Fake influencers: Scammers create fake accounts that mimic popular influencers or experts in the crypto space and endorse fake or dubious crypto projects or platforms. They may also use fake followers, likes, comments, etc. to boost their credibility and influence.
  • Fake live streams: Scammers create fake live streams on platforms like YouTube that use stolen content from legitimate sources and display fake information such as prices, charts, news, etc. They may also post links to giveaways or other enticing offers that lead to malicious websites.

How to Avoid Social Media Scams:

  • Always verify the identity and authenticity of the account or page that contacts you or offers you something. Check their username, profile picture, bio, followers, posts, etc. Look for spelling errors, grammar mistakes, or inconsistent information.
  • Always contact the official customer support or representative of the platform or project that you use through their official website, email address, phone number, or social media account. Do not rely on any links, numbers, or accounts that are provided by the person who contacts you.
  • Always do your own research before investing in any crypto project or platform. Check their website, whitepaper, team, roadmap, social media presence, etc. Look for reviews, ratings, feedback, or complaints from other users or sources.
  • Always be cautious of any unsolicited or unexpected contact from someone who claims to be an influencer or an expert in the crypto space. Do not click on any links, attachments, or pop-ups that they send you. Do not call back any numbers that they give you.
  • Always use a secure wallet and password manager to store your crypto assets and passwords. Do not share them with anyone.
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9. NFT Scams

NFT Scams

Non-fungible tokens represent unique digital assets that can be verified and traded on a blockchain. NFTs can be used to create and sell digital art, music, games, collectibles, etc.

NFTs have become a popular and lucrative market in the crypto space, with some NFTs selling for millions of dollars. However, the NFT market is also plagued by scams, frauds, and hacks that target both NFT creators and buyers.

Some of the most common NFT scams are:

  • Fake NFT projects: Scammers create fake NFT projects or collections that use stolen or copied artwork from other sources and sell them on NFT marketplaces or platforms. They may also use fake social media accounts, websites, reviews, etc. to promote their NFTs and attract buyers.
  • Fake NFT marketplaces: Scammers create fake NFT marketplaces or platforms that look like legitimate ones and offer NFTs for sale or auction. They may also use phishing emails or messages to direct users to their fake websites. They may ask users to register, deposit funds, bid on NFTs, or provide personal information.
  • Fake NFT giveaways: Scammers create fake NFT giveaways or contests that require users to send crypto assets, follow certain accounts, share certain posts, or provide personal information. They may also use fake social media accounts, websites, reviews, etc. to advertise their giveaways and attract participants.
  • Fake NFT bids: Scammers create fake bids on NFTs that are listed for sale or auction on legitimate NFT marketplaces or platforms. They may use fake accounts, bots, or shill bidding to inflate the price of the NFT and induce other buyers to bid higher. They may also withdraw their bids at the last minute or fail to pay for the NFT after winning the auction.
  • Fake NFT wallets: Scammers create fake NFT wallets or apps that claim to store and manage NFTs securely and conveniently. They may also use phishing emails or messages to direct users to download their fake wallets or apps. They may ask users to enter their wallet credentials, private keys, seed phrases, etc. to access their wallets.

How to Avoid NFT Scams:

  • Always verify the identity and authenticity of the NFT project or collection that you are interested in. Check their website, whitepaper, team, roadmap, social media presence, etc. Look for reviews, ratings, feedback, or complaints from other users or sources.
  • Always use a reputable and secure NFT marketplace or platform to buy or sell NFTs. Check their website address, security features, customer support, etc. Look for reviews, ratings, feedback, or complaints from other users or sources.
  • Always do your own research before participating in any NFT giveaway or contest. Check the terms and conditions, eligibility criteria, prizes, etc. Look for reviews, ratings, feedback, or complaints from other users or sources.
  • Always be careful when bidding on NFTs that are listed for sale or auction on legitimate NFT marketplaces or platforms. Check the history and reputation of the seller and the bidder. Do not bid more than you can afford to lose. Do not pay for the NFT until you receive it.

Conclusion 

As the crypto landscape continues to expand, it is crucial to remember that caution is the best defense against falling victim to scams. Whether it’s fake platforms, Ponzi schemes, fake giveaways, or any other devious tactics, the power to safeguard our investments and personal information rests in our hands. By embracing the principles of research, skepticism, and cautious engagement, we can navigate the complex crypto world with confidence.

In this dynamic environment, education is paramount. By staying updated on the latest trends in crypto scams and understanding the strategies scammers employ, we can equip ourselves with the tools needed to make informed decisions. The journey into the world of cryptocurrencies is undoubtedly exciting, but it’s essential to tread carefully, arm ourselves with knowledge, and foster a community where information sharing and awareness play a vital role.

Remember, the potential of cryptocurrencies to reshape finance and empower individuals is significant, but so is the importance of safeguarding our investments, personal data, and trust. By recognizing the threats and staying informed, we can collectively build a safer and more secure crypto ecosystem for everyone involved.

FAQ

What should beginners in the crypto space be aware of?

Newcomers should be aware of the common types of crypto scams and how to protect themselves from falling victim to them.

How can users protect themselves from social media scams?

Users should verify account authenticity, contact official support channels, conduct research, and avoid sharing sensitive information with unknown sources.

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