While investing in crypto can be an exciting opportunity and potentially lucrative, the industry is unfortunately rife with scammers who are trying to make easy money, not from crypto investments but at the expense of potential investors. In this article, we’ll look at the various kinds of crypto scams, how to spot them, and, of course, how to avoid them.
One of the reasons that crypto scams are hard to spot is that they come in many different forms, some of which may be more suspicious or obvious than others. Below is our crypto scams list, featuring some of the more common scams you’ll come across in the world of crypto trading and investing.
As with many other scams, crypto scammers are often trying to gain access to your private information or persuade you to send funds (in this case crypto funds) to them, or to a source that they can then access.
Scammers will try to access your private keys, which are required to gain control of your cryptocurrency. In fact, it can be argued that in the absence of any physical coins, your keys are your currency.
Crypto phishing scams will often consist of an email with links that ask you to send money, make a payment, or enter private keys. Ignore any such emails, delete them, and block the sender.
These are scams that tend to use manipulation and deceit, often persuading the target of the scam that they are contacting them from a trusted organisation such as a bank, government agency or business that the target deals with or holds an account with.
These types of crypto scams also include the scam where you are seemingly contacted by a friend, relative or online acquaintance, often from a social media or other online account that does appear to belong to them but has actually been hacked or cloned.
These scammers will typically have a very plausible reason that you need to send them money and will be trying to get you to reveal private keys or other sensitive information, or to transfer money to their account or digital wallet.
Romance scams are very common and usually involve scammers contacting potential victims via dating apps or social media and starting an online, and sometimes even real-life, relationship. Once trust has been established, the scammer uses this in one of a number of ways.
They may ask for money directly because they have an emergency and cannot reach anyone else. Or they may talk about all the money they’ve made with their cryptocurrency investments, and quite possibly show you the lifestyle that these investments supposedly fund.
This eventually leads to them suggesting that you should also invest and make vast sums of money like they do – at which point, they will recommend an investment opportunity or maybe offer to invest for you. Both of these ‘opportunities’ are aimed at getting hold of your money.
This may not immediately seem like it would be a common type of crypto scam specifically, but the Federal Trade Commission (FTC) has found that around 20% of the money that has been reported lost in romance scams since October 2020 was in some type of cryptocurrency.
With any investment opportunity, whether through a broker or in a business, there is the possibility of a scam. This is especially true for cryptocurrencies. Investors are sometimes persuaded to invest in crypto with scam brokers or to let fake ‘advisors’ invest for them, often with the promise of large, fast or guaranteed returns.
Be especially wary of anyone – whether an individual, a broker, an advisor or a business entity – that insists that you make a transaction in cryptocurrency when there is no clear reason for this. It may simply be that the transaction would be harder to trace than a regular bank transfer.
Scammers sending blackmail emails is nothing new. It is particularly common for scammers to claim to have a record of their victims accessing adult websites or other illegal or potentially embarrassing online material and threaten to expose them unless they send money to the scammer.
Again, this money is often requested in cryptocurrency simply because it is more anonymous and less easy to trace. These types of scams are serious. They are classed as a criminal extortion attempt and should be immediately reported to an enforcement agency such as the FBI.
Scammers may also try to pose as celebrities, public figures or cryptocurrency influencers, and may combine this with an incentive to invest in a specific coin as a giveaway of some kind. They will typically state that for new investors, they will match or multiply the cryptocurrency invested with them.
Such scams are common on social media and may come from a fake account impersonating a celebrity or influencer you follow. They commonly include an extremely time-sensitive element such as ‘before midnight tonight’ in order to get people to transfer funds quickly without thinking it through or consulting others.
Another common imposter scam is when you are contacted by impersonators claiming to be from a cryptocurrency exchange or brokerage that you are familiar with or use. They will often claim to be from customer support and say that your account is compromised, and that you need to go through a security check with them – which is, of course, designed to allow them to access your account.
A rug pull scam is when a business or group raises capital or crypto to fund a project and then suddenly disappears, leaving nothing of value for the investors to recover. Unfortunately, crypto scams lend themselves to this situation as even legitimate crypto projects are often funded by raising money from founding members, who are promised a big return on their initial investment.
A variation on the rug pull scam in crypto circles is the initial coin offering or ICO scam, where investors are persuaded to start investing in a new cryptocurrency at or before launch, but the currency doesn’t really exist, and the scammers simply take the funds invested and disappear.
Fortunately, there are various red flags to look out for when assessing a potential scam. Signs of crypto scams include ‘strong-arm’ marketing, with claims that returns are guaranteed, or that you’ll make a lot of money quickly. You should also be wary if someone approaches you unsolicited on social media or via investing forums with ‘amazing opportunities’, especially if they are time sensitive.
When it comes to ICOs, signs of a scam can be the project having no white paper, or a poorly written one, or that the founders are anonymous or not easily identified or contactable, or, of course, if the project itself just doesn’t seem to make sense.
With phishing and romance scams, the signs to look out for are similar whether you are dealing with crypto or regular fiat currency. Do not trust emails from unknown sources and do not click on the links in them. Only transfer money online except through your normal trusted channels.
Never trust someone you don’t know in real life, or have recently met, to handle investments for you, and don’t ‘lend’ them large sums of money, or even small sums, as this might just be a trick to get your wallet details. If you get a message from someone you know in real life, or an organisation you regularly deal with, such as your bank or regular payment processor, double-check that it’s really from them.
Be very wary of any opportunity that promises unrealistic returns or any kind of ‘free money’ such as investment matching, bonuses, cashback, or other incentives to invest. All these are signs of some kind of scam.
It is vital to report crypto scams as soon as possible to the relevant authorities, such as your local financial regulator or the police. You can report any kind of investment fraud in the UK to Action Fraud, which offers 24/7 cyber reporting. In the US, you can report suspected fraud and other cybercrime at the Internet Crime Complaint Centre (IC3) or contact your local law enforcement agency.
Remember that scams are sometimes obvious but sometimes very sophisticated and clever. Watch out for the red flags listed above, and always use extreme caution when it comes to investing, using, storing and transferring your cryptocurrency.
Do your research carefully and be proactive in the way that you invest in cryptocurrency, or anything else. As you can see from the above examples, most scammers are opportunists who approach many potential victims in the hope that at least some will be taken in.
If you suspect that you’ve been the victim of a crypto scam, report it immediately. You may increase your chances of recovering any money and could potentially alert others before they fall victim to the same scam.
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