Statistics indicate that over 46,000 people lost $1 billion to crypto scams between 2021 and mid-2022. It’s estimated that American consumers lost about $2.6 billion in these scams. Crypto scams usually focus on gaining private data like security codes or tricking people into sending crypto to digital wallets that might be compromised.
Although scammers are constantly looking for new, sophisticated ways to steal from or trick crypto investors, understanding the scams you’re likely to encounter enables you to protect yourself better. Discussed below are the common crypto scams and how to avoid them.
1. Bitcoin investment schemes
When it comes to Bitcoin investment schemes, scammers reach out to investors, claiming to have made a lot of money from Bitcoin investing and promising them that they’ll also profit from these schemes with little to no risk. The fraudsters may start by requesting an upfront fee, which they then steal rather than helping you make money. Additionally, the scammers can ask for your personal identification details under the pretext of depositing or transferring money into your account so they can access your crypto.
Bitcoin investment scams can also involve the use of bogus celebrity endorsements. In these schemes, fraudsters use real photos in fake accounts, articles, or ads to make it appear like the personality is promoting a significant return on investment. The origin of these claims seems genuine because they use trusted brand names and professional-looking sites and logos.
Nevertheless, such endorsements are fake. If you intend to buy Bitcoin or invest in a Bitcoin scheme, conduct in-depth research before investing to safeguard against scams. Be wary of investment projects without clear, comprehensive details and the use of aggressive marketing techniques.
2. Crypto phishing scams
A phishing scam in cryptocurrency is an attempt to trick investors into disclosing their private keys and other sensitive data related to your crypto holdings, resulting in the theft of your digital assets. There are several cryptocurrency phishing scams you may fall prey to, including:
- Phishing links and malware: Fraudsters may send messages/ emails with links that, once clicked, take victims to fake sites meant to steal their private keys or login credentials. The links they send may have malware embedded in them or attachments that might infect your device and steal data directly
- Social engineering: Crypto scammers can use different social engineering tricks to develop trust with victims, like providing personalized advice or taking advantage of an investor’s fear of missing out on lucrative opportunities
- Fake customer support: Fraudsters may pretend to be customer support representatives from a genuine platform providing help with account recovery or technical issues
To ensure you’re protected against phishing scams, avoid sharing your seed phrases or private keys with anybody, and be wary of unsolicited links and offers. Use strong passwords and two-factor authentication and verify any platform’s/individual’s legitimacy before interacting with them.
3. Giveaway scams
Although giveaways are a popular marketing tool, not all are legit. Giveaway scams are a kind of fraud that have become common on social media platforms. In such frauds, scammers promise to reward those who follow, comment, retweet, or like their posts. Fraudsters use fake giveaways as an excuse to steal people’s crypto, personal information, and other assets. They create social media accounts that seem to belong to legitimate crypto exchanges or prominent personalities in the cryptocurrency industry.
Messages announcing giveaways are then posted, accompanied by guidelines on how to participate. Once you start taking part in the giveaways, the scammers may reach out to you directly, requesting your wallet address, private key, and other sensitive details. To avoid falling prey to these scams, be skeptical about offers that seem too good to be true and verify that the social media accounts belong to legitimate individuals or entities. Avoid sharing personal information, and never pay for giveaways.
4. Fake cryptocurrency exchanges
Fraudsters can develop fake crypto trading platforms or counterfeits of official cryptocurrency wallets to lure unsuspecting victims. The fake sites often have identical but slightly varying domain names from the websites they try to copy, making it hard to differentiate the two. To spot a fake crypto exchange and ensure you don’t fall victim to their scams, consider:
- Checking the exchange’s security features and policies: A fake exchange lacks basic security features like two-factor authentication, encryption, and cold storage. Their terms and conditions may seem unrealistic or vague
- Reading the exchange’s reviews and checking their reputation: A fraudulent crypto exchange often has little to no online presence and negative reviews from those they’ve scammed
- Looking at the exchange’s offers and promotions: Illegitimate exchanges provide offers that are too good to be true to attract investors, such as high returns and low fees. Nevertheless, the offers have requirements or hidden clauses that make it difficult for you to benefit from them
5. Rug pull scams
A rug pull scam involves a developer creating a new cryptocurrency, convincing people to invest, and then liquidating their holdings suddenly, leaving investors with worthless tokens. Crypto fraudsters can pull the rug by setting up their token or promoting them to steal from users. In rug pull scams, scammers hype a new project to entice investors to invest their money, then disappear or shut down abruptly. Many of these scams are associated with new projects that may seem exciting.
To avoid getting scammed, be patient and don’t get carried away by the fear of missing out due to the sense of urgency created by the scammers. Ensure the company is legit and has a registered address. If the new coin’s profits are suspiciously high, it could signify a rug pull.
6. Crypto romance scams
Crypto romance scams are online schemes where cybercriminals develop romantic relations via digital platforms to trick unsuspecting victims into giving their crypto assets. Communications may start on dating apps or social media. After several weeks or months of building an emotional connection with you, the scammers may begin telling you fake sad stories surrounding their lives to trick you into sending them crypto worth thousands or hundreds of dollars.
Upon receiving the crypto, they might stick around in an attempt to keep getting more crypto from you or end the relationship. To avoid romance scams, be wary of fast-moving relationships and refusal for video calls or in-person meetings. Be careful of people who are fixated on your crypto assets and never share your private key with them.
Endnote
While crypto investing has many benefits, falling prey to crypto scams can devastate you financially. However, understanding the common crypto scams and how to avoid them can help safeguard your investments and financial health.
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