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The 5 most common crypto scams to watch out for

James
5 mn

As we move into a more digital world with enhanced security systems, so too are hackers and fraudsters. With millions of dollars lost each year at the hands of these ill actors, in this article we take a look at the 5 most common crypto scams and how to spot them. The financial world need not be a scary place, with a few precautions in place you can bank on being able to avoid them.

What is a crypto scam?

A crypto scam is a type of investment fraud revolving around cryptocurrencies. According to a report by Chainalysis, a record-breaking $14 billion of crypto was stolen last year through crypto scams. While there are many different types of crypto scams, of which we'll explore 5 below, the common thread is that crypto is wrongfully taken from a user through fraudulent activities. 

The biggest crypto scam of recent times was in late 2020 when people hacked into the Twitter accounts of high profile individuals and claimed that should someone send Bitcoin or Ethereum to an address they will receive twice the value back. These accounts included the likes of Barack Obama, Elon Musk and Joe Biden. 

The top 5 most common crypto scams

While there are an infinite amount of crypto scams out there, below we are highlighting the 5 most common ones.

Fake crypto exchanges

These types of exchanges provide a buy/sell platform on which users can trade cryptocurrency, however, once they have deposited the funds they cannot withdraw any money. These funds might still appear on the platform although the money is long gone. 

Always read the reviews of a platform, and do your own research before depositing money anywhere. 

Ponzi schemes

Ponzi schemes might have started in the late 1800s but they're still here. The scheme works in such a way that each member earns rewards by recruiting new members, whose money is then used to pay off older members. This eventually reaches a saturation point after which it collapses. 

Always do your due diligence and ensure that the scheme you're investing in is solid. If it sounds too good to be true, it probably is.

Fake investment schemes

Be wary of an investment opportunity promising to deliver unbelievable gains. This might be in the form of depositing funds on a platform only to lose the money or struggle to withdraw it at a later stage. These are often circulated through well-known publications or on social media with celebrities "endorsing" the products. 

Pump and dumps also fall into this category. These schemes are created when a large group of people decide to invest in a coin, only to drive up the prices and cash out at the top. Many people are then left with a worthless coin at the end, having lost their investment. 

Imitating a crypto exchange

Similar to the concept of phishing, someone might create a social media account of a big exchange and contact the user "on behalf of the company". This is intended to gain your trust and is either done in an attempt to gain your passwords, or with a message that you owe large amounts in tax which needs to be paid in Bitcoin immediately to avoid imprisonment. 

Never follow links in an email, rather access the site from your own browser directly and be sure to check the URL. Successful scams of this nature often have a small typo in the URL which goes unnoticed. 

Malware & ransomware

The malware allows scammers to gain access to your computer, either locking you out of files or stealing credit card or crypto address details. With this information, they can drain your accounts in minutes. 

Ransomware works slightly differently in that the scammers lock the entire computer and demand a ransom to gain access again. This is often paired with blackmail where the victim, and in some cases organizations, are threatened that if they don't pay sensitive information will be released. A lot of victims in this situation manage to get out of it unharmed.

These might sound very scary, but should you maintain safe online protocols and check URLs before entering your details, they should be entirely avoided. 

5 tips on how to avoid crypto scams

These might sound obvious but it never hurts to read them again. Below are 5 tips on how to stay vigilant and avoid crypto scams entirely.

  • Be wary of phone calls and emails claiming to be from exchanges and never click the links from them. 
  • Never give your password, private key or security codes to anyone.
  • Never give someone remote access to your device.
  • Look out for social media accounts imitating legal firms or exchanges or a prominent person in the industry. Support will never contact you from a social media account.
  • And lastly, if it sounds too good to be true - it probably is. 

Easily avoided, comfortably secure

We hope this information assists you in keeping your data and money secure online, proper security is always imperative when using payment methods or services on the internet. As technology evolves, so too must our security systems and vigilance. With these tips above you should be well on your way to spotting something that doesn't quite look right, and avoiding crypto scam.