Cryptocurrencies attract many investors due to the decentralized nature of the asset, which makes transactions faster and cheaper. However, for the same reason that digital assets are not regulated by any authorities, they become vulnerable to fraud and attacks. There are hundreds of such cases every day, which is why it is very 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 cryptocurrency scam?
Letâs start by understanding the nature of cryptocurrency fraud. It is a type of fraud where hackers steal digital assets from their holders and do so through fraudulent means. A fraudster is someone who does this, while keeping his identity anonymous or under a pseudonym.
Every cryptocurrency scam is based on fraudulent schemes aimed at gaining the victimâs trust. If the criminals succeed, they move on to the next step: for example, convincing the person to share their personal information or transfer cryptocurrencies to an anonymous wallet. As a result, the cryptocurrency owner loses most or all of their funds.
Types of fraud
Cryptocurrency fraud takes many forms. As a rule, these actions aim to gain access to a personâs digital wallet or transfer cryptocurrencies directly to the scammers. In this case, there are several main scenarios that criminals operate in:
Promise of high profits without risk. This is the most common scenario where scammers make great cryptocurrency investment offers while ensuring their safety. People are often influenced by stories of crypto millionaires who have actually managed to make a fortune through digital investments. However, it is important to remember that there is always a risk of losing money because the cryptocurrency market is very volatile. Therefore, you should be wary of such âgreat offersâ.
Request or demand for money. This method is similar to the previous one, but in this case the scammers ask the person to transfer cryptocurrencies to a specific wallet. They explain that they will help with the investment using emotional persuasion techniques that strongly influence the potential victim.
Impersonating a legitimate company. Criminals pretend to be a trusted person, such as a representative of a popular cryptocurrency exchange or even a famous person. In this way, they make the person feel comfortable with them and start sending advertisements or emails encouraging them to provide personal information or transfer cryptocurrencies. In this case, scammers often use a scare strategy, which makes the person act without thinking.
These are just some of the main strategies that scammers use to steal money from their owners. They are included in various schemes that are considered the most common in the cryptocurrency space. We will explain them in more detail later.
Most common cryptocurrency scams
Cryptocurrency scams come in all shapes and sizes, and they are increasing every year. Weâll tell you about the most popular and widespread scams to date.
Pyramid Schemes
Also known as âPonzi schemes.â This is a prototype of a financial pyramid, where scammers offer their âinvestorsâ the opportunity to earn large sums of money by attracting new participants. Payments are made from the newcomersâ money, not from real profits. In this case, participants in this type of fraudulent project are recruited, but the scammers often disappear forever once the new investor deposits the money.
Initial Coin Offering (ICO)
A type of fraud related to initial coin offerings where several types of deception are practiced. First, so-called promoters of cryptocurrencies raise money for an initial coin offering (ICO) and then disappear. Second, developers can trick investors by launching an ICO on fake exchanges. Third, there are reward scams where it is claimed that there is not enough money to pay the promoters of the project for their work. These are the most common types of ICO scams.
Rug Pulls
This type of scam is similar to Initial Coin Offering (ICO). In âRug Pulls,â hackers create a new cryptocurrency or DeFi project, attract investors, wait for the funds to be accepted, and one day they pull it all. The project and its creators become completely unavailable and investors lose their money.
Phishing
In this case, scammers send emails containing malicious links. They disguise themselves as sites with lucrative investment offers that lure users in. After users click on these links, scammers obtain the userâs personal data, such as the address of a cryptocurrency wallet, keys or secret codes. Once the funds are stolen, the wallet itself often disappears.
Pump-and-Dump
This scheme mainly focuses on small amounts of cryptocurrencies. The essence is that scammers artificially increase the value of assets, misleading potential investors about the low value of coins (pumps). In this way, they press on the fear of losing a unique offer. The attackers then sell the coins that were initially purchased at low prices at higher prices (dumps).
Fake platforms
Cryptocurrency exchanges are the most popular platforms for trading digital assets. For this reason, scammers take advantage of this and create fake websites. The main advantage is that these sites usually have unusually attractive terms â for example, no transaction fees and no registration required.
Cloud Mining
This type is associated with fake platforms, as it can be found precisely on fake platforms. Scammers who are engaged in cloud mining offer users to rent equipment for work and receive a part of the profits. In fact, they do not have any equipment, and after accepting the money they classically disappear.
Social Media Fraud
Scammers use social media to spread false information, such as fake ads or fake promotions about cryptocurrencies. To build trust, they create fake accounts or even pretend to be famous people. They often send private messages to users offering increased profits in exchange for a small payment, and then never send anything.
Live Streaming Scam
Hackers create fake live broadcasts on video hosting sites like YouTube, posing as well-known opinion leaders. During the broadcast, they announce new cryptocurrency offers and investment opportunities, which are, of course, fake. They encourage viewers to send cryptocurrency to a certain address, promising that they will receive a large sum in return. But in reality, they take all the money received for themselves without giving viewers anything.
Pig-Butchering
In this type of scam, the hacker builds a long-term relationship with the victim, often through dating sites. Once trust is built, the scammer convinces the victim to invest a small amount in a fake cryptocurrency exchange that shows positive returns. Once the user invests a larger amount, the scammer cuts off the relationship, and withdrawing funds from the exchange becomes a matter of
Scams in different applications
There are many applications and services on the Internet that become convenient platforms for cryptocurrency scams. They mainly focus on payment systems, instant messaging, and social media. Letâs take a look at how scammers operate in different applications using examples:
PayPal. In this payment service, scammers have come up with several ways to trick users. For example, they pretend to offer legitimate services and convince victims to buy cryptocurrencies because of the great investment opportunities. Of course, after sending the payment, the scammers disappear. Phishing emails masquerading as PayPal messages are also common here, where scammers force users to provide their account details.
CashApp. In CashApp, the most common cryptocurrency scams are similar to PayPal, where scammers pretend to be CashApp representatives and send fraudulent emails asking for account details. It is also common here to pretend to be famous personalities or CashApp representatives themselves and advertise fake promotions. In this case, scammers convince app users to send them cryptocurrency with the promise of double the amount, and disappear after receiving the money.
WhatsApp. In this popular instant messaging app, scammers send spam messages containing fraudulent links or fake investment schemes. They may also pretend to be celebrities or representatives of large companies. As usual, scammers ask for private keys and send money, then leave victims with nothing. They can do the same with group chats, creating a sense of legitimacy and urgency.
Telegram. In Telegram, scammers create fake groups or channels pretending to be famous people or legitimate cryptocurrency projects, just like WhatsApp. Here they advertise fake stocks and investment opportunities, and ask for money to be transferred to them, which they will then steal. They may also use the âPump-and-Dumpâ strategy here, where they artificially inflate the value of the currency and then leave victims with almost worthless tokens.
Instagram. On this popular social network Instagram, scammers hack into celebritiesâ profiles or create fake profiles where they post messages about fake cryptocurrency stocks. In these posts, they encourage subscribers to send cryptocurrencies with the promise of doubling their investment. Sometimes they use direct messages to lure everyone into fraudulent schemes.
Dating apps. On dating apps, scammers establish romantic relationships with victims, which takes some time. Once they are able to build trust, they offer their âpartnersâ the opportunity to invest in cryptocurrencies by sending them to fake platforms to register. Once the money is transferred, the scammers disappear and the victim loses the money forever. This is a classic âPig-Butcheringâ 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 cryptocurrency scams:
Educate yourself. Follow market news: you can find major cases of fraud and new fraudulent schemes. You can also consult experts or friends who have experience in the cryptocurrency field.
Be wary of suspicious messages. Do not follow links sent to you by unfamiliar users via email, instant messages or social media. Never respond to messages offering you a quick and high income, as this is one of the classic schemes of all scammers.
Don't share personal information. Never send your personal data, such as your wallet key and password, to anyone. Remember, legitimate services never ask for such information.
Use trusted cryptocurrency platforms. Choose only trusted and secure wallet providers and exchanges with high ratings. You can also study user reviews about the platform and expert recommendations. An example of a trusted cryptocurrency platform is Cryptomus, where you can work with cryptocurrencies with peace of mind. Data and wallets here are protected by encryption technology, and all users go through verification and know-your-customer (KYC) procedures before starting work, which reduces the risk of encountering scammers.
Use additional security measures. Even on the most secure platforms, you need to be vigilant and protect your assets twice. 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 fraud?
If you have been scammed or think you are at risk of such a situation, you should know where to get help in such cases. Although it is difficult or even impossible to recover the money lost due to fraudulent transactions, by communicating in a timely manner, you can target the scammers or minimize the damage.
We have prepared a list of actions to take in such a situation. Study it to know how to get out of it with minimal losses:
Gather all the information about the case. Prepare a fraud report, including all the details of the transaction and contact with the fraudsters. This will be useful in tracking down the hackers and may serve as evidence for you in court.
Contact the encrypted platform you used. The platform you register with is responsible for the safety of your data because you give them access to some confidential information. Therefore, write or call the platformâs customer support first so that the siteâs security team can start working on your case.
Report the fraud to your bank. Report the fraud to the financial authorities you use as well, if you have a card or account from that organization linked to your cryptocurrency wallet. These companies will usually know if your information has been compromised and can help you block your accounts to avoid further losses.
Report to the authorities. Local authorities are among the organizations that help fight cryptocurrency scams, so reporting your case to them is also essential. Provide them with all the information, including the scammersâ contact details, the platform you registered on at their request, and their appearance if you had direct contact with them. This will help them in their future investigations.
Share your experience. Tell your story to your friends or other crypto users: for example, in private forums or on your social media. This way, you will help others not to fall victim to scammers, and maybe you will hear stories similar to yours and hear some new and useful information for yourself.
There is no foolproof defense against fraud attacks, so it is essential to take care of your personal security. We hope our article has helped you learn more about the types of crimes in this diverse field, and now you know how you can protect yourself from fraud and what to do if such a situation happens to you. Share your experience in the comments, if you have been scammed, or tell us your thoughts on the subject.
