Where money is concerned, scams always follow. And the same is true with cryptocurrency.
Digital currency is a form of currency stored in a digital wallet, and the owner can turn currency into cash by transferring it to a bank account. Cryptocurrency, such as bitcoin, is different from digital currency. It uses blockchain for verification and does not run through financial institutions, so it is harder to recover from theft.
Even though cryptocurrency is a newer trend, thieves are using old methods to steal. Here are some of the common cryptocurrency scams to watch out for.
1. Bitcoin investment schemes
In bitcoin investment schemes, scammers contact investors claiming to be seasoned "investment managers." As part of the scheme, the so called investment managers claim to have made millions investing in cryptocurrency and promise their victims that they will make money with investments.
To get started, the scammers request an upfront fee. Then, instead of making money, the thieves simply steal the upfront fees. The scammers may also request personal identification information, claiming it's for transferring or depositing funds, and thus gain access to a person's cryptocurrency.
Another type of investment scam involves using fake celebrity endorsements. Scammers take real photos and impose them on fake accounts, ads or articles to make it appear as though the celebrity is promoting a large financial gain from the investment. The sources for these claims appear to be legitimate, using reputable company names such as ABC or CBS with a professional looking website and logos. However, the endorsement is fake.
2. Rug pull scams
Rug pull scams involve investment scammers "pumping up" a new project, nonfungible token (NFT) or coin to get funding. After the scammers get the money, they disappear with it. The coding for these investments prevents people from selling the bitcoin after purchase, so investors are left with a valueless investment.
A popular version of this scam was the Squid coin scam, named after the popular Netflix series Squid Game. Investors had to play to earn cryptocurrency: People would buy tokens for online games and earn more later to exchange for other cryptocurrencies. The price of the Squid token went from being worth 1 cent to about $90 per token.
Eventually, trading stopped and the money disappeared. The token value then reached zero as people attempted but failed to sell their tokens. The scammers made about $3 million from these investors.
Rug pull scams are also common for NFTs, which are one of a kind digital assets.
3. Romance scams
Dating apps are no stranger to crypto scams. These scams involve relationships ,typically long-distance and strictly online where one party takes time to gain the other party's trust. Over time, one party starts to convince the other to buy or give money in some form of cryptocurrency.
After getting the money, the dating scammer disappears. These scams are also referred to as "pig butchering scams."
4. Phishing scams
Phishing scams have been around for some time but are still popular. Scammers send emails with malicious links to a fake website to gather personal details, such as cryptocurrency wallet key information.
Unlike passwords, users only get one unique private key to digital wallets. But if a private key is stolen, it is troublesome to change this key. Each key is unique to a wallet; so, to update this key, the person needs to create a new wallet.
To avoid phishing scams, never enter secure information from an email link. Always go directly to the site, no matter how legitimate the website or link appears.
5. Ponzi schemes
Ponzi schemes pay older investors with the proceeds from new ones. To get fresh investors, cryptocurrency scammers will lure new investors with bitcoin. It's a scheme that runs in circles, since there are no legitimate investments; it is all about targeting new investors for money.
The main lure of a Ponzi scheme is the promise of huge profits with little risk. There are always risks with these investments, however, and there are no guaranteed returns.
6. Fake cryptocurrency exchanges
Scammers may lure investors in with promises of a great cryptocurrency exchange -- maybe even some additional bitcoin. But in reality, there is no exchange and the investor does not know it's fake until after they lose their deposit.
Stick to known crypto exchange markets such as Coinbase, Crypto.com and Cash App to avoid an unfamiliar exchange. Do some research and check industry sites for details about the exchange's reputation and legitimacy before entering any personal information.
6 common cryptocurrency scams in 2024😖🚨😰
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