Have you been a victim of a crypto scam? In 2023 and the first half of 2024, cryptocurrency users lost about $2 billion and $1.4 billion to scams, rug pulls, and hacks. If this sounds like you, you’re not alone. Knowing every kind of cryptocurrency fraud is one of the best methods to protect yourself. Scammers employ various strategies, such as phishing attacks and Ponzi schemes, and they will keep using them in the future. As such, you can guard against hazards by being educated and aware.
Our guide outlines the ten prevalent types of cryptocurrency investment scams and a list of the platforms on which these scams are most frequently encountered. We also offer guidance on how to stay safe from dangers and fraud involving cryptocurrency. Now, let’s get started.
What Is a Crypto Scam?
Simply put, a crypto scam happens when someone uses cryptocurrency to steal money, personal data, or virtual assets from another individual. Scammers utilize cryptocurrencies ‘ decentralized and anonymous characteristics, making this fraudulent behavior easy. Regretfully, getting any money returned from a cryptocurrency scam is challenging.
It can be hard to differentiate between scams because they can take forms and vary widely. But they frequently accompany claims that they may provide substantial returns for investors with little to no risk, drawing individuals in with the promise of big profits. Not only beginners but an extensive range of people are targeted by scammers. They have even gone after big businesses and seasoned investors.
Top Cryptocurrency Scams by Type and Amount Lost
As we previously stated, in 2023, scams, rug pulls, and hacks cost cryptocurrency users about $2 billion, and in the first half of 2024, they lost over $1.4 billion. Let’s examine each scam in more detail to see how they operate and how to avoid becoming a victim.
Phishing Scams
Phishing scams are a particular kind of scam in which the con artist creates a phony website, social network account, or email address to obtain your data (passwords, wallet keys, identity, etc.). These frauds frequently imitate trustworthy cryptocurrency institutions, such as exchanges, to give the impression that they are reliable. You may receive legitimate emails or texts, but they will request private keys or login credentials, among other critical information.
These messages will frequently attract you with the promise of a significant discount or a quick request for your data. Once the scammers get your data, they can use it to steal your digital assets, possibly to empty your exchange accounts on trustworthy sites.
Example:
A Coinbase email appears in your inbox. According to the email, you must confirm your identification quickly. To finish your verification, you are instructed to click the link. However, the hyperlink does not lead to the official Coinbase website. Instead, it directs you to a phony website where you are required to provide your login credentials. Once the scammer has your information, they can access your Coinbase account and withdraw any money there.
Romance Scam
Being emotionally tricked is another essential deception to watch out for. Crypto romance scams occur when con artists fabricate profiles on dating websites or other popular social media platforms in an attempt to trick you into believing them. They accomplish this by connecting with you over several weeks or months. Once the con artist senses your confidence, they will request a cryptocurrency transfer or investment in a scheme. The money will not be utilized in any way for the investment—instead, it will just go right into the scammer’s pocket. The funds that con artists steal can be vast sums of money.
AARP claims that in November 2023, the Secret Service and U.S. Justice Department recovered $9 million worth of Tether from con artists who had taken advantage of over 70 victims. A significant percentage has been the target of romance scams.
Example: A cryptocurrency scammer creates a dating app profile where they pretend to be a prosperous business owner. After they begin corresponding with you on the internet for a few weeks, the exchange becomes more and more passionate. Before long, the con artist almost casually brings up the possibility of making a lot of money by investing in a cryptocurrency scheme. Under the false idea that you are investing in a trustworthy plan, you send Bitcoin to the scammer’s wallet. But the con artist never gets in touch with you again.
Impersonation and Giveaway Scams
Scammers are increasingly posing as influencers, celebrities, or well-known businesses to advertise phony giveaways or investments. These schemes take the following forms:
Fake Celebrity Endorsements
Scammers can build a false social media profile or break into an authentic account. They’ll use these accounts to advertise phony cryptocurrency schemes, such as giveaways or investment opportunities, and then pretend that a famous person has endorsed them. The endorsement will frequently state that there are substantial profits to be earned.
You will be asked to send some cryptocurrency to an address in the post, giving you the idea that you will eventually receive a more significant sum. Under the notion that you’ll receive a more significant amount later on, the post will ask you to deposit some cryptocurrency at an address.
Example: A renowned businessman’s X account gets compromised. Next, the hacker shares a link to a Bitcoin giveaway. Followers who want to participate must send 0.1 BTC to a specific address to receive 1 BTC in return. No follower ever gets anything in return.
Social Media Scams
Con artists create fictitious accounts, pages, or groups on social media sites like Facebook or Instagram. Subsequently, they will utilize those pages to advertise phishing links or fraudulent investment schemes; in 2024, the amount of money lost to deepfakes, or fake social media frauds, will exceed $25 billion. Con artists used screenshots of substantial profits, fictitious success stories, and testimonials to entice victims. Users who click links on these posts will be taken to a website that collects private keys or login information.
Example: A Facebook page pretending to be an authentic cryptocurrency investment company is created by a scammer. They persuade you to send money to the scammer’s wallet by posting success stories and advertising a high-yield investment opportunity on that page. But neither your first money nor any return is ever seen again.
Crypto Investment Scams
Sometimes, con artists create alluring cryptocurrency investment plans that seem risk-free and offer large profits. They frequently employ complex strategies to persuade you that their investment is secure and lucrative. Fraudulent ICOs and NFTs, Ponzi scams, and pump-and-dump schemes are the most prevalent. This is how they function:
Ponzi Schemes
Ponzi schemes create the appearance of productive investment by using money from new investors to pay returns to previous investors. As a result of the scammer’s increasing success, more investors become involved, but ultimately, the scheme implodes, and most participants suffer large losses. Ponzi schemes are still around today, although they gained much traction in the 2017–2018 cryptocurrency boom. They took many different forms but mostly took the shape of high-yield investment plans (HYIPs).
Pump and Dump Schemes
Scammers use misleading assertions to raise the price of cryptocurrencies in pump-and-dump scams artificially. They acquire a significant amount of low-value, low-volume cryptocurrencies to achieve this. They then heavily advertise the coin through other marketing methods and on social media. The price rises as more investors become interested. The con artist then wipes out their assets at the highest point. When the cryptocurrency’s value decreases, other investors will be left with worthless coins.
ICO and NFT Scams
Funds can be raised for legal projects using Nonfungible Tokens (NFTs) and Initial Coin Offerings (ICOs). Scammers frequently use initial coin offerings (ICOs) and nonfungible tokens (NFTs) to raise money for fictitious enterprises, like purportedly ground-breaking technologies or exclusive digital assets. Scammers use fraudulent promotional materials to trick investors into investing, but they vanish once they gain a sizable sum of money.
Blackmail and Extortion Schemes
These systems function just like a conventional currency would. Victims of cryptocurrency scams are blackmailed or forced to pay a price in cryptocurrency by con artists. Because they fear that the con artists may have access to private images, videos, or bank records, victims pay. Scammers frequently give deadlines for when they will expose this information if the victim doesn’t pay them in cryptocurrencies.
Example: A con artist says they got sensitive images from your computer through hacking. They request Bitcoin payment to keep these pictures from being shared with your acquaintances.
Cloud Mining Scams
Through fictitious businesses that appear to be mining contracts, these frauds deceive their victims. These contracts guarantee cryptocurrency mining revenues without requiring the ownership of costly equipment. Meanwhile, these businesses were founded by con artists who lacked the necessary mining equipment. Furthermore, they lack the resources to give the investors the promised rewards. Some mining scams begin as a type of Ponzi scheme, using the funds of later investors to pay the original investors.
Example: A con artist creates a phony website for cloud mining and offers lucrative Bitcoin mining contracts. Investors buy these contracts, but the fraud artist never actually mines the money before vanishing with it.
Fake Crypto Exchanges and Wallets
Sometimes, scammers will set up phony cryptocurrency wallets and exchanges in order to steal money from you. These phony platforms frequently have the same appearance as authentic ones, making it challenging to tell them apart. They entice victims with promises of excellent security, cheap costs, or exclusive features. However, when you open an account and deposit money, the con artists take advantage of you and vanish.
In May of this year, two individuals in the UK stole about £6 million worth of cryptocurrencies from victims. To gain access to the victims’ online wallets, they imitated the Blockchain.com website.
Example: A con artist makes a phony cryptocurrency trading website that resembles Binance to the exact degree.
After opening accounts and depositing money, users discover that the exchange is fraudulent and that their money has been lost.
SIM-Swap Scams
These are highly complex instances of cryptocurrency fraud. Scammers will use your mobile number to target and access your internet accounts, including your cryptocurrency wallet. Fraudsters can change passwords and intercept verification codes sent to your messages using your number. It implies that your digital assets are directly accessible to them.
Social networking, data breaches, and phishing emails are common ways for scammers to obtain your mobile number. A fraudster could then use this information to contact your mobile operator and request a SIM swap, allowing them to read your communications and get around any two-factor verification you might have set up on your wallet or cryptocurrency exchange.
AI Crypto Scams
Scammers have been able to create new techniques for deceit and fraud because of the exponential growth of artificial intelligence (AI). Artificial intelligence (AI) chatbots and virtual assistants can be used by scammers to interact with people, give financial advice, advertise phony token sales and initial coin offerings (ICOs), or present phony high-yield investment possibilities.
Artificial Intelligence (AI) has the potential to undermine social proof-of-work, the tenet that cryptocurrency projects with larger and more devoted online communities must be genuine.
Before investing in a project, users should proceed with caution and due diligence, as AI makes it simpler for projects to con people.
Scammers can even plan tricky pump-and-dump operations by utilizing social media platforms and AI-generated content, boosting token values artificially and profitably selling off their holdings. Technology may allow scammers to automate and expand their fraudulent operations.
Rug Pulls
Rug pulls in the cryptocurrency world are deceptive practices where developers or project partners suddenly and deliberately withdraw funds or liquidity from a decentralized finance (DeFi) project, exposing investors to tokens that are either worthless or drastically declined.
Rug pulls are standard in blockchain-based projects such as Ethereum (ETH), where the project contracts manage the project’s operation. The con artists fabricate a project that looks authentic, draws in investors, and persuades them to contribute money or buy tokens.
But as soon as a sizable quantity of money or liquidity has amassed, the con artists take advantage of holes in the smart contract to siphon the money. Usually, the vulnerabilities are there from the beginning but are concealed in every code.
Rug pulls share similar features that can assist you in spotting these con games and prevent you from being duped. One reason is that rug pull initiatives frequently don’t reveal the developers’ or team members’ identities. They might use fictitious names or give scant background information.
Con artists may also make fictitious or exaggerated statements about the project’s potential, collaborations, or future advancements to attract investors. Tokenomics for rug pull projects could also be biased firmly in favor of early investors or developers.
Worst Platforms for Crypto Scams
Crypto frauds are more common on some social media networks than others. A few of the worst are listed below:
Facebook Crypto Scams
Con artists use Facebook to set up fictitious sites, groups, and advertising scams. Unfortunately, scammers find the platform an easy and appealing target because of its large user base and ease of generating false profiles. Fraudsters frequently attract victims into their scams by fabricating success stories and testimonials.
WhatsApp Crypto Scams
Unwanted messages from unidentified numbers are a standard part of WhatsApp scams. These communications will lure customers into fraudulent conduct by promoting phishing links or phony investment possibilities. Unfortunately, it is difficult to identify and deter scammers using the platform’s encrypted messaging feature.
Twitter (X) Crypto Scams
Giveaway scams and impersonation are shared on Twitter. Scammers frequently use phony profiles or hack verified accounts to spread false information. A famous example from recent times is when 50 Cent’s X account was compromised and used to advertise a phony meme coin that ran on the Solana blockchain. The real-time aspect of the platform makes things worse for any X coin scam because it facilitates the rapid propagation of scams.
Telegram Crypto Scams
Telegram groups and channels frequently advertise pump-and-dump schemes, phony initial coin offerings (ICOs), and shady investment possibilities. The website is a haven for scammers since it permits anonymity and accommodates giant groupings.
How to Spot Crypto Scams Sooner
Being aware of cryptocurrency scams at an earlier stage is a beautiful strategy to avoid becoming a victim of a deceptive scheme. You can do so by:
Analyze the Project’s Whitepaper
Any genuine cryptocurrency project ought to have a whitepaper attached. A credible whitepaper will describe the technology and future roadmap of the project, as well as the objectives of the investment. It is also essential to provide information on the project’s team, including details on their background and experience. You are likely looking at a fraudulent scheme if there is no whitepaper or if the whitepaper is poorly written.
Red Flags in Communication
It’s crucial to exercise caution when you get unwanted texts. Scammers frequently employ coercive techniques and poor grammar if you receive enticing messages out of the blue. Legitimate projects typically need expert communication.
Spotting Unrealistic Promises
Promises of assured significant earnings or returns are unquestionably signs of fraud, especially if they highlight the low risk involved. Never forget that oftentimes, something is too excellent to be true. Any ambiguous or insufficient details regarding the methods by which the returns will be realized are a clear and instant warning sign.
Strategies to Avoid Cryptocurrency Scams
The following are the most excellent techniques to guard against falling victim to a scam:
Check for Third Party Reviews
It’s wise to read as many reviews as possible before investing. It’s an essential component of your research. You can confirm the project’s credibility by conducting an appropriate and comprehensive investigation. Rather than depending just on the project’s website for testimonials, make sure you study reviews supplied or published by a third party to ensure the integrity of the investment.
Ignore Unknown Messages
Unknown emails offering cryptocurrency investments from unidentified people or businesses should always be regarded cautiously. Ensure not to open attachments or click links in unwanted messages if you receive them. Please notify us of the platform from which the message was received. Check the sender’s validity before responding to the message.
Verify Endorsements and Partnerships
Double-check claims before making investments, as scammers frequently make misleading claims about endorsements or affiliations with respectable businesses. Take these actions to achieve that:
- Visit the partner’s official site or their social media pages.
- Verify whether published news articles or press releases confirm the agreement.
- contact the enterprise directly to determine if the partnership is genuine.
Take Your Time Before Investing
Making sure you thoroughly investigate and comprehend the Bitcoin investment proposition is one of the best things you can do to protect yourself. To do this, use:
- Investigating the investment in depth.
- Asking credible financial advisors and reliable sources for advice.
- Only make investments you can handle losing.
Bookmark Important Links
Last but not least, bookmarking necessary web addresses is an excellent choice to avoid unintentionally visiting phony exchange websites. Additionally, several exchanges include anti-phishing checkers that allow you to verify whether the email or social media account appears to be from an employee of the organization.
How to Report Crypto Scams
Your financial security depends on your ability to recognize scams. However, one of the most important ways to combat financial crime is to know how to report it. You can assist in defending others by doing the following actions:
Steps to Report Crypto Scams
- Get in touch with the platform where it occurred (it might have been a cryptocurrency exchange or a social media site).
- Contact appropriate authorities, like a customer protection office in your community.
- Get in touch with the wallet or cryptocurrency exchange associated with the scam.
- Submit a report to the appropriate cybercrime reporting organizations or the Internet Crime Complaint Center (IC3).
Can You Get Money Back from Crypto Scams?
Your money being recovered from a cryptocurrency scam is quite unlikely. It can be difficult because cryptocurrencies are decentralized and anonymous, but it is getting easier. Hacken’s Web3 Security Report Q2 2024 shows that the cryptocurrency market recovered over half of its stolen money in Q2 2024. By taking these actions, you may try to get your money back.
Steps to Recover Money from Crypto Investment Scams
1. Report the Scam: Report the scam right away to the appropriate authorities and websites, according to the instructions above.
2. Get Legal Assistance: Speak with a lawyer who has handled bitcoin disputes before.
3. Blockchain Analysis: Track down and retrieve money using blockchain analysis tools. In this regard, you could get assistance from crypto forensic firms like Cipher Blade and Crystal Intelligence.
4. Public Pressure: The fraudster may occasionally be forced to repay the money if it is made public.
FAQs
Conclusion
The cryptocurrency industry is changing quickly, so looking for con artists and their ever-more-sly and devious methods of tricking you is essential. You can prevent being a victim by reading guides like this and exercising caution while investing. Before making any investing decisions, one of the finest things you can do is stay informed by doing research.