Crypto scams are schemes where fraudsters trick you into giving up your cryptocurrency or personal information or encouraging you to invest in fake crypto projects for their own financial gain.
Since cryptocurrency is still a new market, scammers are busy exploiting new and experienced investors alike. Thankfully, crypto scams can be easily avoided if you have the right information.
In this article, we’ll show you exactly what crypto scams are, how to avoid them, and what to do if you’re worried you may have fallen prey to one.
Key Takeaways
- A crypto scam is when a scammer deceives you into giving up cryptocurrency or personal information or encourages you to invest in a fake cryptocurrency project.
- Common crypto scams include fake exchanges and wallets, phishing scams, rug pulls, and pump-and-dump schemes.
- Avoid falling into a crypto scam by identifying red flags such as promises of guaranteed returns, pressure to invest quickly, and unsolicited offers to invest.
- Only purchase crypto on regulated exchanges like Coinbase or Crypto.com, and always keep two-factor authentication enabled.
What Is a Crypto Scam?
A crypto scam is an online scheme where scammers trick you into giving up your crypto assets or personal information or encouraging you to invest in fake cryptocurrency projects that don’t exist.
Common types of cryptocurrency scams include:
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- Fake exchanges and wallets: A scammer will design and publish a fake crypto marketplace that looks totally legitimate, with the ability to create a crypto wallet and apparently buy cryptos and non-fungible tokens (NFTs). Once you transfer funds to purchase crypto, the scammer will take them and disappear.
- Phishing scams: A scammer will send an email or other message that contains a link to a fake URL. You’ll be prompted to input your login info to access your “account,” and the scammer will use these credentials to break into your crypto wallet and steal your funds.
- Rug pulls: A scammer with web development skills will create a new crypto coin and reach out to you for investment, promising high returns. When you do invest, they’ll simply pocket the funds.
- Pump-and-dump schemes: A scammer will artificially “pump” up the price of a cryptocurrency by spreading false information and attracting you and others to invest. Once the price is high enough, they’ll “dump” their shares, causing the value of your coins to plummet.
How To Avoid Crypto Scams
If you know what to look for and how to keep your digital wallet secure, crypto scams shouldn’t pose a problem. Below are the best strategies for recognizing and avoiding crypto scams.
Watch for red flags
Being aware of common warning signs can help you identify potential scams. Here are some important red flags to watch for:
- Promises of guaranteed returns: Legitimate cryptocurrencies never market their coins by promising guaranteed profits—scam coins often do.
- Pressure to invest quickly: Be aware of urgency tactics designed to rush you into rash decisions, such as limited-time offers or countdowns.
- Unsolicited offers: As a rule, ignore any unsolicited messages or emails about crypto investment opportunities. These usually entail a self-proclaimed “crypto expert” claiming exclusive knowledge of a promising investment and using phrases like “once-in-a-lifetime opportunity” or “act now to secure your spot.”
- Giveaway scams: Unsolicited offers can also take the form of giveaway scams, where scammers claim you’re entitled to free cryptocurrency but require your personal information before you can receive the funds.
- Lack of documentation: Real cryptocurrencies will always have whitepapers and records of their initial coin offerings available. However, even this isn’t enough to prove legitimacy. Avoid cryptos that have no official documentation.
- Unusual payment methods: If you’re specifically asked to purchase crypto with a gift card or with another cryptocurrency—often through unsolicited emails, social media messages, or Telegram chats—you’re likely dealing with a crypto scammer.
Only use trusted platforms
Not all crypto platforms are created equal. Reputable, regulated platforms you can trust include Coinbase, Crypto.com, and Gemini. Cryptocurrency scams are most likely to occur on unregulated platforms such as Best Wallet, Margex, Uniswap, and PancakeSwap.
Legitimate, regulated exchanges are usually registered with the Financial Crimes Enforcement Network (FinCEN), demonstrate SOC 2 compliance, and require users to complete identity verification steps in line with KYC and Anti-Money Laundering (AML) regulations.
Not sure whether a given exchange or coin is legitimate? If it has any of the below aspects, it’s probably fake:
- Strange URLs with misspelled words or unusual characters.
- Poor website quality, with frequent typos or bad design.
- A huge amount of niche, unpopular coins available for trade.
Enable two-factor authentication
Two-factor authentication is when you’re required to provide a second piece of information in addition to your password, like a code sent to your phone, before you can access your digital wallet. In the event of a phishing attack where your password is compromised, two-factor authentication could be the final stop that prevents a scammer from accessing your crypto.
Consider using an authenticator app for the second step of your two-factor authentication. An authenticator app generates a new, unique code every 30 seconds, making it much harder for scammers to use your stolen password to access your crypto.
What To Do if You Get Scammed
The crypto market is still relatively new and highly unregulated. If you get scammed, it’s very unlikely you’ll ever be able to recover your funds. However, there are still a few steps you can take if you do end up falling victim to a crypto investment scam:
- Report the scam to the FBI’s Internet Crimes Complaint Center, providing as much detail as possible.
- Secure your account immediately by changing your passwords and enabling two-factor authentication (if you haven’t yet).
Conclusion
Crypto scams are designed to trick you into giving up cryptocurrency or personal info or investing in fake coins.
To avoid them, look out for telltale signs such as promises of guaranteed returns, urgency tactics, and lack of official whitepapers. Only invest on trusted platforms like Coinbase and Crypto.com, and keep two-factor authentication enabled for extra security.
For further reading, check out our article on the recent Trump Free Crypto Telegram Scam—an unfortunate case study of a real-life crypto scam.
