Cryptocurrency Scams: How to Identify and Protect Yourself
Cryptocurrency has revolutionized the financial landscape by offering new ways to trade, invest, and transfer money globally. But as digital currency becomes more mainstream, it ultimately attracts scammers who take advantage of the investors with fraud or scams. It’s essential to understand the various types of cryptocurrency scams to protect your digital assets and private financial data.
What Are Cryptocurrency Scams?
Cryptocurrency scams are attempts to obtain someone’s digital assets, private keys, or personal information in illegal ways. Scammers might do it by impersonating a reputable organization, trader, or service. Sadly, if a scammer convinces someone to send cryptocurrency or provides a private key, there is almost no chance of getting the money back. Cryptocurrency transactions are not reversible and are relatively anonymous.
Common Types of Cryptocurrency Scams
1. Cryptocurrency Investment Scams
Investment scams represent one of the most prevalent areas of the crypto industry.
- Fraudsters try to lure investors by providing guarantees of returns or “risk-free” methods of making money from crypto trading or staking platforms.
- In many cases, these frauds feature fraudulent dashboards with impressive growth of profits, designed to keep investors on board with a vast trove of funds.
- When the scammer has drained or collected an appropriate amount of money, the website disappears, or it claims to “pause” withdrawals before disappearing into the night.
TIP: Always be skeptical of any platform that claims to deliver consistent returns, with limited or no risk.
2. Fake Apps
- Cybercriminals will sometimes release fake cryptocurrency apps that seem similar to legitimate apps.
- These apps can sometimes be found in “official” app stores, thus adding even more credibility and legitimacy to their appearance.
Once you download these applications, they will capture your private keys or login information and move all your money to the scammer’s wallet.
3. Fake Websites
- Scammers create websites that imitate authentic exchanges or wallets in appearance and functionality.
- These phishing-like websites might request seed phrases and/or login credentials.
- Once the user enters this information, the attacker has full access to the account’s funds and is usually able to withdraw amounts quickly.
Warning Sign: Always verify the URL of the website, look for the HTTPS encryption in the browser field, and never follow links you may encounter from unknown sources.
4. Fraudulent Initial Coin Offerings (ICOs)
- Scams involving fake initial coin offerings (ICOs) will lead victims to believe they are launching a new cryptocurrency that will produce high returns on investment.
- Scammers will convince victims to purchase the tokens prior to launch, claiming that, by being an early participant, they are gaining a business advantage.
- After taking the victims’ funds, the project will no longer exist, and no product will ever be delivered to the investors.
Advice: It is always a good idea, before you consider investing in an ICO project, to research the team behind the project, the white paper for the project, and investigate how tokens will be distributed to maintain transparency.
5. Cloud Mining Scams
- According to cloud mining scams, fraudsters will have a website that appears, at face value, to offer mining services where a user can rent computing power.
- Then the scammers will promise daily or monthly returns based on the profits from mining.
- In reality, however, most of these platforms do not mine anything at all and collect deposits from victims and then simply disappear.
Best Practice: Research whether or not the cloud mining operation provides verifiable proof of equipment ownership and payout history.
6. Blackmail and Extortion Scams
- This type of scam involves sending the victim an email or some type of message indicating that the scammer has compromising materials relating to the victim.
- The scammer will request payment in cryptocurrency to prevent this information from being made public.
Advice: If a person is confronted with a blackmail request for payment using cryptocurrencies, the individual should never send any funds. The victim should report the solicitation to law enforcement or a cybersecurity professional.
7. Pump and Dump Schemes
- A group of people will intentionally raise the price of a low-value cryptocurrency through pump and dump schemes.
- Once the price increases, the scammers sell their share of the currency, pocket the profit, and leave everyone else holding the bag.
- These scams often gain traction through social media or online communities.
Red flag: Be mindful of the hype on an unknown coin online and advertising guaranteed returns in a short time frame.
8. Phishing Scams
- Phishing scams continue to present one of the greatest risks in the crypto space.
- Scammers impersonate legitimate companies using emails, text messages, or social media to steal your private information and then rob you. They send victims to fake websites or have unsuspecting victims download an attachment with malicious software.
Prevention tip: Always review the sender address, do not send your wallet keys to anyone, and always enable 2FA when possible.
How to Protect Yourself from Crypto Scams
- Verify Source: Only use trusted and well-established exchanges/services.
- Perform a Comprehensive Audit: Before moving forward, read user reviews and do research on the business and its founders.
- Secure Your Wallet: Store your private keys offline and keep them on a hardware wallet.
If You’re a Victim of a Cryptocurrency Scam
If you have lost digital assets to a fraudulent platform, phony app, or scam crypto project, we can help.
Contact us, and our team investigates online financial scams, tracks cryptocurrency transactions, and helps victims get their money back.
Start the process of trying to get your money back by reporting your case.