A reported $4.3 billion worth of crypto was either stolen or hacked in 2022.
Why it matters: Crypto is an emerging blockchain-powered technology that presents a lucrative opportunity for people to earn an income and send money globally without third-party involvement. However, scam artists deceive unsuspecting investors to invest in fake projects with the promise of outrageous yields.
Even though many people are aware of the nefarious activities of internet fraudsters, these scammers keep devising new techniques to trick unsuspecting individuals.
Below are the most common cryptocurrency scams and how you can avoid them.
Investment scams/Ponzi schemes
Crypto investment scams involve getting unsolicited offers for a once-in-a-lifetime opportunity to gain financial freedom through crypto trading.
This scam takes several forms.
- Scammers send you a link to a fake website (that looks credible with fake celebrity endorsements) and request you put money into a crypto investment account. Your money is gone as soon as the transaction is completed.
- Another method involves hackers sending you to a malware-infected website to gain access to your sensitive information.
- Ponzi schemes occur when scam artists request that you make payments in crypto so they can recruit more members to the scheme. They also promise massive returns as an early member. However, the program is a fraud.
Scammers often pose as investment managers or influencers who promise to help you grow your crypto portfolio to earn guaranteed massive returns. Keep in mind that cryptocurrencies are volatile, so returns are never guaranteed. The best course of action is to end communications with anyone promising massive returns on investment.
Rug pull scams
Crypto newbies are sometimes bombarded with dozens of fake tokens. The ease of creating tokens and attracting interested buyers to buy in early fuels rug pulls.
Typically, scam artists create a token and list it on a decentralized exchange. They then persuade unsuspecting investors to buy the token to increase its value. When the price reaches a certain point, the founder sells their holding while investors are left with nothing. This is why rug pulls are also called pump-and-dump schemes.
Rug pulls are also rampant with NFTs. Scammers create NFT collections similar to trending collections and sell them to unsuspecting buyers before carting away their money, leaving buyers with worthless assets.
To avoid getting the rug pulled from you, research the project and its founders. Read the company’s white paper as well.
NFTs (non-fungible tokens) are digital assets used to represent ownership. Because of their uniqueness, creators, celebrities, and athletes have used them to monetize their content or digital collectibles. However, many scam artists clone these NFTs and sell the fakes, which are worthless to unsuspecting buyers.
To avoid falling for this scam, look up the ownership of the NFT on the blockchain. You can also verify an NFT’s authenticity by DMing the creator on Twitter. Platforms like Opensea put a blue checkmark on genuine collectibles. Finally, if someone’s offering a trending NFT at a cheap price, it’s most likely a fraud.
Bitcoin phishing scams
Phishing scams are one of the oldest internet scams, involving a fraudster requesting money over email. Crypto phishing isn’t any different.
Crypto phishing involves cybercriminals impersonating representatives from reputable crypto platforms and sending fake emails or texts to convince recipients to either divulge their crypto wallet’s private keys or send crypto (mostly Bitcoin) to the fraudster’s address.
To avoid falling for this scam, check the sender’s email address and match it with the supposed website domain. For example, a phishing scam email could be from a URL like echo.com or eco.co instead of eco.com. As the difference isn’t always easy to spot, never reveal your private keys or any other sensitive information over unsolicited communication.
Social media scams
Social media accounted for half of all crypto scams in 2022. While this happens on all platforms, it’s most rampant on Twitter and Telegram.
Social media ads or posts from influencers promote fake cryptocurrencies. The promotion links to a site where you’re asked to make payment in crypto, which you’ll eventually lose.
Some social media scams occur on YouTube, with fake accounts hosting live streams that ask you to invest. To boost the authenticity, bot-driven comments attest to the legitimacy of the project. Don’t fall for these traps.
Refrain from sending crypto to unsolicited requests. Check the profile of the accounts to see how long it’s been around and the quantity of content created.
In loader cryptocurrency scams, the scam artist asks for account login credentials so they can add huge sums of crypto. They claim their account is restricted and can’t receive such large sums. They promise the victim a handsome reward.
They then load the account and drain it, leaving their victim to pay the credit card charges. Never reveal your login details to a third party regardless of how trustworthy they seem.
How to protect yourself from crypto scams
While we’ve highlighted some of the ways to avoid crypto scams, here are four tips to protect you online.
- Do your own research (DYOR)
- Report suspicious activities
- Ignore urgent requests
- Never share your data