15 types of cryptocurrency scams that you NEED TO AVOID!!!!

Cryptocurrency scams had a record-breaking year in 2021, with a new report showing that scammers took away $14 billion in cryptocurrency. That number is nearly double the $7.8 billion that scammers took in 2020, according to the 2022 cryptocurrency crime report from blockchain data firm Chainalysis, published on Thursday, January 6.

With the explosion of interest in cryptocurrency over the past year, it’s no surprise that “Olympic-level scammers” have noticed new opportunities for illicit activities, said William E. Quigley, a notable investor and co-founder of the WAX blockchain. The high-tech nature of cryptocurrency will continue to attract sophisticated scammers, Quigley said in a panel discussion hosted by blockchain company Light Node Media last month.

Consider the recent “Squid Game” scam, where investors allege that the new SQUID cryptocurrency token and associated role-playing online game were just an elaborate scam. Investors claim the developers disappeared after the currency’s price skyrocketed and appear to have taken in over $3 million.

In February 2022, the cryptocurrency exchange Wormhole lost $320 million after a cyberattack.

So what cryptocurrency scam forms should be avoided to not lose money? Check out 15 forms of common cryptocurrency scams right below.

Contents

1 15 Common Cryptocurrency Scam Forms to Avoid 2024

15 Common Cryptocurrency Scam Forms to Avoid 2024

Cryptocurrency Gift Scams on Social Media

There are many scam posts on social media promising Bitcoin gifts. For example, while scrolling through Facebook, you’ll encounter fake celebrity accounts advertising gifts to attract people.

However, when someone clicks on the gift, they are taken to a scam website asking for verification to receive Bitcoin. The verification process involves a payment to prove the account is legitimate.

Victims may lose this payment – or worse, click on a malicious link and have their personal information and cryptocurrency stolen.

Requests for Payment Only in Cryptocurrency

If someone says they cannot accept any currency other than Bitcoin or Ethereum, it could be a scam. Bitcoin and other Altcoins are a developing asset, so experts say that reputable organizations will not accept cryptocurrency and usually only accept conventional means like bank transfers, checks, credit and debit card payments, and cash.
Generally, anyone asking you to pay them in Bitcoin might be trying to accumulate it and take advantage of its soaring value. Unlike banks, blockchain lacks the usual know-your-customer (KYC) protocols. That means people can open wallets without having to present valid identification. Although blockchain is public and creates open, permanent access records, transactions on the blockchain are more or less anonymous – making it easy for them to scam money and run away.

Anonymous or Fake Identities

Jonathan Padilla – former head of blockchain strategy at PayPal, CEO, and co-founder at Snickerdoodle Labs, a California-based blockchain data security company, stated:

“With a decentralized platform, there really isn’t a way to tell who is a good actor and who is a bad actor,” Padilla explained. “It all relies on buyer beware.”

The anonymity and censorship resistance of blockchain is an ideal environment for scammers to operate. Although blockchain is always public and immutable, verifying identity is difficult. Therefore, many impersonators of celebrities or hidden real identities lead users to be scammed, thinking they are trustworthy. Recently, the FBI warned about cryptocurrency scams on LinkedIn as a typical example.

Cryptocurrency Phishing Scams

This form of cryptocurrency scam is quite common and has been around for a long time. Malicious actors send emails trying to lure recipients to click on a link and then ask them to enter their personal information – including their cryptocurrency wallet key and the user’s information gets stolen.

Cryptocurrency Romance Scams

Dating apps are rife with cryptocurrency frauds. According to the FTC, about 20% of the money lost in romance scams from October 2020 to March 2021 was sent in the form of cryptocurrency. Such scams involve complicated relationships or just online romances, where one party pressures and persuades the other to buy or give money to buy some new kind of coin, eventually losing both the relationship and the money.

ICO Scams

ICO is known as an initial coin offering with a limited amount to allow early investors to invest in a project, aiming to raise funds for future project development. However, ICOs are now one of the fraudulent forms that many have been deceived by. Accordingly, there are companies or individuals calling for participation in an ICO for a new coin, promising that the coin could increase by thousands of percent once it is listed. In reality, many ICO projects are successful, but with the increasing number of cryptocurrency ICO projects, it becomes difficult for investors to distinguish between genuine and fake projects.

And then the money invested in ICOs can be completely lost if invested in projects that exist only on paper without real development.

Cryptocurrency Scam: Rug Pull

The term “rug pull” in cryptocurrency scams comes from the idiom “pulling the rug out”.

A rug pull is a fraudulent act in the cryptocurrency industry, where cryptocurrency developers abandon a project and run away with investors’ money. Rug pulls often occur in DeFi, especially on decentralized exchanges (DEX), where scammers create a token and list it on DEX, then pair it with a leading cryptocurrency like Ethereum.

After a significant amount of unsuspecting investors exchange their ETH for this token, the scammers withdraw everything from the liquidity pool, driving the price of the currency to zero. The creators of this currency may even create temporary hype on Telegram, Twitter, and other social media platforms, initially pumping a significant amount of liquidity into their pool to foster investor trust.

Scams in Cloud Mining Platforms

This scam means that cloud platforms market to investors that they can mine a certain coin like BTC with a small capital. Instead of investing in an expensive mining rig as it is currently, they gather small investors to mine together and share profits according to the percentage of contribution. In return, investors must invest capital to rent their cloud mining platform, but then the rewards from mining are nowhere to be found, and the initial investment cannot be reclaimed.
While Cloud Mining is used by many and is effective, it is important for investors to thoroughly research to find a reputable Cloud Mining platform.

Cryptocurrency Scam Ads

Scammers, to deceive more cryptocurrency from investors, are willing to spend capital to buy ads on Google, Facebook, etc. When searching for something related to cryptocurrency, you might encounter an ad website right at the top and then click on it thinking it is a reputable site. After conducting transactions through this website, you end up losing your money.
For example, the Ether wallet below, the original site is myetherwallet.com while the fake one is myetherwallet.ac.

Impersonating Support Teams

In the name of a support group for an exchange or project. They will approach people who are having problems (many post their issues on Facebook groups or somewhere else seeking help). Scammers will claim they are the support department for that project. To help you solve the problem, they ask for personal information, deposit money, or Private Key, but in reality, they “solve” by taking away the money in your wallet.

Impersonating Exchanges & Apps

Some have blatantly scammed by setting up fake exchanges or apps to deceive investors. They take names similar to leading exchanges such as Binance, FTX, Huobi, KuCoin, Bitfinex, etc. Then, if users inadvertently make payments there, they also lose their money.

Ponzi (Pyramid & Multi-level Marketing) Scams

This scam can be called a multi-level marketing that we often refer to. That is, calling for people to participate in a project with a certain amount of money, promising that they will receive much higher returns than saving by attracting more people to participate.
With this form, the money of later participants is used to pay profits to earlier ones, and at some point, the model will collapse, leaving those at the top of the pyramid at risk.

The most famous Ponzi scheme in cryptocurrency has to be Bitconnect, which operated for a year and when detected as a scam, Bitconnect’s market capitalization was about $2 billion.

Pump and Dump Scams

This cryptocurrency scam form can be translated as “inflate and deflate”. When a group of traders, such as the founders or collaborators of a certain coin project, spread misinformation or pump money to increase the price of an asset and then sell them at a higher price. This can lead ordinary investors to lose a lot of money and is more likely to happen when buyers don’t know much about the project and are swayed by online promotional programs.

Impersonating Pools and OTC Scams

Through Telegram or Discord, impostors pretend to be part of a Pools group and introduce upcoming ICO projects. Participants in the Pool will receive tokens from the upcoming ICO, but the condition is that they must send ETH to the group to enjoy the benefits.
However, one fine day, the money you sent may disappear.

Participating in Pools needs to be considered carefully as reputable Pools usually require KYC with clear and specific regulations along with high monthly fees.

With OTC scams, the fraudulent party will offer you to sell or buy assets directly but the condition is that you have to transfer money first.

OTC transactions are extremely risky, so proceed with caution and use a trustworthy third party as an escrow. Be careful as the intermediary could be an accomplice of the person offering the OTC deal.

Suddenly Receiving a Large Amount of Tokens

This is a new form of cryptocurrency scam that has recently emerged. Accordingly, one fine day, your wallet suddenly receives a large amount of some token from an unknown sender.
This amount could be worth tens of thousands of dollars, tempting many with greed. Instead of wondering who sent it or returning it, they try to sell them on DEX platforms. However, when you execute orders to sell on DEX, it’s also when the money in your wallet gets “wiped out” because the scammer has set up some Smart Contract to take all your money. So what seemed like a beautiful day turns into your darkest day, remember “nothing in this world is free.”

How to Avoid Cryptocurrency Scams

Do not invest or trade in cryptocurrency based on advice from someone you know online.
There is no such thing as a free lunch, so don’t rush to unwrap a gift that falls from the sky. Don’t trust social media posts advertising cryptocurrency gifts.
ABSOLUTELY do not share your “Private Key” with anyone, keep it in a safe place (preferably written on paper and kept in the safest place).
Do not invest in any new cryptocurrency project if you do not fully understand it.
Projects advertising huge profits with high percentages are also highly likely to be scams.
Be cautious about advertisements involving celebrities and influencers as they might be aiding scammers.

See also some more useful related information:

Above are 15 common forms of cryptocurrency scams that you need to avoid. As society develops, tens of thousands of cryptocurrency projects are born, also making scammers think of more ways to deceive. Therefore, everyone needs to be extremely cautious. Wishing you wise investment choices and success.