How to Spot and Avoid a Crypto Scam

Sep 8, 2022

In crypto investing, you can make a lot of money if you know what you’re doing and lose a lot if you don’t. Hence, in this article, we share valuable information on some of the most common scams in the crypto space, and tips on how to avoid them.

Types of crypto scams and how they work

Generally, there are two types of crypto scams:

  1. Fraudsters attempt to obtain private keys or other access information associated with your digital wallet. This allows them to steal your coins by accessing your crypto wallet.
  2. Fraudsters trick crypto investors into transferring cryptocurrency to them

Specifically, however, these crypto scams can be categorized as follows:

Social engineering scam

Social engineering scams can fool you easily because they get information on your profile or your current situation, and use it against you.

In most cases, the social engineer will contact the victim out of the blue and ask for urgent help, placing an emotional appeal in order to get the victim to act out of empathy.

Attackers who have done their research will know how to trick victims into handing over their info. Once the attack is successful, the scammer disappears forever. It is impossible to persuade social engineers to return stolen crypto, since they don't use their real identities.

There have been recent incidents in which hackers have stolen verified Twitter profiles of trusted public figures and started posting spam messages on them. It appears to be a sophisticated attack at first glance, but many security analysts believe these hackers are simply bent on exploiting vulnerable people.

Imposter and giveaway scams

On social media, it is not uncommon for celebrities and public figures to share a lot of videos about cryptocurrencies in their feeds. Fraudsters have been known to organize fake giveaways using their names and likenesses. To make it seem more legitimate, they might reply with other fake accounts. They would also post images of QR codes that would lead people to a website where they can enter and, supposedly, win a prize. If you win, however, you will have to confirm your crypto wallet address by sending payments.

Don't trust giveaways that ask you to send money to confirm your wallet address! Always be cautious of any unsolicited message, and remember that a legitimate company would never try to obtain your login information or funds.

Remember: whenever something seems too good to be true, it probably is.

What are the crypto red flags

Phishing scams

In phishing, criminals 'fish' for people's personal information in order to trick them into handing it over. Attacks on emails and websites are becoming more common as hackers become more sophisticated. An attack of this type typically involves a pop-up or a phishing email, with the goal of stealing your financial information and money.

Traditionally, phishing scams try to obtain your bank or credit card information, whereas crypto thieves might want to access your crypto wallet.

You may receive an email that looks genuine and tempting, but when you click on the link inside, harmful programs may be installed. Depending on the link you clicked, you might have to provide login credentials or personal information. But beware! This is a scam and one of the sneaky ways scammers defraud people of their money.

Blackmail and Extortion Scams

Scammers also use blackmail emails as a social engineering technique. Such emails claim to have records of adult sites you've visited and threaten to expose you if you don't share your private keys. A case such as this represents an exorbitant criminal attempt to extort money and should be reported to a law enforcement agency such as the FBI for further investigation.

Business opportunity scams

The goal of business opportunity scams is to lure victims by promising them large returns through crypto, which does not materialize. Scammers usually ask victims to send small amounts of crypto, with the promise of receiving something in return, but most of the time victims do not receive anything in return.

Crypto investments can certainly provide real returns, but only if you stick with the legit ones, so make sure you do your research before investing. The signs that an opportunity is too good to be true are usually obvious to experienced cryptocurrency investors, but less experienced investors may be more susceptible to such schemes.

One of the biggest scams was the BTC Global crypto scam. It has been widely publicized, not only because they have defrauded over 27,000 investors, but also because their scheme lasted several months. In many cases, victims were scammed into depositing money into a pool that was supposedly managed by a "master trader” but the master trader vanished with the money.

If someone wanted to withdraw money from their cryptocurrency investment account, they were told the "master trader" couldn't provide the service for some reason, and they never saw a dime again.

Rug Pull

A rug pull happens when a team pumps its token before disappearing with the funds - leaving investors with worthless tokens. Rug pulls occur when fraudsters create new crypto tokens, pump up their prices, and then pull as much value out of them as possible before abandoning them.

Here are some tips to help you avoid crypto scams

1) NEVER share your financial information and private keys

No matter how trustworthy a company appears, don't reveal information such as bank account details or private keys because criminals may be able to dupe you. Keep these details private if you need them to complete a transaction or access an account.

2) Be careful when considering offers that sound too easy or too good to be true.

Generally speaking, if you're promised a return on an investment that sounds too good to be true, then it's likely to be a scam. While cryptocurrency investments can be a great opportunity, no one can guarantee that you will be able to make money instantly. A person who makes such promises is not to be trusted.

3) Be careful about where you send crypto to

In the same way that you wouldn't transfer money to a random bank account, you should only send crypto to wallets that you or trusted third parties control. To determine whether the other party is legitimate, ask yourself if they seem trustworthy.

If they claim to be a business, do a quick Google search to verify their legitimacy. You can see how long they've been in business, if they've got a good reputation, and if they have good reviews.

4) Double-check the URL

Make sure you verify the domain name of the website and the social media handle of the person before sending money or other personal information to them. Make sure there is no obvious misspelling, and if there is, verify the account's authenticity.

In some cases, it may be a good idea to contact the official social media channel to ask if the account in question is authentic, and to alert them to any suspicious copycat accounts on the platform.

5) Don’t feel pressured to reply to threatening messages

Someone who is messaging you with threats or warnings may be trying to convince you to send cryptocurrency quickly without properly thinking it over. When you act based on fear, you are more likely to make rash decisions and not consider all the factors.

You can also enable two-factor authentication on almost all cryptocurrency exchanges and digital wallets. Adding this layer of security can help protect your funds and authentication credentials in case you lose your trusted device.

6) Don't respond to any strangers that contact you out of the blue.

Unsolicited opportunities aren't always scams, but you should always be cautious about those made without prior contact. In general, it's a good idea to make transfers through official channels that have customer service or fraud reporting capabilities.

The Internet and social media are easy places for scammers to contact you, offering trading returns, special promotions, and other scams. Therefore, whenever you contact customer support or send an email, remember to use official channels only.

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