Cryptocurrency Scams: Avoid Getting Taken in by a New Type of Scammer

Lyndon Seitz
Writer
Dolores Bernal
Editor
January 30, 2024
Cryptocurrency blockchain realistic miner in black hood behind computer against digital screen and bitcoins net

Image by macrovector

Cryptocurrency is a new(ish) technology that many people don’t understand, but they see an opportunity in it, either for privacy, monetary gain, or something else.

However, an attractive prospect lacking knowledge is a breeding ground for scammers; often, potential victims aren’t as savvy as they think. Therefore, cryptocurrency scams have become a major problem in recent years, with major losses for the victims.

Here is what you need to know about cryptocurrency scams, how they work, and how to deal with them.

What Are Cryptocurrency Scams?

As you might surmise, cryptocurrency scams involve cryptocurrency in some way. It’s an overarching term with many scams under its umbrella, given the many ways cryptocurrency can be involved.

  • They could be scams where cryptocurrency is promised as a reward or payment that never comes. 
  • It could be a get-rich-quick scheme involving cryptocurrency (those are common).
  • It could also be a selection of scams based on the idea of payment of cryptocurrency one way or another. This makes it easier for the scammer to get away with it.
  • It could also be a scam involving misinformation regarding cryptocurrency.

Just remember that if cryptocurrency is involved, it is a cryptocurrency scam, which isn’t mutually exclusive, with it being another type of scam.

How Common Are They?

You might not see cryptocurrency scams in the normal corners of the internet. Still, if you look at cryptocurrency and engage in those conversations online, they are everywhere.

If you’re reading this, you’ve likely passed by a few cryptocurrency scams, whether you know it or not.

One article published on the FTC website states that more than $1 billion in cryptocurrency has been lost from more than 46,000 people since 2021 to scammers, and we’re still waiting on the updated numbers.

Cryptocurrency in Other Scam Types

While it might be the dream of cryptocurrency fans for cryptocurrency to supplant regular money in transactions leading to a more globalized society, we just aren’t there yet. And we won’t be there for some time, even if the powers that be allow it (unlikely).

However, cryptocurrency is nonetheless harder to track and has its uses. Unfortunately, many of these uses make it great to receive payments in scams.

We won’t review all the scams and fraud types that will demand cryptocurrency as a payment (we have articles on most of them, though). However, know that it can always come up. Also, know that no legitimate business or deal should or will only accept cryptocurrency as a payment option.

What Are the Consequences of Falling for a Cryptocurrency Scam?

It can vary, but it is never good.

  1. Most cryptocurrency scams are meant to either steal your money or your cryptocurrency, which in many ways are the same.
  2. There is also the risk of information loss and identity theft. Some scams have information collection components or involve phishing.
  3. Beyond the above, there is also the stress of dealing with all this. Protecting yourself again and trying to reverse the damage could take dozens or even hundreds of hours, depending on the scams.

Something important to note is that the consequences are generally more permanent than other scams. It may be harder to get your crypto wallet or exchange account back. The protections you’d find with larger financial institutions aren’t always there.

Things to Remember When Dealing with Cryptocurrency

  1. From an investment standpoint, cryptocurrency is a highly volatile investment. Anyone who promises guaranteed high returns is lying to you or doesn’t know what they’re talking about.
  2. You must remember that people can easily not be who they say they are online. They might have an agenda, potentially manipulating you into acting against your financial interests. Take advice at your own risk.
  3. Also, remember that for many people, lying online has no consequences.
  4. There are many coins, each with someone hoping to make a dollar off them. Know that most coins are worthless. Most will not become the next big thing, and even the ones will not be the next big thing for long.
    • When a coin reaches the news, the chance for massive profits and opportunity has already passed.
  5. Your security and wallet options are varied and have advantages and disadvantages. Some are more focused on security, while others are focused on accessibility. I recommend leaning towards security, but that is kind of our thing.

Tips for Not Falling for a Cryptocurrency Scam

  1. Understand how cryptocurrency and cryptocurrency markets work as best as you can. You can always learn more, and the markets are always changing. By learning more, you can more easily know when someone is lying or trying to trick you.
    • Just avoid falling into the trap of thinking you know better than the scammer when you run into one.
  2. As with anything related to investing, do your due diligence and understand the people and processes involved before getting involved in any enterprise. Ask tough questions. Ask about future plans.
  3. Always ask yourself what a person’s motives or goals are when talking to someone online, and know they might not be what they say they are. Are they after your information, money, or something else?
  4. If something sounds too good to be true, then it is. You aren’t going to find free money online.
  5. Separate your crypto account and other accounts as best you can.
  6. Only use trusted exchanges when buying cryptocurrency.
  7. Avoid unusual links and offers. You aren’t going to find the next big thing from a random message from a stranger on Telegram, despite the many people who’ve tried.

6 Common Cryptocurrency Scam Variants

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Image by Freepik

There are more cryptocurrency scam types than any article can go over, if only because new ones are being created and tried out regularly. 

Instead, it is more helpful to learn the most common types of cryptocurrency scams and see what common threads you find in whatever you are dealing with. Most scams online will fall into one of the following categories: you should watch out for them. 

1. Investment Scams

In cryptocurrency, investment scams are about a scammer supposedly providing insider information or an amazing investment opportunity in the crypto market. Someone calling themselves an investment manager or a representative from an equivalent company may contact you about this.

The goal is to get you to buy in, and then they flip the switch on you. They might steal your investment, steal your information, or charge ridiculous fees. Regardless, they aren’t real investment professionals.

Defense: Be careful of such opportunities, and be suspicious about people contacting you. Why would someone reach out to you, of all people, about such a thing? 

2. Pump and Dumps

You might get contacted by someone online telling you that, with good timing, you can make a killing by raising the price of a coin with a bunch of other people.

However, while you might be told you’re in on the profits and make out great, you will be one of the real victims. 

While you are pumping up a coin that is completely worthless and unpopular on its own, the scam organizers are the ones actually selling the coins at the right time.

And eventually? No one is going to buy the coin at that price. You will either hold the coin forever or sell it at a massive loss. In either case, you lose money.

Defense: Don’t get involved in these types of schemes. You can never know if you’ll actually be the victim. 

3. Rug Pull Scams

In this type of scam, someone will contact you with an investment or startup opportunity relating to cryptocurrency. They will promise you the world (and good returns on top of that) but need money to invest in setting up. It might be for a new coin, exchange, or something else related to cryptocurrency.

Whatever the case, they try to make it sound promising. However, after a certain amount of time or they pull in enough money or victims, the scammer vanishes, taking all the investment money or cryptocurrency. 

They might have fled the country, been operating under a false identity all this time (easy enough to do online), or been in a different country all along. In any case, reaching them and getting compensation will be tough.

Defense: You should avoid such offers unless you are an experienced investor and entrepreneur. Even if you are, you should do research and get commitments. Do not part with your money or cryptocurrency easily.

4. Cryptocurrency Phishing Scams

Phishing scams are the bread and butter of scammers, used in every possible context, to every possible recipient, using every possible method. Many of these will be related to cryptocurrency, though most will still use the standard tactics to get you to part with your money or information.

Defense: Don’t click suspicious links or download suspicious files; learn more about phishing tactics.

5. Giveaway Scams

Have you seen offers for free cryptocurrency online, perhaps a specific one when it’s popular? Have you gotten a spam email telling you you’ve won a prize and need to claim it? These are likely giveaway scams.

In many ways, this is a variant of a prize or lottery scam, just using cryptocurrency as the bait for your money or information. Treat it the same way.

Defense: Remember that things aren’t given away for free online. If it looks like it, there’s a catch. Don’t accept cryptocurrency as a giveaway; don’t give personal information or money away to collect anything.

6. Fake Exchanges and Websites

There are plenty of legitimate exchanges for cryptocurrency, large and small, and private trades (not recommended if you’re new to the market). However, there are also less legitimate or trustworthy ones, and you must watch out for them.

The websites exist to steal your funds or information or install malware on your device. That’s it.

Some people will pose as enthusiasts and try to drive traffic to these fake sites, so don’t believe what people say about a cryptocurrency website online. Only use trusted sources.

Defense: Look it up first before signing up with an exchange or providing any details to a website (or even using it if you’re suspicious). If there’s no information, that’s a bad sign.

What to Do if You Get Caught in One?

If you’re reading this, you may be a current or recent victim of a cryptocurrency scam. It’s troubling, but you can come out the other side. 

However, you need to act calmly but quickly, getting information together and working to reverse as much damage as possible while minimizing future problems.

What should you do? The steps can vary in order and specific actions based on the type of scam you’re a victim of, but here are the general steps to follow.

1. Understand the type of Scam You’re Dealing with

As you can see from the options above, there are many types of cryptocurrency scams, and I couldn’t even go over all of them. Try to identify the scam as best you can. Study it further from there.

You must fully understand how this scam affected you, how you fell for it, and if there is any future danger.

By understanding these things, you’ll be able to react accordingly, get the proper receipts and records, and take the right precautions to avoid further issues.

2. Get Records and Create a Clear Chain of Events

When dealing with cryptocurrency scams, it’s helpful to establish a narrative of what happened with as many details and records as possible. The bar for getting your money or cryptocurrency back is higher, so more evidence is needed.

In general, I recommend getting:

  1. Proof of ownership of the original funds or cryptocurrency. This can involve a small transaction or signing a message with your private key.
  2. All transaction IDs, where the cryptocurrency was sent from and to (to the best of your knowledge). Include amounts as well.
  3. Get screenshots of any interactions with the scammer if you can get them.
  4. Any additional details you can remember?
    • Dates and places help here to establish a narrative.

3. Try to Reverse the Dealings or Transactions

First, you must report the scam to the FTC and local police. They may give further instructions, which you can then follow. While reporting will not take long, getting your money back may be difficult.

In truth, it will be difficult to reverse the transactions in many cases fully. You or the authorities may be unable to track where or who your money went to. There will be some logs, especially if certain exchanges were used, but sites need to consider false reports and actual scams.

4. Implement Future Security and Prevention Measures

Whether you got everything back or not and wherever you are when it comes to getting your identity and credit under control, I know you never want to let this happen again.

Based on the information you gained from the previous steps, create a plan to review cryptocurrency protections, your information security plans, and everything else relevant. 

This might involve changes in managing your cryptocurrency and may take time to change wallets, exchanges, etc. However, it’s necessary for your long-term information and cryptocurrency security. See the next section for more information. 

Protecting Your Cryptocurrency and Your Identity

Gold bitcoin and padlock

Image by fabrikasimf

1. Cryptocurrency Protection

Protecting your cryptocurrency wallets and coins is vital compared to other types of credit, currencies, and accounts, given that cryptocurrency transactions are hard, if not impossible, to reverse. 

In some ways, that’s the point of cryptocurrency. It has its advantages, but those advantages have a downside when dealing with scams. That’s why it’s important to secure your accounts and cryptocurrency.

I cannot go over how to do so in complete detail in this article, so I refer you to this guide instead.

2. Information Security

You also need to protect your information from these scammers. To protect your identity and credit before (ideally) or after dealing with a scam, I recommend using an identity theft protection service such as Aura. 

It will monitor your accounts, notify you of suspicious behavior, provide identity theft insurance, and help you deal with identity theft if something happens. 

On top of this, you will also want to learn about the latest scams, use good cybersecurity habits, and simply be aware of what you’re doing online.

Conclusion

Cryptocurrency can be a great tool, investment opportunity, or technology to talk about. But with this new technology comes new threats and people looking to take advantage of users, wherever their interests lie. The scammers will not rest.

You’re likely interested in security if you’re interested in cryptocurrency, but review the fundamentals and ensure all of your accounts and wallets are secure before diving fully into cryptocurrency. 

Otherwise, invest in services such as Aura, use the best security settings and practices, and always stay vigilant.

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