Cryptocurrency scams are on the rise. According to the FTC, over $1.5 billion of crypto is lost every year in the USA alone, and that figure is only increasing. Scammers love cryptocurrency because it’s decentralized, largely unregulated, and transfers are irreversible.
With the rise of AI, scams in the blockchain space are becoming increasingly sophisticated and challenging to identify. So, what are the latest common crypto scams and how can you avoid them? We’ve listed all the major scams being used to dupe people. With this knowledge you can easily avoid being one of them.
1. Pump-and-dump schemes
Pump and dump scams arise when a number of individuals group together and invest in a particular cryptocurrency with the aim of creating hype and inflating the value. Once the value of the coin has been sufficiently increased, the scammers cash out at the same time, crippling the value of the coin in the process. All the poor investors that joined late are now stuck with crypto that’s virtually worthless.
How to avoid the pump and dump crypto scam
If you see a crypto being aggressively marketed by individuals or teams with very little background information on themselves, consider it a red flag. If something seems too good to be true, it probably is.
2. Rug pulls
A ‘rug pull’ is when a team of scammers raise capital through cash or crypto payments to fund a commercial venture. Once enough crypto has been accumulated, the scammers drain the funds and disappear. These types of crypto ventures often resemble ponzi schemes, offering high yield returns on investments as a way to convince you to invest. Those of you who’ve been following crypto for long enough will no doubt remember the infamous Bitconnect, a crypto project that existed between 2016-2018 ran off with $2.4 billion.
How to avoid the crypto rug pull scam
Before investing in any project, make sure the people behind it are completely transparent regarding their identity and contact details. Be wary of exaggerated claims about an investment opportunity’s potential. If you’re offered guaranteed returns, steer clear.
3. Fake celebrity endorsements
Some scammers try to deceive their victims into investing their crypto by using fake celebrity endorsements, a practice that has become increasingly prevalent since the rise of AI. A famous example of a fake celebrity endorsement involved a deep fake video of Elon Musk claiming investors would receive a 30% return, or more, on his new crypto project.
Famous faces ranging from Mark Zuckerberg to Prince Harry and Meghan Markle have also been unwittingly involved in fake endorsement scams. Michael Saylor, a Bitcoin evangelist Chairman of MicroStrategy, claims his identity is stolen to front some kind of scam approximately every 10 minutes.
How to avoid the fake celebrity endorsement scam
Don’t take any celebrity endorsements at face value – chances are they are a scam. These scams are popping up on all social media, including YouTube, X, Reddit, and TikTok.
4. Fake crypto exchanges and wallets
A common crypto scam is the use of fake crypto wallets, apps and exchanges to steal user funds. Essentially, the scammer will create a fake website with a design and domain name that imitates a legitimate crypto wallet or exchange. These websites may even allow you to withdraw small amounts of crypto to build trust before eventually closing down and denying all withdrawal requests.
How to avoid the fake crypto exchange scam
Always check the domain name of crypto platforms for misspellings or variations that signal fraudulent activity. You can also check whether the crypto platform is listed on regulatory websites.
5. Phishing
Phishing is when scammers imitate established organizations and send fraudulent emails requesting personal information such as login details, credit card numbers and the private keys to your crypto wallet. The scammers may pretend to be a bank, government department or mortgage company in order to deceive you.
How to avoid the crypto phishing scam
Keep in mind that banks and lenders cannot ask you to provide your wallet private keys. If you receive unsolicited emails or messages requesting personal information, you might want to flag the issue or contact your local law enforcement agency.
6. Blackmail and extortion
Scammers may claim to have access to embarrassing or sensitive personal information to blackmail their victim into sending over their cryptocurrency or private keys. This personal information may include photos, videos, or a record of illicit webpages or adult websites the victim has visited.
How to avoid the blackmail crypto scam
If a scammer attempts to blackmail you by threatening to release personal information, you should report the case to a law enforcement agency.
7. “Crypto business opportunity”
Preying on potential victims with the promise of instant riches, scammers typically reach out with the offer of a lucrative business opportunity that’ll fix your financial woes in a heartbeat. Such scammers will make claims of ‘guaranteed returns’ – though you will, of course, be required to invest large sums of your crypto.
How to avoid the crypto business opportunity scam
Business opportunity scams are often run by crypto scammers impersonating financial managers and cryptocurrency investors, making them tricky to identify in many situations. Just keep the old adage in mind – if it sounds too good to be true, it probably is.
8. Fake job listings
In some fraudulent scenarios, scammers will post phony job listings or send fake offers to entice victims into their scheme. Many of these job listings relate to the cryptocurrency sector, such as investor recruiting or crypto mining. However, as these crypto scams are becoming increasingly sophisticated – particularly with the rise of Artificial Intelligence – fake job listings are becoming increasingly personalized and challenging to tell apart.
How to avoid the crypto fake job scam
All these fake job offers do have something in common – applicants must make a modest crypto payment to get up and running. In some cases, the scammer will simply steal your initial deposit and disappear. The savvier fraudsters tend to deposit one small payment into your account to gain your trust before asking for a much larger crypto payment to keep going – which you then lose forever.
