8 Popular Crypto Scams to Avoid

Bitcoin scammer

Today I am writing about 8 different crypto scams and what you can do to avoid them. I’ll also share some of my personal experiences with a couple different scams.

Crypto Scams

1. Fake Cryptocurrency Exchanges

There are fake cryptocurrency exchanges that operate in much the same way as legitimate trading platforms. They allow you to deposit funds and maybe even make trades, but when you try to withdraw your funds, you can’t.

Scammers create fake cryptocurrency trading platforms to exploit victims. These fake sites tend to have similar, but slightly different domain names from the legitimate ones, sometimes making it hard for users to tell. What’s worse, some of these copycat websites even appear very high in search results and look exceptionally similar to the real versions.

About a year ago while I was still working as a crypto accountant, a gentlemen called me asking for support in trying to recover $40k he deposited onto a not very well known exchange. He shared with me that when he tried to withdraw it wouldn’t work. Then when he sent them an email, he was told he would have to to pay them ridiculous amounts of money to get his crypto back. He had been scammed.

What’s unfortunate is, if he had done a little bit of research, he would have been able to avoid the fake exchange. While he was sharing his story with me on the phone, I googled the exchange (I don’t recall the name). It took me about 60 seconds to decide that I would never trust this exchange with my money.

Keep in mind, the exchange he used was centralized. Once he sent his hard earned crypto to them, it was there’s either to keep or return to the customer when he wanted to withdraw.

Crypto Scams to Avoid – TIPS

  • Take a closer look at the web address. Is it really legitimate?
  • Only download apps from official platforms

“If an exchange promises a rate of return on an investment that seems way too good to be true, it most likely is not true. Any offers of guaranteed returns should be considered as suspicious as well.”

Bitcoin scammer

2. Phishing Attacks that Steal Your Login Information

Phishing is a type of cryptocurrency scam that involves tricking victims into giving up their private keys or personal information. The attacker typically pretends to be a legitimate entity to gain the trust of the victim. Once the victim has been scammed, the attacker then uses their information to steal their cryptocurrency.

Phishing emails are sent to your inbox with an attachment or link that is disguised as a legitimate message from a legitimate source such as a wallet provider or crypto exchange.

The emails almost always contains a link that leads to a fake website that looks identical to the real one. Once the victim clicks on the link and inputs their login information, the attacker uses it to access their account.

Crypto Scams to Avoid – TIPS

  • Never click on a link from an email. Instead go directly to a website.
  • Check the email address that sent the message. Is it really legitimate?

3. Cryptojacking to Mine Crypto on your Computer

Cryptojacking is an attack where a cybercriminal runs cryptocurrency-mining software on your hardware without your permission. It can hide on desktops, servers, or mobile devices. Of course the motive is profit. You pay the electric bill while the attacker receives the crypto from mining.

There are three types of cryptojacking: file-based, browser-based, and cloud-based.

File-based cryptojacking involves malware that gets downloaded to your computer. Once download, the file executes a crypto mining script. These malicious files get spread through phishing attacks via email.

Broswer-based cryptojacking takes place when a crypto mining script is embedded onto a website. The website scripts are designed to run automatically and download the code onto the users’ computer.

Cloud-based cryptojacking requires hackers to search through an organizations files for API keys that will allows access to their cloud services. This type of attack tends to be much more profitable for cybercriminals due to unlimited CPU resources.

If your PC gets infected with a file or browser-based cryptojacking script it will perform slower, use more power, and generate more heat. You might hear the fan spinning up to cool itself. If a laptop is infected, its battery will die faster. Even if it’s a desktop, it will use more electricity and increase your electric bill.

Crypto Scams to Avoid – TIPS

  • If you suspect something is not right with your PC check the Task Manager.
  • Look for a program you don’t recognize that may have the word Miner in it.
  • If you find one, right click and disable it.
crypto scam - fraud

4. Crypto Scams Promising High Returns on Investment

Crypto scams promising high returns on investments are becoming increasingly popular. While it may seem like an easy way to get rich quickly; Don’t be fooled! If it sounds too good, it probably is.

There are two main types of investing scams with crypto: pump and dumps and rug pulls.

Pump and dumps occur when malicious groups artificially pump up the value of a token, attracting more investors, before selling off their tokens (ie dumping) then pocketing the profit. This scam relies on hyping a coin and getting more people to buy into it. As the price rises, insiders sell all their coins, dumping them on the unsuspecting public.

Rug pulls is a crypto scam where founders of a crypto project disappear one day taking all the tokens with them. A rug pull can be difficult to predict, because you are trusting the project’s founders, and it may not be obvious that it’s a scam until the creator just walks away.

Crypto Scams to Avoid – TIPS

  • A rug pull sign is when a crypto restricts your ability to sell it whenever you want.
  • Be wary if marketing promises of high return.
  • Watch for grammar errors on websites.
  • No data on founders or location of the project is a red flag.

5. Fake Cryptocurrency Wallet

Face crypto wallets are designed to infect your computer will some kind of malware to either steal your passwords or private keys.

This type of attack often starts by sending out emails or text messages impersonating a legitimate wallet app. The most common message sent is “your wallet app is out of date”, “click here to get the latest version”. Hackers have been contacting potential victims over the phone, posing as customer service representatives of crypto wallet companies and tricking people into downloading their fake apps.

Some well known wallet apps have been impersonated so beware! They include the popular MetaMask and Trust Wallet.

Crypto Scams to Avoid – TIPS

  • Only download wallets from official websites.
  • Check this list for wallets: https://cryptolinks.com/ but don’t download anything.
  • Instead type the address in the browser manually and see if it takes you to a legitimate site.
  • Another site is https://www.investopedia.com/ , type crypto or bitcoin wallet in the search bar.
  • For newer people recommend Exodus, Coinbase wallet, or Guarda wallet. I’ve used them all.

6. Crypto Ponzi Scams

Ponzi schemes pay older investors with the proceeds from new ones. It’s a scheme that runs in circles, since there are no legitimate investments; it is all about targeting new investors for money.

Here’s a list of the top 5 crypto ponzi scams:

  • Onecoin
  • Bitconnect
  • PlusToken
  • GainBitcoin
  • Mining Max

Crypto ponzi scams usually promise very high returns in a very short period of time. This plays on people’s emotions who might be strapped for cash. They get lured into the scam by a promise to reduce their financial pain. Ponzi sites also typically have referral programs, to get you to sign-up others and maybe earn a little commission. But don’t be fooled!

Ponzi scammers are like con artists and may show flashy cars, and wear expensive jewelry or expensive clothes. They may also claim their system is proprietary and they can’t divulge the secrets of how their system makes money. One last key component of a successful crypto ponzi scam is it may be difficult to cash out your holdings.

Crypto Scams to Avoid – TIPS

  • Beware of phrases like, “high investment returns with little to no risk”.
  • Beware of overly consistent returns. That’s not normal.
  • Beware of problems cashing out your crypto funds.
  • Always check the credibility of crypto investment firms.
Crypto scam - phishing

7. Fake Telegram/Discord Crypto Support

I recently had an issue with my Solana Phantom wallet and made a boo boo by forgetting to write down the password to the wallet. I tried to recover the wallet using my 12-word seed phrase, but the process couldn’t find the correct wallet address. After trying all the tricks I knew, I was unsuccessful. I had $500 connected to the wallet in a Pool position, so I decided to take a chance and try to get help on Telegram.

I went into Telegram fully aware I would possibly be scammed. Immediately after texting that I needed help, I was pounced on by someone claiming to be from Radyium. He seemed to legitimately want to help me, but apparently might have been a scammer, because someone else claiming to be from Radyium messaged with me a few minutes later.

This guy also seemed legit. He worked with me for an hour trying to solve the problem. We couldn’t get the wallet recovered though.

To be honest, I don’t really know for sure either of them were legit. Both of the asked me for my seed phrase and wallet address so they could help me reset the Phantom wallet password. This was an obvious red flag, but I gave in because I couldn’t access my wallet anyway. The funds were already lost to me. About an hour after leaving Telegram someone stole my funds from the Liquidity Pool I had entered. They didn’t steal it from my wallet though. I don’t know how they did that.

Technical Support Scam

Since this experience I’ve learned how this “technical support scam” works.

The scam is simple: the scammer sets up a Telegram profile and joins a group where they expect to find people asking technical questions. They then watch the group waiting for someone to ask a question or report a problem. Once a question is asked the scammer sends a direct message to the person posing as technical support offering to help.

Then, the person will either;

  • Chat with you and eventually ask for your secret recovery phrase
  • Direct you to a ‘support form’ that asks for the secret recovery phrase.
  • Link you to a fake phishing site that will ask for your phrase or to connect your wallet

If you give them your seed phrase or connect your wallet to a fake website, they will have access to all the funds in your wallet. Soon after, they will drain your wallet.

Crypto Scams to Avoid – TIPS

  • NEVER give your crypto wallet recovery phrase to ANYONE or ANYTHING.
  • Never reply or click on links from anyone who direct messages you first about a support issue. Ignore them or block them.
  • If you want to ask for support on Telegram, find the group admin yourself and message them directly.
  • Be extremely wary of ANYBODY who DMs you first in Telegram – they could be trying to build a relationship before initiating a scam.
  • This is a great website to help you recognize fake crypto stuff.

8. Fake Crypto Investing Platform

I got involved with a platform called Dropil back in 2018.

Dropil provided three primary services: an automated trading system called Dex, an analysis and signals bot called Arthur, and a wallet called Max.

I was using DEX. It was designed to remove human emotion from trading, by managing trades in a users accounts according to their risk appetite, safe, moderate, aggressive. The trading was all done by algorithms. I loved it because it was so easy. I was earning DROP tokens as rewards. This was my first adventure into yield farming.

Even though I was earning rewards in the form of DROPs, I closed all my positions a few months later because the DROP token kept dropping in price.

Two years later the founders of Dropil were accused of FRAUD by the SEC. You see their bot trading algorithm didn’t work. It didn’t return gains for users of DEX because it make enough profit. So the founders decided to treat their platform like a Ponzi Scheme. They paid out just enough profits to keep people thinking the system worked.

When they wouldn’t provide details about their trading bots, many people got suspicious, including me.

Crypto Scams to Avoid – TIPS

  • Before using any platform, do your homework and research it thoroughly. 
  • Never trust only in paid ads to send you to the correct website.
  • Follow the social media channels of platforms you like. You never know when they might announce something important.

Conclusion

Many of the methods used by crypto hackers and scammers are not new. In fact, many have been around a long time. Where money (ie crypto) is concerned, scams always follow. According to a Federal Trade Commission report more than a $1 billion have been stolen by crypto scammers since 2021.

My best advice is keep learning, keep learning, keep learning. If you want to play in the crypto world where it’s possible to make amazing amounts of money, you must educate yourself so you don’t accidently lose it.

For more information about crypto investing or tips on avoiding scams, please join our private Facebook Group.

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