Cryptocurrency Scams: Common Types and How to Prevent Them
Key Takeaways
- Cryptocurrency scams are increasing, with new and old techniques used to steal funds.
- Common scams include rug pulls, Ponzi schemes, phishing attacks, and fake investment opportunities.
- Awareness, security best practices, and due diligence are essential for protecting digital assets.
The Rising Threat of Cryptocurrency Scams
With cryptocurrency adoption at an all-time high in 2024, scammers are leveraging the growing hype to deceive unsuspecting investors. The FBI’s Internet Crime Complaint Center reported over $5.6 billion in losses due to crypto-related fraud in 2023, marking a 45% increase from 2022.
Despite blockchain’s decentralized nature, scams continue to evolve, exploiting both beginners and seasoned investors. Here are some of the most common cryptocurrency scams and tips on how to protect yourself.
1. Bitcoin Investment Scams
Fraudsters posing as “investment managers” promise huge profits in return for an upfront fee. Once paid, the scammers disappear.
Some scams also involve fake celebrity endorsements, where fraudsters use doctored images and impersonate famous figures to lure investors into fraudulent schemes.
How to Avoid:
- Be skeptical of investment opportunities promising guaranteed high returns.
- Verify the credibility of investment managers.
- Check official celebrity accounts and sources for endorsements.
2. Rug Pull Scams
Scammers promote a new cryptocurrency, NFT, or project, attracting investors with fake hype. Once funds are raised, the creators disappear, leaving investors with worthless assets.
One of the most infamous examples is the Squid Coin Scam, where investors were prevented from selling their tokens after buying in, leading to a loss of $3 million.
How to Avoid:
- Avoid investing in projects that lack transparent teams and whitepapers.
- Verify liquidity locks and smart contract audits.
- Be cautious of projects with sudden, extreme hype.
3. Romance Scams (Pig Butchering Scams)
Scammers establish long-distance relationships via dating apps or social media and eventually persuade their victims to invest in cryptocurrency. Once funds are transferred, they vanish.
In 2023, romance scams accounted for $1.179 billion in reported losses, according to the FTC.
How to Avoid:
- Be wary of individuals who push you into crypto investments.
- Never send money or share financial details with online acquaintances.
- Verify identities through video calls or public records.
4. Phishing Scams
Phishing remains one of the most common scams, where fraudsters send fake emails or messages containing malicious links. These links lead to spoofed websites that steal login credentials or private keys.
How to Avoid:
- Never enter personal information through email links.
- Always verify URLs before entering sensitive data.
- Enable two-factor authentication (2FA) on all accounts.
5. Man-in-the-Middle Attacks
Hackers intercept internet connections to steal crypto wallet keys and login credentials, especially on public Wi-Fi networks.
How to Avoid:
- Use a VPN to encrypt your online activity.
- Avoid logging into crypto accounts on public Wi-Fi.
- Enable 2FA and hardware security keys.
6. Social Media Giveaway Scams
Fake giveaways claim to offer free Bitcoin or other crypto assets. Victims are asked to send a small deposit to verify their identity, but the scammers never send anything in return.
How to Avoid:
- Ignore unsolicited giveaway offers on social media.
- Verify contests only from official company accounts.
- Never send crypto to unknown parties.
7. Ponzi Schemes
Scammers recruit investors by promising high returns with little risk. Older investors are paid using funds from new investors, but the cycle eventually collapses.
In 2024, a Ponzi scheme led by the Adam brothers raised $60 million, claiming to exploit crypto price differences. Instead, they used the funds for luxury purchases before facing SEC charges.
How to Avoid:
- If it sounds too good to be true, it probably is.
- Verify whether the investment is backed by real assets or services.
- Research company leadership and their financial records.
8. Fake Cryptocurrency Exchanges
Fraudulent exchanges lure investors with unrealistic trading benefits but prevent them from withdrawing funds. Victims only realize it’s a scam when it’s too late.
How to Avoid:
- Use reputable exchanges such as Coinbase, Binance, and Kraken.
- Read reviews and research exchanges before depositing funds.
9. Fraudulent Job Offers
Scammers impersonate recruiters and offer remote work opportunities, often requiring payment in cryptocurrency for job training.
Additionally, North Korean IT freelancers have targeted companies for insider access to steal data and conduct cyberattacks.
How to Avoid:
- Verify job postings and companies via LinkedIn and official websites.
- Never pay upfront fees for job applications or training.
- Avoid sharing private information with unknown recruiters.
10. Flash Loan Attacks
Flash loans allow traders to borrow funds instantly, but attackers manipulate the system to artificially inflate token prices, cash out, and crash the price.
In 2023, Platypus Finance lost $8.5 million due to a flash loan attack.
How to Avoid:
- Be cautious when participating in DeFi protocols.
- Check smart contract audits before investing.
11. AI-Powered Crypto Scams
Attackers now use AI to generate fake endorsements, spread misinformation, and create deepfake videos of celebrities promoting scams.
How to Avoid:
- Verify sources before trusting investment advice.
- Be skeptical of AI-generated images or videos.
- Avoid “too good to be true” offers promising fast profits.
12. Bitcoin ATM (BTM) Scams
Scammers manipulate victims into depositing cash into BTMs, claiming their bank accounts are compromised or linked to illegal activities.
In 2024, B2M fraud losses exceeded $65 million.
How to Avoid:
- Never send money through a Bitcoin ATM under pressure.
- Confirm claims with financial institutions before taking action.
How to Protect Your Cryptocurrency
- Use cold storage wallets (Ledger, Trezor) for large holdings.
- Enable multi-factor authentication (MFA) on all accounts.
- Never share private keys or seed phrases.
- Avoid clicking on unknown links.
- Verify platforms and companies before investing.
How to Report Crypto Scams
If you suspect fraud, report it immediately:
- Commodity Futures Trading Commission (CFTC): CFTC.gov/complaint
- Federal Trade Commission (FTC): ReportFraud.ftc.gov
- Internet Crime Complaint Center (IC3): ic3.gov
- U.S. Securities and Exchange Commission (SEC): sec.gov/tcr
Staying informed and vigilant is key to protecting your crypto assets. The more you educate yourself about potential scams, the safer your investments will be in this rapidly evolving digital landscape. 🚀