What is a Crypto Scam & How to Avoid Them?

When criminals steal money from users investing in crypto or use the new digital currency to make transactions, it is known as a Crypto scam. It can be very difficult to recover the stolen money since most crypto assets are not tracked or regulated by the government. This is also why we are seeing many criminals attempting to scam unsuspecting users. So it becomes imperative for end-users to protect their crypto assets.

Crypto Scams Mainly Fall Under Two Categories:

  • Steal or transfer crypto directly: In this scam, criminals present fake business opportunities, impersonate authorities, or other malicious ways to transfer Crypto from their target’s crypto wallet to their wallet.
  • Getting access to a user’s wallet: Scammers try to obtain private information like private keys or security codes, or even access hardware to gain access to their target’s crypto wallet.

This article will examine the major types of crypto scams and discuss how to spot, avoid, and report crypto scams.

Types of Crypto Scams

Crypto Investment Scam:

Criminals contact investors claiming to be experienced investment managers. The so-called investment managers claim to have made millions in crypto investing and promise the same to their targets. They usually ask for an upfront fee and steal this fee. They also ask for personal information, claiming to transfer funds but instead gaining access to the user’s crypto wallet.

Scammers also use fake celebrity endorsements to scam users of their Crypto. Criminals use fake photos to impose them on articles, ads, or accounts to make it look like a big celebrity is backing the investment. However, these are fake and another way to gain access to your personal information or steal money.

Crypto-Romance Scams:

Crypto scams are common on dating apps. This scam usually involves a long-distance relationship where the scammer gains trust. Then, the scammer will try to convince the target to invest in or send money in Crypto. The scammer disappears once he receives the Crypto.

Read more: How crypto scammers are using Tinder to scam investors?

Phishing Scams:

This scam is the most popular type and has been around for some time. Criminals send emails with malicious links to obtain personal information like security codes or crypto wallet key details. We should never enter sensitive information on an email link.

Read more: What is A Phishing Attack In Crypto?

Rug-Pull Crypto Scams:

Scammers pump up a new NFT or crypto project to get funding. They vanish after receiving substantial funding for the bogus project. People cannot sell fake NFT or crypto assets as the coding prevents them from doing so. Thus, leaving users with a valueless investment.

The most popular rug pull scam involved Squid coins, named after the popular tv series, Squid Games. Users had to play to earn crypto coins. Users of the online game had to buy tokens, which they would later exchange for another Crypto. The value of a Squid coin skyrocketed to $90 per coin from just one cent. Soon, the trading of these coins stopped and the money disappeared. People then attempted to sell their tokens, which resulted in the token’s value reaching zero. It is reported that scammers made about $3 million from this elaborate scam.

NFTs are commonly used to pull off rug pull scams.

Airdrop Crypto Scams:

Crypto and blockchain companies send free tokens to users using a process called crypto airdrop as a marketing tactic. But this, unfortunately, attracts scammers too.

A crypto airdrop is a marketing activity to create awareness and promote new cryptos entering the market. However, scammers are airdropping fake coins to digital wallets and can get access to funds and personal information. This scam aims to gain sensitive information like security codes or trick the target into sending crypto coins to a compromised wallet.

Whatsapp Crypto Scams and Social Media Giveaway Scams:

These are mainly fake posts on Whatsapp and other social media platforms promising free crypto giveaways. Some include fake celebrity accounts endorsing the campaign to lure users.

However, when a user clicks on the giveaway, they are asked for verification to receive the giveaway. It usually involves paying a fee to verify. The victim loses money and could also have sensitive information stolen.

How to Identify Crypto Scams?

You must be aware to identify and spot red flags for information and communication involving crypto offers. We have listed a few below.

  • Promises of free money and promises to multiply your money.
  • Obvious misspellings and typographical errors in any crypto promotional material and communication. 
  • Fake celebrities and influencers.
  • Fraudulent contracts lock you into holding crypto assets without being able to sell them.
  • Big social media crypto Ponzi schemes.
  • Vague or confusing details about where the money is going.
  • Extortion, blackmail, or any other psychological manipulation. 

How to Avoid Crypto Scams?

Most scams could be avoided if users had implemented safe practices when using or accessing their crypto wallet.

  • Keep track of crypto wallet keys: Every crypto wallet has a unique key to access it. The wallet key information should be secured and you have all the control necessary to access the wallet key.
  • When to use your wallet: If you have thousands of dollars in Crypto, you must take additional precautions to protect your assets. Ensure your wallet is guarded by robust security measures such as two-factor authentication, holding a large portion of your assets in cold wallets, and insurance policies against scams.

How to Report a Crypto Scam?

Contact customer service for the respective exchange If you detect any malicious activity in your crypto wallet. Always keep a copy of any communication with the crypto exchange. If the issue escalates, register a complaint with the local cybercrime investigation cell. A copy of the communication with the crypto exchange should be attached with the complaint for their reference.

How to Recover Scammed Crypto?

Crypto once transferred to a specific wallet address cannot be returned unless the recipient sends the tokens back. The best course of action would be to report the incident to your Crypto exchange and law enforcement authorities who can take proactive action to seize any tokens which are part of a fraudulent transaction.

Concluding Thoughts

Crypto scams are of two types: having a target send Crypto to a compromised wallet and obtaining the user’s private information. You should be able to identify a crypto scam early if you understand the methods used by scammers to steal your Crypto. You should secure your wallet keys and know the signs of a crypto scam.

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