Join us for Amplify’s virtual annual meeting on April 17.
To learn more and register to attend, visit the Members Annual Meeting webpage.

What Do Crypto Scams Look Like?

Katie DuncanJuly 14, 2023

Reviewed By : Amplify

Bitcoin scam

Cryptocurrency has become increasingly popular in the last few years, attracting a wide range of investors and enthusiasts. But, as the digital currency market expands, so does the risk of falling victim to crypto scams.

For anyone involved in the crypto space or considering purchasing crypto, understanding what these scams look like is crucial for protecting your identity and investments. In this article, we will break down the various types of crypto scams that exist and the warning signs to watch out for.

Types of Crypto Scams

Cryptocurrency scams come in all shapes and sizes, each with its own deceptive techniques and objectives. By understanding these seven different types of scams, you can better recognize and avoid falling victim to them.

1. Ponzi Schemes

Ponzi schemes aren’t new, but they’ve found their way into the crypto space, luring investors with promises of high returns.

These schemes operate by attracting new investors and using their funds to pay off earlier investors, creating the illusion of profitability. Scammers often present themselves as experts with exclusive access to lucrative opportunities. However, when new investments dry up, the scheme collapses, leaving investors with significant losses.

Notable examples include OneCoin, which defrauded investors of billions, and BitConnect, a lending platform that guaranteed unrealistic daily returns.

How to Protect Yourself from Crypto Ponzi Schemes

To protect yourself from Ponzi schemes, exercise caution when encountering investment opportunities that promise extraordinary returns and heavily rely on recruiting new investors. Conduct thorough due diligence, research the individuals or organizations involved, and seek advice from trusted sources.

2. Fake Initial Coin Offerings

Scammers have exploited the popularity of new tokens and Initial Coin Offerings (ICOs) to carry out fraudulent activities. Fake ICOs involve the creation of deceptive projects that make false promises and manipulate whitepapers to attract investments. These fraudulent schemes mislead investors by presenting enticing new types of cryptocurrencies with exaggerated claims about technology, partnerships, and potential returns.

How to Protect Yourself from ICO Scams

To protect yourself from fake ICOs, always conduct thorough research. Scrutinize the project’s whitepaper, team members, and advisors. Verify the legitimacy of the project by checking their background, technical documentation, and partnerships.

3. Phishing Scams

Phishing scammers employ various tactics to trick users into revealing personal information, login credentials, or private keys. They create spoofed emails or websites that closely mimic popular cryptocurrency exchanges or wallet providers. These messages often contain urgent requests, claiming security issues or enticing offers, aimed at coercing users into taking immediate action without verifying the authenticity of the communication.

Real-world incidents highlight the risks of phishing scams. In the Binance phishing incident, hackers crafted a fake Binance website to steal user credentials, compromising their accounts and funds.

How to Protect Yourself from Phishing Scams

Be wary of unsolicited emails, messages, or links, particularly those urging immediate action. Always verify the legitimacy of websites or platforms by manually entering their URLs or using trusted bookmarks. Additionally, you should implement two-factor authentication (2FA) for your cryptocurrency accounts and use reputable hardware wallets or software wallets to securely store your digital assets.

4. Pump and Dump Schemes

In a pump and dump scheme, scammers create hype and excitement around a particular cryptocurrency, often through coordinated efforts in online communities or social media platforms. They spread false information, make exaggerated claims, and create a sense of urgency to attract buyers and drive up the price. Once the price reaches a peak, the scammers sell their holdings, causing the price to plummet and leaving unsuspecting investors with substantial losses.

Pump and dump schemes have been prevalent in the crypto market. A well-known example is the Dogecoin pump and dump, where coordinated efforts artificially inflated the price of Dogecoin, luring unsuspecting investors who later experienced significant losses when the scheme unraveled.

How to Protect Yourself from Pump and Dump Schemes

To protect yourself from pump and dump schemes, exercise caution when encountering cryptocurrencies with sudden price surges driven by unsubstantiated claims. Conduct thorough research, look for fundamental value in projects rather than short-term hype, and be mindful of investments based solely on online rumors or promotional messages.

5. Malware

Malware is malicious software that can infect computers or mobile devices. Scammers often distribute malware through phishing emails, infected websites, or downloadable files. Once installed, malware can compromise the security of your devices and gain unauthorized access to your cryptocurrency wallets or private keys, allowing scammers to steal your funds.

How to Protect Yourself from Crypto Malware

To avoid falling victim to these types of scams, it is crucial to implement strong security measures. Use reputable antivirus software and keep your devices and applications updated with the latest security updates.

6. Social Media and Fake Wallets

Another similar tactic involves the creation of fake wallets. Scammers develop counterfeit wallets that resemble legitimate ones, tricking users into downloading and using them. These fake wallets can record sensitive information, such as passwords or private keys, enabling scammers to access and drain your cryptocurrency holdings.

The scammer will use a sense of urgency or “special offer” pressure to get people to use this fake wallet. Don’t fall for it—digital crypto wallets come in a huge variety, and you do not need a specific wallet to buy or sell crypto.

How to Protect Yourself from Fake Wallets

If someone on social media, whether it’s YouTube, Facebook, or another channel, is promising huge returns on a crypto product—be wary. Be cautious when downloading files or clicking on suspicious links, and only use official wallet applications or hardware wallets from trusted sources. Anyone who tries to convince you to only use a specific wallet to buy or sell crypto is probably trying to scam you. Do your research and find a stable, publicly-known crypto wallet that has a good pattern of positive reviews and usage.

7. Crypto Giveaway Scams

In a giveaway scam, scammers often reach out to potential victims through social media platforms, email, or messaging apps. They present themselves as influential figures, cryptocurrency projects, or exchanges and claim to offer free cryptocurrency in exchange for a small initial deposit or personal information.

The scammers create a sense of urgency and excitement, pressuring victims to act quickly to secure their share of the giveaway.

However, once victims send the requested funds or disclose their personal information, the scammers disappear, leaving the victims empty-handed and at a financial loss. It’s important to note that legitimate giveaways or airdrops do exist, but scammers exploit the concept to defraud unsuspecting individuals.

How to Protect Yourself from Crypto Giveaway Scams

Always be skeptical of unsolicited messages or emails promising free cryptocurrency. Remember that legitimate giveaways typically do not require you to send funds or provide personal information upfront, and you will never be solicited or pressured to enter.

8. Impersonation Scams

Impersonation scams are also big right now. You may have even witnessed one of your friend’s social media accounts get hacked by someone trying to peddle crypto. This is known as an impersonation scam.

In these impersonation scams, fraudsters gain unauthorized access to a person’s social media account through hacking or phishing techniques. They then exploit this access to craft convincing posts or messages that boast about substantial profits or extraordinary returns from crypto investments. By leveraging the trust and credibility associated with the impersonated individual, scammers aim to lure unsuspecting victims into investing or following their instructions.

The fraudulent posts or messages often include enticing investment opportunities, exclusive insider tips, or requests for financial contributions. Victims, believing they are dealing with someone they know personally, may fall prey to these scams and end up losing their funds or providing personal information to the scammers.

How to Protect Yourself from Impersonation Scams

Be vigilant for any suspicious account activity or unexpected requests from individuals, even if they appear to be someone you know. If you encounter a suspicious message or post, independently verify its authenticity through direct communication with the individual using a trusted contact method—like a good ol’ fashioned phone call.

Stay Sharp and Knowledgeable

Understanding what these— and other scams— look like is crucial for protecting yourself and making informed decisions in the crypto space.

Recognizing the warning signs and red flags associated with these scams is the first step in safeguarding your investments. Unrealistic promises, lack of transparency, pressure tactics, and suspicious websites or communication channels should serve as indicators of potential scams. By staying informed and maintaining a skeptical mindset, you can put yourself in a better position to avoid fraudulent schemes.

Become an Amplify Member

Every Amplify account holder enjoys fee-free banking. That means no overdraft, maintenance, or other banking fees cutting into your pocket.

Katie Duncan

Katie Duncan is a financial writer based in Austin, Texas. Her articles include financial advice for freelancers, homebuyers, and more. When she’s not writing, Katie loves traveling and exploring the outdoors with her friends and her dog, Poe.