Crypto scams are flourishing and at a rapid pace. The amount of cryptocurrency stolen in the first quarter of 2022 is higher than the amount of crypto stolen in 2018-2020.
With crypto scams skyrocketing, not doing proper research before making an investment is a very unwise decision.
Let’s talk about what you can do to make safer investments. We’ll start with the 10 common crypto scams that are responsible for the majority of the stolen amount.
Afterwards, we’ll share some great tips that will help you make safe investments, and finally we’ll talk about how to spot and report crypto scams.
There is one more thing we would like to point out before starting. This article does not contain any financial advice. With that said, let’s start.
Nowadays, it’s common for scammers to lure people into a trap by baiting them with great opportunities.
They will tell the crypto traders about this great investment opportunity, and how it can quadrupole their investment. The scammers will encourage the people to go to their website, to find more info about the project.
The websites are often professionally designed, include hundreds of testimonials, and even celebrity endorsements.
Unfortunately, these gimmicks are enough to persuade many people so they will make an investment, and lose their money for good.
As you can tell, the scams that fall in this category occur on social media. The scammers advertise their products or services, and ask the users to pay in crypto.
To gain your trust, scammers add positive comments on their posts and pages using bots, and pull off many other gimmicks. Crypto payments are not common, therefore, it’s best to be extra careful before making crypto payments.
3. Employment Scams
The employment scams have started rising in numbers in the last few years. The numbers have quadrupled in just the last two years. The scammers offer the victims a job and offer to pay in crypto. Obviously, the users don’t get paid and sometimes their crypto wallet gets hacked.
A giveaway scam is when the scammer promises the users to give back a multiplier of the initial investment. Since people wouldn’t trust a random person, the scammers hire an influencer and because many people blindly trust influencers, they’ll make the investment.
Scammers often pretend to be a trusted authority and ask the people to invest in a product. They can pretend to be a government official, credit card provider, a bank employee, or a celebrity.
The imposter Scams are super effective. To this date, Elon Musk’s imposters have stolen over $2M.
The loader scam doesn’t fall in the category of sophisticated scams. Actually, they are far from it. The scammers ask the users to provide their account’s logins. They show the users that they are making insane ROIs on their investment, and that they need multiple accounts to grow their business even more.
In return, they promise to give a portion of the earnings they will make using the owner’s account.
You’re probably thinking that this strategy could never work, but you should think again. Because it does work. Scammers use many strategies to gain people’s trust, plus some people are quite gullible, so the scam does work on some people.
Scammers are getting smarter and smarter. They create a replica of a popular crypto app, and promote it on popular platforms. People download fake apps thinking they are downloading the real one, and when they make a transaction, the receiving address is changed to the scammer’s address and their crypto gets stolen.
Phishing scam is an old-school strategy that is still quite effective. The people pulling off the scam contact people and ask them to buy their product or service.
They usually contact people through email, pretending to be a crypto project with a high reputation. They tell people that they are launching an ICO and that people can purchase their coin or NFT at a cheap price.
9. Romance Scams
A romance scam involves having an online affair with a person in order to gain their trust. Once the scammer has gained the person’s interest, they come up with a good reason to ask for money.
The problem with crypto romance scams is that they are even worse than normal romance scams. This is because tracing crypto is much harder than tracing fiat.
The number of crypto romance scams is quite high. According to the Financial Task Force (FTF), 20% of the overall romance scams are crypto romance scams, and they are the second most popular crypto scam.
Blackmailers email people and tell them that they have got people’s private pics, videos, etc. They will demand the victim to pay crypto, otherwise they will release the private data.
Fortunately, most of the blackmailers are all bark and no bite. They don’t actually have anything on the users. Therefore, if they don’t provide any solid proof that they have the private data, you should just block and report them, and move on to your business.
Fortunately, you can avoid crypto scams by following a few tips. Implementing these tips can be a bit time consuming, but they are well worth the effort.
Majority of people who become victims of crypto scams are buyers. To avoid sharing the fate of those people, all you have got to do is become an informed buyer.
Take these steps before making a purchase and you won’t have to worry about getting scammed:
- The creation date
- Names of the creators
- Purpose behind the creation of coins
- The technology used
- The differences between this coin offering and the rest
- Numbers of coins being produced
- The features that helps these coins stand out from other coins
The Internet is filled with wrong advice, and if there was a list of industries with fake advice, the crypto industry would definitely rank high on that list.
The reason is that crypto is a developing industry and it has a huge user base, which makes it a great target for scammers.
Therefore, it’s really unwise to take advice from a source that you don’t truly trust. Make sure to only take advice from people who you know on a personal level or the ones with high financial credentials.
Many people become a victim of a scam by doing their business on a wrong website. Fortunately, there is a simple way to identify whether the website is legit.
Look at the website’s URL and see if it starts with https or http. The former is a sign of a legit website and the later is a sign of a scam.
Your wallet is where your crypto assets are stored, so make sure the wallet is secure. Here are some things you can do to make your wallet secure.
Brand’s Credibility: The first thing to keep in mind is that you shouldn’t purchase a wallet from a brand with little credibility.
There are plenty of companies that are selling wallets to steal crypto, and if you don’t pay attention to who you are purchasing from, then you may very well lose your crypto.
Make sure to only purchase the wallet from popular brands with a solid history. You may see wallets that are unrealistically cheap, and the price factor may be very alluring. This is a common technique used by scammers, so if the price seems too unrealistic, know that it’s a wolf disguised as a sheep.
Don’t Share Longins: While it’s obvious that you shouldn’t share your logins with anyone, as we have discussed already, some people do it. No matter how much money someone promises to give you for your account’s logins, you shouldn’t share them.
On any electronic device, you shouldn’t share your logins even with those who are closest to you. Hackers can hack their account or device and ask you for your logins via text. If you have to share your logins with someone, make sure to call them and confirm that they are the ones asking for your logins.
Don’t Login Using Public WiFi: You shouldn’t login using the public WiFi. There are many ways hackers can monitor your activities using public WiFi, and if you use your logins, they’ll steal them.
Two Factor Authentication: The two factor authentication adds another layer of security. Even if someone gets control of one of your devices, they won’t be able to hack your account.
This is because in order to login in to your account, they’ll need a code that will be sent to your second device. This way they won’t be able to hack into your account, and you’ll know that the device that didn’t receive the code has been hacked, so you can do something about it on time.
Multiple Wallets: Even if you’re very careful, there is still a tiny chance that your wallet can be hacked. In case such an event occurs, you can reduce your loss by creating multiple wallets.
Because if you have divided your assets among multiple wallets, the hacker only takes 20% to 30% of your crypto and not 100%.
Cold Storage: There are two types of wallets. Online wallets and offline wallets. The online wallets exist on an online database, so your assets are stored online. Whereas the database of offline wallets exist inside a small device. When you store your assets in this wallet, your assets are stored offline. The latter storage option is called offline storage.
While online wallets are a safe bet, it’s safer to store your crypto offline. The online wallets have assets stored in the database of the wallet provider, if the wallet provider is a fraudster they will steal your assets. However, it’s not a wallet provider that you have to worry about (considering you have purchased the wallet from a credible brand). Because your assets are stored online there is always a chance that hackers can get their hands on them.
Offline wallets are disconnected from the internet, and since they are completely disconnected from the internet, hackers can’t hack these wallets.
In case you’re wondering why we are talking about investing in traditional finance, bear with us.
You can earn crypto by investing in traditional finance. There are companies in the stock market whose prices are connected with crypto, and Exchange Traded Funds that invest in crypto.
These assets are regulated by federal authorities, so your chances of investing in a scam are much lower compared to crypto.
If you’re implementing most of the tips we have mentioned, then you won’t need to learn how to spot crypto scams. But, knowing how to spot crypto scams is still a good thing because it’ll further enhance your chances of avoiding crypto scams.
Furthermore, it’ll help you identify which projects to report. The scammers are stealing the hard-earned money of so many people, and they should be reported to federal authorities.
Let’s start with spotting crypto scams.
Spotting a crypto scam is easy when you know what you’re looking for. Here are a few easy ways to spot crypto scams.
Whitepaer: A whitepaper is a professional document that is created to tell investors what they need to know before investing in a project.
It contains information such as the goal of the product, how it’s going to solve it, the protocols of the blockchain, and the roadmap.
Scammers mostly do a poor job of creating a whitepaper. You should compare their whitepaper with a whitepaper of an established project, and if they do a poor job of explaining the product or the figures mentioned in the document don’t add up, then you shouldn’t invest in the project.
Even if the project isn’t a scam, it’s not worth investing into because the creators are not professionals.
Free Items: Free coins or any other free item is a big sign of a scam. Therefore, be skeptical of the projects that offer free items and especially the ones that offer a lot of coins.
Marketing Campaign: The way legit projects and scam projects carry out their marketing campaign is quite different. The goal of the legit projects is to contribute to blockchain technology, and you’ll notice the emphasis on their solutions in their marketing campaigns.
In contrast, the scammers always put their emphasis on profits. The social media posts, content on website, and whitepaper will emphasise say invest in our project and earn huge profits.
Team Members: Last but not least, you should check the history of the team members. The team members must have past experience on at least one legit project, and they shouldn’t be related to even a single scam.
Reporting a crypto scam is quite simple. All you have to do is go to the online complaint form of a government organization, and file a complaint.
Here are links for all the top agencies and regulatory bodies:
- Financial Task Force (FTC)
- Commodities Futures Trading Commission (CFTC)
- Federal Bureau of Intelligence (FBI)
- Security Exchange Commission (SEC)