By Norah ODonnell
Crypto users lost almost $2 billion to rug pulls, scams, and hacks in 2023, and more than $1.4 billion in the first half of 2024.
One of the best ways for users to keep themselves safe is to understand the types of crypto scams out there entirely. From the Ponzi schemes to phishing attacks, scammers use multiple tactics and will keep exploiting them in the future. Thus, users can protect themselves against risks by remaining alert and always staying informed.
Here are the top crypto scams that are plaguing the entire sector.
1. Phishing Scams
A phishing scam is a scam where the criminal sets up a phony website or social media profile or sends fake emails. All these things are done for the sake of acquiring personal information like passwords, identity, and wallet keys, among others.
The scams will mostly mimic renowned and reputable crypto entities, such as exchanges, to make them seem trustworthy to the targeted victims. Any emails or messages users get also seem trustworthy but they ask for sensitive information like login details and private keys.
In most cases, there is the lure of a fantastic deal in the messages, or a request to give out information urgently. Once scammers receive users’ information, they can then steal their digital assets – maybe by draining their exchange accounts on legitimate sites using the information users give them.
2. Romance Scams
Another major scam to look out for is when users are emotionally manipulated. Crypto romance scams are when scammers set up fake profiles on dating sites and other mainstream social media platforms to lure victims into trusting them. They achieve that by building a relationship with unsuspecting users for several weeks or months.
After the scammer feels that the user trusts them, they ask for an investment into a crypto scheme or a crypto transfer. The transfer goes straight into the scammer’s pocket and is not used for the investment. This money that the scammers steal can amount to some eye-watering sums.
Based on AARP, in November 2023, the United States Justice Department and Secret Service retrieved $9 million worth of Tether from the scammers who targeted over 70 victims. A huge portion had been targeted via romance schemes.
3. Impersonation And Giveaway Scams
Notably, scammers increasingly pretend to be influencers, celebrities, and famous companies and promote investment opportunities and giveaways. All of these are fake and here is how the scams are executed:
Fake Celebrity Endorsements
Scammers either create a fake social media profile or hack into a verified account. They will utilize these accounts to help promote phony crypto schemes, including giveaways or investment opportunities, and then claim that a celebrity has endorsed them.
The endorsement will mostly claim there are high returns to be made. On that note, the post asks users to send some crypto to an address, giving them the impression that they will get back to a bigger amount in the future.
Social Media Scams
Scammers set up fake pages, profiles, and groups on platforms like Instagram and Facebook. They then use the pages to promote fraudulent investment schemes and phishing links. In the first half of 2024, fake social media scams, renowned as deepfakes, exceeded $25 billion.
Scammers managed to achieve all that by posting fake testimonials, screenshots, and success Stories of huge profits to lure victims. The links on these posts direct the users to a site that captures the login credentials and private keys.
4. Crypto Investment Scams
Sometimes, scammers design enticing crypto investment schemes that promise high returns with little to no risk. They mostly feature extensive strategies that convince users that their investment is profitable and safe. The most common kinds include pump-and-dump schemes, Ponzi schemes, and fraudulent ICOs and NFTs.
Here is how they operate:
Ponzi Schemes
Ponzi schemes utilize funds from new investors to pay returns to the earlier investors, which creates the illusion of a highly profitable investment. That false success attracts more investors, but ultimately, the scammer runs out of new gullible investors, and the scheme collapses, leaving many participants with huge losses.
While Ponzi schemes exist even today, they were popular in the 2017/2018 crypto boom and came in all sizes and shapes. However, they came mainly as high-yield investment programs (HYIPs).
Pump And Dump Schemes
In pump-and-dump schemes, the scammers artificially inflate the price of crypto via false statements. They purchase a huge amount of low-value and low-volume crypto to do that. Then, they promote the crypto heavily on social media and through many other marketing channels.
Other buyers are attracted, helping drive the price up. The scammer then sells off their holdings at the peak and the price of the crypto crashes, leaving the other investors with worthless coins.
ICO And NFT Scams
Initial Coin Offerings (ICOs) and Non-Fungible Tokens (NFTs) can raise funds for legitimate projects. Nonetheless, scammers exploit ICOs and NFTs by raising money for nonexistent projects. Some of these projects include supposed groundbreaking technology or a distinct digital asset. Investors are duped into investing via fake promotional materials, but when the scammer has collected enough money, they disappear.
5. Blackmail And Extortion Schemes
These schemes operate as they would with traditional money. Crypto scammers blackmail and extort victims, pushing them to pay a fee in crypto. Victims pay because they are scared of what information these scammers hold over them, including personal videos, photos, and financial records.
Scammers threaten to publish the information, mostly with a deadline, unless the victim pays the scammer in crypto.
6. Cloud Mining Scams
These kinds of scams fool the victims by duping them through fake firms that offer mining contracts. The contracts promise profits from crypto mining without the need to own any of the required expensive equipment. Nonetheless, these firms have been set up by scammers who do not have the mining equipment either.
Additionally, they cannot pay the returns promised to the investors. Some mining scams start as a form of Ponzi scheme, paying the initial investors with newer investor money.
7. Fake Crypto Exchanges And Wallets
To steal funds from users, the scammers sometimes create fake crypto exchanges and wallets. These fake platforms mostly appear identical to the legitimate ones, which makes it challenging to distinguish them from the real thing.
They lure victims with attractive offers like high security, low fees, and exclusive features. Yet, when users create an account and deposit funds, the scammers steal the funds and eventually disappear.
In May 2024, two men in the United Kingdom stole nearly £6 million worth of crypto from victims. They replicated the website of Blockchain.com to access victims’ online wallets.
8. SIM-Swap Scams
These are highly advanced forms of crypto fraud. Scammers mostly target users via their mobile number and use it to gain access to their online accounts, including crypto wallets. Scammers can use your number to intercept verification codes sent to messages and can reset passwords. Hence, they can readily access your digital assets.
Scammers normally learn mobile numbers via social media, data breaches, and phishing emails. With that information, a scammer can contact your mobile provider and ask for a SIM swap which is how they will read your messages and bypass any two-factor authentication you have set up on your crypto exchange or wallet.
The Takeaway
With the crypto space evolving quickly, it is important to remain aware of scammers and their cunning and conniving ways of defrauding users. By remaining aware by reading guides and remaining vigilant when investing, users may protect themselves from falling victim. Remaining informed by conducting research is one of the best things users can do before they make any investment decisions.