Cryptocurrencies are full of investment opportunities for new and veteran investors. Nonetheless, where there is money, there are also people looking for ways to take advantage of the unprepared. Crypto scams are a real danger in the digital market of cryptocurrencies, and many scammers have gotten away with their ill-gotten digital assets. So, the question is, How to protect myself from crypto scams? To protect yourself from crypto scams, always do your own research, never trust any promises of big profits, use security measures like VPNs, and never trust offers made through dating apps or websites.
Before embarking on a new crypto investment, empower yourself with knowledge by referring to our comprehensive guide on the most common crypto scams and how to avoid them.
Top 8 Crypto Scams to Watch Out For
Scammers continue to use the same tried and proven tactics from other markets, the difference being that cryptocurrencies are the preferred payment method. Investment scams are one of the main ways that crypto scammers apply to convince people to invest in and buy cryptocurrencies and then send them to the scammers.
Yet scammers also pass themselves as business representatives, government agencies, and even romantic partners, all to take your hard-earned coins. Let’s take an in-depth look at some of the most common crypto scams to look for.
Investment Scams
In this type of scam, promises of “big money” with “zero risks” are made, and the scam usually begins on social media or apps. Of course, these scams can also start via text message, email, or phone call, and in investment scams.
Let’s take a quick look at how scammers apply this method:
- An “investment manager” unexpectedly talks to you, promising to multiply your money, but only if you buy cryptocurrencies and transfer them to their online account. The website you are directed to seems legit, but it’s as fake as their promises. If you log into your “investment account,” you won’t be able to withdraw or transfer your assets, or doing so will require the payment of an elevated charge.
- The scammers pose as celebrities and promise to multiply the coins you send them. Yet, no celebrity is talking to you through social media. If you click on the unexpected link they send you or send your cryptocurrency through a QR code of the supposed celebrity, those assets end up directly in the scammer’s pockets and are lost.
- A “virtual lover” wants you to send money or cryptocurrencies to help them invest. As soon as someone you know through a dating site or app asks for money or offers investment advice, you must know it’s a scammer. The advice and the offer to help you invest in cryptocurrencies are a scam. If you send your crypto or any other form of currency, you will never see them again
- Scammers guarantee your profit or promise highly profitable opportunities. Nobody can guarantee or make those promises, even less so in a short amount of time, and in the world of cryptocurrencies, there’s no “low-risk” option. So, if a company or representative promises you will turn a profit, that’s a scam, even if they are “sponsored” by famous people or have “happy customers” statements. Both can be easily falsified.
- Scammers make huge claims with no explanations or details. Whichever is the investment you are offered, please find out how it works and ask where your money will end up. Investment managers or advisors will be willing to share that information with you and will support it in detail.
One piece of advice that we at PlasBit always give our customers is to do an online search before deciding on investing. Search for the name of the company or person and the name of the cryptocurrency, adding words like “review,” “scam,” or “complaint.”
Dust Attack
In this scam, the objective isn’t stealing cryptocurrencies but information to use in further attacks. By carrying out a massive number of “dust” transactions—that is, transactions of really small amounts—to a specific crypto wallet, the attackers create a “dust” trail to follow and steal the information linked to it: the owner’s real name, email, password, etc. The information they gather is then used for other scams, like blackmailing the victim.
Pig Butchering
This scam is relatively new and mixes a bit of romance scams with a bit of investment scams. First, you receive a message on a dating app or website from someone who is “interested” in knowing you. You start to talk, and trust starts to grow between you two. Then, your “friend” tells you they have a big business opportunity for you or need your help. In both cases, they try to get you to transfer your crypto as an “investment” or as “help.” Once the pig has been fattened (you have sent lots of cryptocurrencies their way), it is butchered (the scammer disappears without a trace with your money). The trust built in the relationship is the main tool of the scammer.
Crypto Recovery Scams
These scams try to take advantage of victims of crypto robberies. The scammers advertise their “crypto recovery” services in ads and social media while fishing around for any victim venting online. Once someone contacts them, they ask for payment in advance for their service, usually through tokens. Once the tokens are transferred, the victim never hears from the “company” again.
Scammers might also pose as police officers and call potential victims with the pretext of “returning” some lost tokens. Then, they follow the same process: ask the victim for a payment before “returning” the money and disappearing.
AirDrop Scams
Airdrop scams are schemes where cyber thieves try to deceive users by offering fake airdrops (fake gifts of coins or tokens). These scams take advantage of the appeal of free tokens to deceive beginners and the unprepared into connecting their crypto wallets to malicious websites, transferring assets to scammers, or revealing sensitive information.
Most airdrop schemes involve some phishing techniques that attract users to fake websites. Some common methods are:
- Scammers create phishing websites that imitate legitimate airdrops and then promote them through different channels, like social media and emails. The objective is to deceive users into revealing sensitive information or connect their crypto wallet. In other words, they attract users by promising free tokens for their participation in the airdrop. Once users show interest, scammers ask for information like wallet addresses or even passwords, all under the pretext of claiming the airdrop.
- Scammers pass themselves as well-known crypto exchange platforms or influential people to amass credibility and lure victims into participating in fake airdrops. Scammers might also hack legitimate social media accounts to exploit their followers or subscribers.
- Be careful if you find assets in your wallet that you never asked or traded for. Scammers might distribute unsolicited cryptocurrencies or NFTs to promote malicious websites. Usually, users might find the scammer’s website when they check their wallets through a block explorer or as part of an NFT image that suddenly appeared in their wallets. Victims might also lose funds when trying to sell or transfer tokens from scammers. If you receive unexpected tokens, don’t interact with them
Ponzi Scheme
The classic and well-known pyramid scheme has also entered the crypto world. Using a combination of manipulation tactics, money management, and investor trust, scammers build a profitable house of cards. First, scammers promote their “project” through social media and websites with promises of big profits in a short amount of time. New investors fund this project and are promised a huge profit percentage after a certain time.
As more people invest, those funds are used to pay the “profits” of the older investors, thus “fulfilling” the project’s promises and creating trust in it. The name Ponzi Scheme comes from Carlo Ponzi, who was not the first to implement it but the first to do it on such a massive scale that the scam now bears his name.
Carlo Ponzi’s structure hit the crypto community hard in 2019, a year in which its implementation caused losses of 4.300 million dollars in cryptocurrencies: over 90% of the estimated scam income.
Rug Pull
Since 2019, the hold of Ponzi schemes has decreased, paving the way for other kinds of scams, like the rug pull. The scam works in a simple yet deceptive way. The scammers launch a new token or project to the market and make alluring promises to attract investors. Those who fall into the trap start investing hard in the project and transfer their cryptocurrencies to the scammers.
Once the scammers decide that enough money has been collected, they suddenly disappear with the money, thus pulling the rug from under the investors’ feet. The impact of this kind of scam shot out in 2021. Its contribution to the rise of crypto scam-related losses is enormous: around 2.800 million dollars from the 7.800 dollars scammers obtained just in 2021. That’s why information and thorough research are key when asking ourselves, “How can I protect myself from crypto scams?”
Pump and Dump
A scam present in all markets, the artificial inflation of the price of an asset is the main focus in this case. Scammers find a low-investment token, then coordinate and start to promote and buy these tokens en masse. This massive demand rises or “pumps” the crypto price, making it more attractive to other investors. When the price is high, the scammers sell their massive amount of tokens, thus flooding the market and causing the price to deflate or “dump” quickly.
The allegations against Elon Musk clearly exemplify how popularity can be considered an illegal tool in financial markets. In 2021, Elon was accused of abusing privileged information and manipulating the Dogecoin token, resulting in losses of millions of dollars.
The investors claimed that Musk used his Twitter account, paid influential people, and used his 2021 appearance on NBC’s “Saturday Night Live” and other “publicity stunts” to create a self-profitable market for Dogecoin tokens in digital wallets belonging to him or Tesla. They also said that Musk’s actions included a massive sale of 124 million dollars worth of Dogecoin in April of the same year.
How to Avoid Becoming a Victim
Now that we’ve discussed the danger, it’s time to answer the central question of this analysis: How to protect myself from crypto scams? Even though scammers get more, shall we say, “sophisticated” in their methods, there are some general guidelines we can follow to avoid better falling into their digital traps.
Guaranteed Profits
Scammers are the only ones who guarantee profits or high turn rates; this is the main attraction tool of investment scammers. Don’t trust anyone who promises you will earn money quickly and easily in the crypto market.
Love or Business
Never mix online dating with investment advice. If you meet someone on a dating site or app, and that person tries to “help” you invest in the crypto market or asks you to send cryptocurrencies their way, it’s a scam.
Beware the Links
Never click on the link from an unexpected text message, email, or message in your social media, even if it seems to come from a crypto project you know. Scammers are good at impersonating people and platforms, so don’t trust any unexpected links.
Thorough Research
Before deciding to invest in any crypto project or offer we receive, we must conduct our own detective work on the people and project. Many victims could have avoided getting scammed by dedicating one or two hours to searching for information online.
Don’t Be Greedy
One of the biggest tools for crypto scammers is human greed. It is the cornerstone of Ponzi schemes, as people fall in love with the quick profits and thus invest more money. As we said, don’t trust promises of big and/or quick profits. And if you see that your money is growing suspiciously quickly, withdraw it as fast as possible.
Increase Your Security
Dust attacks have become less common as the prices of cryptocurrencies go up, making it more expensive for scammers. Nevertheless, using privacy tools like TOR (The Online Router) or a VPN (Virtual Private Network) can help increase your anonymity and avoid getting tracked.
How We Protect You
At PlasBit, the safety and security of our clients is paramount. We value the service we provide with each transaction performed on our platform; as such, we go to great lengths to ensure that every transaction is scam-free. We will act as your bodyguards, making video calls to users trying to complete a KYC to confirm you are not about to get scammed. Confirming their identity through the call and questions related to the usage of our services are part of the process we follow to ensure that every transaction is carried out willingly.
The Biggest Crypto Scams in History
Information is the most important thing when learning how to protect myself from crypto scams, so to give more context to the information we have reviewed, let’s talk about some of the biggest crypto scams in the market. Most of these scams are related to platforms that, at first glance, seemed (or pretended to) carry out legitimate business. On the other hand, others proved to be scams from the get-go. No matter their initial goals, they all proved disastrous for their investors.
OneCoin
With a global reach, OneCoin is widely considered one of the biggest scams in the history of cryptocurrencies. Ruja Ignatova, the “OneCoin Cryptoqueen,” was the engine behind this project, founded in 2014 following the rise of Bitcoin. Ignatova promised that her ecosystem would overtake all the proposals available in 2016, the year an aggressive marketing campaign was launched.
In 2014, Ignatova and Greenwood, her cofounder, started introducing OneCoin to investors in Europe, New York, and around the world. They organized online seminars and conferences in which they encouraged future investors to deposit their funds in an account that would later allow the purchase of OneCoin packages.
OneCoin functioned as a multilayered marketing network, where investors would receive commissions for recruiting other investors to buy OneCoin packages. These packages tended to different income levels, from “beginners” to “tycoon business managers.”
What followed was a shopping frenzy. Between the third quarters of 2014 and 2016, investors gave OneCoin over $4,000 million. The castle started coming down in 2016 when investors found difficulties in selling OneCoin to recover their initial investments.
A year later, OneCoin’s CEO disappeared, and the regulators’ warnings paved the way for deeper investigations by the authorities. The project is estimated to have received between 4 and 19.4 billion dollars, money whose current location is unknown (as is Ignatova’s).
ModernTech
Another infamous pyramid scheme that affected over 32 thousand investors (most of whom were located in Vietnam). The scammers promised monthly return rates of 40% for minimum investments of $1000$ in the ICO of their native tokens. The company claimed to be the official representative of two digital tokens, Ifan and Pincoin, and responsible for their ICOs in Vietnam.
According to ModernTech, Ifan was a digital asset that would work under Singapur’s laws and was destined to be used for downloading albums, live presentations, and ticket buying, a way to connect celebrities to their audience. On the other hand, Pincoin, a project that started in Dubai, was sold to investors as an opportunity that would bring approximately 40% monthly profits.
Suspicions of a scam began when payments started to arrive in tokens instead of legal currency. Unhappy investors rallied in front of ModenTech’s main office in Ho Chi Minh to demand answers from the company and to get their money back. Yet the building owner let them know that the offices were vacated a month prior.
The whereabouts of the ModernTech team are unknown to this date.
Bitconnect
The crypto market has seen hundreds of coins come and go. Some have stayed on their feet since their inception. Other projects died without making much noise. A few were scams, Bitconnect being one of these last few, a Ponzi Scheme whose main claim was super high return rates.
Satish Khumbani, founder of the crypto trading platform Bitconnect, was the mastermind behind the scam, deceiving investors with a loan program that promoted technology that supposedly would guarantee profits when operating with the volatility of cryptocurrencies.
The authorities explained that Bitconnect operated as a Ponzi scheme, paying new investors with money from old investors. According to US authorities, Khumbani operated this program for around a year before terminating it abruptly. After that, Khumbani manipulated Bitconnect’s promoters to deceive and create a fake demand in the market.
Khumbani and his accomplices also hid the location and control of the profits generated in the scam through token trading using Bitconnect’s crypto wallets and international investors.
Khumbani was charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit commodity price manipulation, operation of an unlicensed money transmitting business, and conspiracy to commit international money laundering, facing a maximum penalty of 70 years. Sadly, Khumbani returned to India before he could be convicted and disappeared without a trace.
Conclusion
Practically 90% of losses due to crypto scams are related to Bitcoin, Ethereum, and Tether (according to the FTC). This percentage answers to the popularity of these three cryptocurrencies, the popularity that cyber thieves take advantage of to create fraudulent schemes.
Does this mean that we can avoid scams by avoiding these assets? Not at all. You might lose money by investing in any project. Scammers can get you involved in an illegal investment structure but might also deceive you through a new project with their native token and even their roadmap.
We are not talking about projects that fail due to incompetence, lack of resources, or regulatory pressure. The end result might be the same, and you lose money, but it’s an entirely different circumstance: the objective wasn’t to be involved in a crypto scam. In any case, independent from outside intentions, it is clear that as investors, we must research each project deeply before exposing our money, using review sites such as Trustpilot to find more information before making a decision. The crypto world is dangerous, and every person who owns a crypto is vulnerable; with PlasBit, you can be assured that someone is looking out for you, as we are the best answer to the question of how to protect myself from crypto scams.