A Comprehensive Guide to Understanding Crypto Scams Types

Bad actors behind crypto scams are responsible for huge annual losses that investors and projects incur annually. The vulnerability to crypto scams mandates the implementation of viable strategies to shield one from crypto scammers. 

Crypto is a major target for scammers who leverage the emerging technology. They also leverage the general public’s lack of knowledge regarding blockchain tools to position themselves as leaders or professionals in the space.

This guide focuses on the most prevalent scams and how to spot them.

Types of Crypto Scams

Bitcoin Scams 

An example of a common scam is phishing. In this case, the hacker impersonates a genuine-sounding service, firm, or person and tries to deceive victims into disclosing their private keys.

People should avoid being tricked by verifying all senders’ email addresses and ensuring the sites they are linking to are authentic. Mostly, phishing email addresses slightly misspell a real site or transfer a person to a site containing identical errors, such as coinbase.com, rather than coinbase.com.

An excellent habit to prevent moving to malevolent websites is bookmarking authentic sites utilized for crypto and solely utilizing the bookmarks when accessing the sites.

NFT Scams

An example of a scam unique to the nonfungible token (NFT) entails fakes and forgeries. In case an NFT project, for instance, Bored Ape Yacht Club, starts rising in value, scammers target persons seeking to ‘ape.’

The scammers make copycat collections, occasionally stealing the original art and cloning projects to imitate the real and valuable ones. Occasionally, a blue-chip project nonfungible token becomes listed for a bargain-basement price. Hence, in case an NFT for the same is far below market rates, there is a probability that it is a fake.

OpenSea, an NFT marketplace, confirms a collection’s or artwork’s authenticity using a blue checkmark. One can also verify an NFT’s previous ownership and sale.

Social Media Crypto Scams

Most crypto scams stem from social media, particularly Instagram and Twitter. A 2022 report by the U.S. Federal Trade Commission revealed that almost 50% of those who reported losing crypto to a scam in 2021 claimed it began with a post, ad, or message on a social media platform. 

An example of a scam unique to social media originates from YouTube. It involves people setting up fake livestreams to trick viewers out of their crypto.

To avoid being duped, people should always confirm the channel’s history, including when it began and the other videos posted.

Ponzi Schemes 

According to several critics, crypto is a ‘Ponzi scheme.’ A Ponzi scheme refers to financial fraud where the investors are lured by the promise of supernormal returns. It does not do this by investing the received money but rather by payouts allocated to early investors using funds from the latest investors. 

Crypto is a major target for Ponzi, which primarily depends on an ‘expert with significant information on a new and intricate technology. A Ponzi scheme’s major warning indicator is ‘definite’ returns.

If a person is promising significant guaranteed returns, it means that it is a scam.

Rug Pulls

Nonfungible tokens and decentralized finance are particularly vulnerable to rug pulls. Fraudsters can make a crypto token and have it listed on a decentralized exchange without undergoing any code audit or background check. 

Recently listed currencies mainly experience price increases, and eager investors might not do adequate research on the projects. After feeling the price has peaked, the fraudulent crypto projects’ founders disappear with the investors’ funds.

To avert rug pulls, one should research by thoroughly evaluating new NFT or cryptocurrency projects, particularly reading the white paper and determining the founders. Lack of an earlier record or white paper should be a warning sign.

Crypto Romance Scams

A con artist creates fake profiles on dating sites or social media platforms to lure targets. After knowing the victim, the scammer turns a conversation to Bitcoin or other cryptocurrencies and persuades the individual to invest some money in the token.

After some time, the scammer cuts links with the victim and disappears with the money. To avoid crypto romance scams, one should be cautious of requests from people they have not met in real life. 

A common warning indicator is someone refusing to meet via video conferencing apps or face-to-face. 

End Thoughts 

Crypto is a major target for scammers who leverage the emerging technology. It is necessary to understand that bad actors are inspired to leverage the inadequate awareness of blockchain tools to deploy various crypto scams.