Cryptocurrency scams can occur when a person transfers money or cryptocurrency to a criminal, typically never seeing it again. Scammers may impersonate trusted entities such as government agencies, banks, credit card providers or even celebrities.
For example, fake celebrity social media accounts will promise to multiply any cryptocurrency you send them. However, you’ll actually be sending your cryptocurrency to a scammer who will pocket it and then disappear.
- Social Media Scams
Social media platforms like Facebook, Instagram and messaging apps like WhatsApp and Discord are breeding grounds for scams because they don’t have ID requirements. These scams often promise bitcoin giveaways and encourage victims to make a payment in exchange for the cryptocurrency, essentially stealing the money from their wallets without anyone being able to reverse the transaction.
Another popular scam involves fraudsters who contact investors and claim to be seasoned “investment managers.” They may offer to help them make millions through cryptocurrency investments, but they’ll often require an upfront fee. This is known as a “pump and dump” scheme, which can lead to major losses for victims.
Fraudsters also target crypto traders by posing as call center representatives and asking them to provide personal information, including passwords and private keys. This is a type of phishing scam, and it’s one of the most common ways that hackers can steal digital assets. They can also use phishing emails to gain access to an investor’s cryptocurrency wallet and steal their funds. Romance scams are a growing threat, and they often involve the use of crypto, particularly non-fungible tokens (NFTs). These scams exploit the popularity of these assets by luring victims with promises of lucrative returns.
- Bot Scams
Taking advantage of the crypto boom, scammers are employing many of the same tactics as traditional fraudsters to steal users’ crypto. For example, scammers using a livestreaming platform to market a fraudulent promotion often ask victims to move their cryptocurrency investments to an external wallet to “verify their address.” This action allows the scammer to gain access to the two-step authentication codes needed to open a victim’s crypto account and transfer funds to their own account.
In investment scams, smooth-talking scammers pose as seasoned investment experts promising high returns on their projects and convince victims to send them their cryptocurrency. These scams also include ransomware, where the attacker encrypts the user’s files and demands a ransom payment in crypto assets.
Other cryptocurrency scams include liquidity mining, where the scammer moves your crypto to an exchange and uses it to make fake trading profits on a false blockchain dashboard. This type of scam can cause significant losses. Also, beware of spoofed customer support numbers. Scammers can use these to impersonate your bank or other major services and ask you to provide confidential information. A good way to protect your crypto is by using a hardware wallet.
- Unsolicited Investment Opportunities
Fraudsters often target unsuspecting investors through websites, newsletters, and phishing emails filled with misinformation. Smooth-talking scammers pose as seasoned investment experts and promise high returns on investments made through their fraudulent crypto trading platform, which is designed to appear legitimate (even producing artificial gains).
Another popular crypto fraud involves “rug pull” scams, in which the perpetrator lures victims into investing in a new cryptocurrency project, nonfungible token, or coin by pumping up its value and then disappearing with their funds before completing the project. The coding in these investments prevents victims from selling their coins, so they’re left with worthless assets.
In addition to investment scams, fraudsters can also try to steal a victim’s private crypto keys by hacking their devices or downloading malware on them. The turbulent cryptocurrency scene should put everyone on high alert, and it’s always best to err on the side of caution when making any digital investments or transactions.
- Ponzi Schemes
Crypto scam recovery often mimic more traditional financial frauds, such as phishing scams and identity theft. The goal is to gain access to a victim’s personal information or crypto wallet, where valuable digital assets like non-fungible tokens (NFT) can be transferred.
Ponzi schemes are especially common in the cryptocurrency space, with operators promising high returns to entice new investors. The scheme essentially works by “robbing Peter to pay Paul,” with new investments paying for the previous ones until the bubble bursts and the operator disappears with the funds.
Other popular crypto scams include business, government, or job impersonation scams, where perpetrators pretend to be from a reputable online source to convince users to send them money via crypto. Then, once they receive the payment, the scammers turn around and sell their crypto for profit or use it to fund further fraudulent activities.
Another form of crypto scam involves stealing the victims’ private keys from their crypto wallets. These scams can be averted by using security tools that protect wallets against unauthorized access. It’s also important to do thorough research before investing in any crypto project.
- Fake Celebrity Endorsements
Celebrities often endorse products and services, but they also can be used to promote fraudulent investment products or NFTs (non-fungible tokens). For example, a fake celebrity endorsement scam uses an actor’s image or likeness in ads to trick viewers into making a cryptocurrency purchase. These ads are typically accompanied by a fake news article that is meant to bolster the legitimacy of the bogus product, per the New York Times.
For instance, the Times reported that actresses over 40 tend to get targeted in these fake articles and ads, which claim that the celebrity endorser makes a certain percentage of the sales from click-throughs on links to an e-commerce site selling the product. The celebrities involved in this type of scam are usually uninformed or unaware that they’re participating in a pump-and-dump scheme.
In addition to using celebrity images, scammers also create fake websites and social media accounts to give their bogus ads more credibility. This includes compromised Facebook accounts such as this one that’s being used to spread a fake “Metacoin” cryptocurrency scam.