5 Common Crypto Scams and Tips to Avoid Them
The last few years have been monumental for cryptocurrency, with coins like Bitcoin skyrocketing to all-time highs. Unfortunately, crypto’s great success has also led to increased instances of people trying to take advantage of those new to the crypto space.
Earlier this year, the US Federal Trade Commission shared that the number of reported crypto-related scams and their dollar amount has dramatically increased, with more than $50 million in crypto lost this year alone.
Being vigilant against scams in cryptocurrency is crucial because all crypto transactions are permanent and irreversible due to the immutable nature of blockchain technology. It is vital to do your due diligence before making any transactions and protect yourself against scams.
Investing in cryptocurrency has its risks, but getting scammed should not be one of them. Below, find five common types of crypto scams and tips on how to avoid falling victim to them.
1. Investment Scams
Investment scams typically begin on social media platforms with unsolicited messages from strangers promising grand opportunities of fast and high returns with minimal financial risk. Then, the scammers might ask you to send cryptocurrency directly to participate in the investment deal with promises to multiply your contribution fast.
Or, they may lead you to a phony yet realistic-looking website to learn more about the opportunity that requires you to submit personal information or send crypto to participate.
If you were to follow through with this so-called opportunity, rather than getting rich quickly, the money you “invested” would never be seen again.
Tips to avoid investment scams
If it sounds too good to be true, it probably is.
Always be skeptical of people promising unusually high returns or grand investment opportunities.
It is doubtful that a legitimate business person will ever cold-contact you via social media and even more unlikely that a stranger will ever be able to help you get rich quickly.
As a rule of thumb, never send any cryptocurrency to someone you have not met in person, no matter how convincing someone online can be.
2. Romance Scams
The romance scam is one of the most common scams to plague the financial services industry, and cryptocurrency is no exception. The Federal Trade Commission estimates that 20% of all romance scam victims lose money through crypto transactions.
Typically, these scams start on dating websites where scammers prey on the good intentions of those looking for love. Scammers pose as potential suitors and spend hours upon hours chatting you up online and occasionally by phone to win your trust.
Then, your love interest starts asking for money. They ask you to send cryptocurrency to save on transfer fees because it is cheaper than traditional remittance services. The requests usually start small and get bigger the more you send. Frequently, these people will make up bogus stories of medical disasters or legal misfortunes to manipulate you into sending more.
Once you catch on to the ways of your nefarious lover, they will ghost you, taking all your crypto with them. These scammers are incredibly well-versed in manipulation and prey on people in some of their most vulnerable moments.
Tips to avoid romance scams
Never send money to someone you have not met in real life, no matter how deep of a connection you feel you have with them online.
Be suspicious of someone’s sudden misfortune, especially if their life seems to be just one unfortunate mishap after another.
Always be skeptical of urgent requests for money, especially if you have only met someone online.
3. Phishing Scams
Another prevalent scam across all industries is phishing scams, where fraudsters attempt to gather your personal information, including name, address, social security number, passwords, and in the case of cryptocurrency - access to your crypto wallet via your seed phrases or private key.
These scams can take many different forms and typically start as emails, phone calls, or texts or could even start on social media messengers or forums. Often, the scammer will impersonate a trusted source and will try to trick you into sharing some of your personal information.
For example, they may try to impersonate a CoinFlip representative and contact you to help you with your digital wallet in some way. They may ask you to fill out a form or ask for ways to access your wallet. Once they have that information, they will take your info and transfer your crypto out of your wallet before you realize what is happening.
Tips to avoid phishing scams
Know that CoinFlip or any other trusted financial services company will never directly reach out to you requesting personal information when you are not expecting it.
If you are contacted by a CoinFlip representative or representative from any other company, immediately reach out via our official lines of communication listed on the company website to verify the authenticity of the request.
Keep an eye out for grammatical errors and spelling mistakes. Scammers often make typos that a legitimate organization would never make.
Double-check the authenticity of any email or website by comparing logos and branding.
Verify if the message is coming from an official company email address.
Avoid clicking on any links in messages.
4. Impersonation Scams
Another common crypto scam centers around impersonation. Scammers will impersonate a government authority, public figure, business (as seen above), or possibly even someone you know. These impersonators often require you to pay in cryptocurrency, despite no US government agency accepting crypto payments.
One version of an impersonation scam is someone pretending to be a government agency like the IRS or a utility company and demanding that you owe money. These scammers will ask you to visit a Bitcoin ATM near you to pay your outstanding fees.
Tips to avoid impersonation scams
Be skeptical of outstanding balances that you are unaware of.
Know that the IRS will only ever contact you by US mail - never by phone or email.
Be suspicious of any business, agency, or person demanding payment in the form of cryptocurrency.
When using a Bitcoin ATM, only use your personal crypto wallet. Never deposit funds into a wallet owned by anyone but yourself.
5. Social Media Giveaway Scams
This common crypto scam combines some of the elements of investment and impersonation scams. Giveaway scams are promoted through social media and appear to be sponsored by celebrities or famous personalities in the crypto sphere and promise to multiply any amount of cryptocurrency sent in. Sometimes this happens through imposter accounts, but other times it is because a celebrity or crypto thought leader’s account was hacked.
Often, these posts have threads of comments from alleged participants who were able to generate high returns from the giveaway in the post. Do not be deceived. These commenters are either in on the scheme or are bots trying to make the opportunity appear legitimate. Unsurprisingly, those who participate in such giveaway scams never see any crypto returns, and the crypto they sent in is lost forever.
Tips to avoid social media giveaway scams
If it sounds too good to be true, it probably is. No celebrity or thought leader will ever send you free crypto.
Do not send crypto to anyone you do not personally know.
Legitimate social media giveaways do not require you to send crypto or any other form of money. Be wary of any giveaway that asks you to pay to play.
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