What To Know About Cryptocurrency and Scams

Be sure to double-check the background of NFTs, as some people create elaborate stories about artists to increase sales and drive up prices artificially. Romance cryptocurrency scams, like the Pig Butchering scam, follow the same approach, but the funds are requested in cryptocurrency and are much more difficult to reverse. Instead, the scammers load up victims’ accounts and drain them, taking all of the cryptocurrency for themselves. Let’s start by taking a closer look at 14 of the most common crypto scams to watch out for. Cryptocurrency and Bitcoin scams can jeopardize your finances and put your identity at risk if you aren’t aware of the ways that people can try to take advantage. Keep reading to learn more about these scams and tips to avoid cryptocurrency fraud.

Cryptocurrency Scams: How to Spot, Report, and Avoid Them

Act fast to minimize the impact on your investments and increase your change to recover lost funds. Always do your own research — it’s your best defence against fraudulent crypto investments. Identify credible sources and evaluate risks before making any investment decisions. Phishing scams are a classic trick that can target your crypto wallet and email accounts to make you give sensitive information, like private keys, to scammers.

What Are the Biggest Cryptocurrency Scams?

Investigate how transparent exchanges are about their liquidity and ICO rules—a sign of a reliable company. You should also verify if an exchange uses blockchain technology, which helps secure your transactions. It’s important to not underestimate crypto scammers and their devious tactics. Scammers attract investors to a project, then withdraw all funds and abandon the project, leaving investors with worthless tokens.

Frauds Using Romance

Research thoroughly and be wary of projects relying heavily on celebrity endorsements. There are different types of wallets, including digital and hard­ware wallets which offer different levels of security. Do your research and choose the type that suits you best and keep your crypto assets safe. Your digital wallet is the doorway to your crypto­currency account, so its security is paramount for your crypto account. Researching the team behind a crypto­currency project also gives you valuable information.

How Is A Cryptocurrency Exchange Different From A Crypto Wallet

Joe Greenfield, the chief forensic examiner at the investigative firm Maryman, strongly urges investors not to take anything at is bitcoin a ponzi scheme face value. If someone is asking for money through unexpected messages or promising unrealistic returns, there’s a high chance they are a crypto scammer. Always do your research and be sceptical of messages that seem off or too good to be true. White papers are crucial for assessing a crypto­currency project’s legitimacy. A good white paper explains the project’s protocols and functionality in detail. Fraudulent ICOs often have poorly written white papers with fabricated details to mislead investors.

Blackmail scams

Scammers will falsify documents and fabricate account statements to keep the scheme going and recruit more investors. Curley says scam victims will also need the help of an attorney or law enforcement if they hope to recover some of their funds. Once an investigation finds a wallet on an exchange with the stolen funds, the exchange needs a subpoena order to release private information about who owns the wallet.

Norton 360 with LifeLock Select can help protect your devices and personal information from scammers and stop malicious software before it can do harm. And the built-in Dark Web Monitoring feature will alert you if your data appears on the dark web, where criminals can use or purchase it. Get Norton 360 with LifeLock to help protect your personal data against scams and keep your identity safer. Between October 2021 and August 2022, nearly 46,000 people lost crypto assets totaling $1 billion. Here are a few more trends indicated top 10 most popular programming languages in 2022 by data and some key takeaways about how these scams work.

One of the most common red flags in crypto scams is the promise of guaranteed profits or high, consistent returns. No legitimate investment, especially in a market as volatile as cryptocurrency, can assure risk-free gains. Scammers often entice investors by claiming their project offers fixed daily or weekly returns, sometimes reaching unrealistic percentages like 10% per day or 100x gains in a month. Be skeptical of any project that presents itself as a surefire way to get rich quickly—it’s almost always a trap. The cryptocurrency market’s rapid growth has attracted sophisticated scammers who exploit its decentralized nature to defraud users of billions.

If you suspect a crypto­currency scam, contact relevant authorities immediately. Also we advise to report to organizations like the Internet Crime Complaint Center checking your browser before accessing cryptopay me and the Commodity Futures Trading Commission to support their investigations and prevent further fraud. Legitimate projects focus on solving real problems rather than relying on celebrity endorsements.

Because cryptocurrency exists only online, there are important differences between cryptocurrency and traditional currency, like U.S. dollars. Between August 2021 and August 2023, the number of cryptocurrencies available worldwide grew by over 3,000. When this happens, the Federal Trade Commission (FTC) advises that you ignore the scammer’s threats and report the crime to the FBI . If you cannot find one of these documents on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) System, the ICO has not been registered. In this case, it’s best to wait and see what happens because the issuer isn’t following the rules, and it might be a scam.

Once someone logs in or pays money to these websites, they might find it impossible to recover their lost funds. Always verify the validity of any site before entering sensitive information into it. But once you complete your transaction, the offer never comes to fruition, and you don’t see your money again. You might equate these types of cryptocurrency scams to multi-level marketing schemes or Ponzi schemes. They’re called pig butchering scams because the butcher (the scammer) fattens up their account by getting you to invest more money over time before disappearing. Crypto scams are fraudulent schemes that aim to steal crypto­currency or personal information.

Cryptocurrency is stored in a digital wallet, which can be online, on your computer, or on an external hard drive. A digital wallet has a wallet address, which is usually a long string of numbers and letters. If you buy from a trusted exchange, use a safe wallet, and do everything you can to spot and avoid scams, crypto is generally pretty safe. But because the industry is unregulated and the value of cryptocurrency changes so much, it’s not as safe an investment as you may be led to believe.

• There’s also no such thing as an exchange requiring you to send in a fee in order to withdraw your money.
• Reporting crypto­currency scams helps authorities track down scammers and fight fraud and protect other investors from further fraud.
• Dealing with scammers and their slew of cyberattacks shouldn’t be a part of the equation.
• These scams rely on psychological manipulation and can be devastatingly effective.
• For further perspective, in early 2023, the International Monetary Fund found that trillions of dollars of value in cryptocurrencies have been lost following platform collapses.
• Yet, anyone who’s studied these periods knows that many, if not most, speculators lost it all while trying to strike it rich.

Romance scams pull on victims’ heartstrings by way of social engineering tactics. Cybercriminals play the part of an online love interest and gain a victim’s trust before asking them to send money. A rug pull occurs when project developers abandon a project and run away with investor funds.

Employment scams

There are thousands of cryptocurrencies, and each type provides different ways to purchase and store it. The most successful ICOs and cryptocurrencies were fueled by early speculative investing. The lure of getting rich quickly is probably older than recorded history, and the outcomes were likely the same.

• “It’s really, really hard for probably 90% of the population to identify or even be in tune with,” she said of the sophistication of some scams out there.
• Platforms market to retail buyers and investors to get them to contribute upfront capital to secure an ongoing stream of mining power and rewards.
• For example, some scammers create fake websites for ICOs and instruct users to deposit cryptocurrency into a compromised digital wallet.
• Especially if they’re unsolicited, urgent payment requests are a major red flag of cryptocurrency scams.
• To protect your crypto assets, it helps to know when and how you’re being targeted and what you can do if you suspect that a cryptocurrency or any communications related to it are a scam.
• Use blockchain explorers and smart contract analysis tools to review code before investing.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. As of the date this article was written, the author does not own cryptocurrency. For many people, the mad rush into cryptocurrencies has evoked a sense of the Wild West or Gold Rush eras, when it was believed there were limitless possibilities for enrichment. Yet, anyone who’s studied these periods knows that many, if not most, speculators lost it all while trying to strike it rich. Scammers are always finding new ways to steal your money using cryptocurrency.

In 2023, crypto-related fraud losses rose to $5.6 billion, an increase of 45 percent from the previous year, according to the FBI’s 2023 Cryptocurrency Fraud Report . Legitimate ICOs will do everything they can to assure you they are real, from registering with regulatory agencies to publishing pitchbooks and having verifiable backgrounds. Cryptocurrency will neither be airdropped into your wallet by legitimate companies nor hurry you into making a decision. A pitchbook is a marketing document that outlines what a project or venture is setting out to accomplish and how it plans on doing it. It discusses the competitive environment it faces, its competitive advantages, its initial valuation, and more.