The 5 Biggest Crypto Scams 

Crypto scams are on the rise. The growing adoption and increasing number of cryptocurrency users make for an attractive and lucrative domain. Impressive creativity and unyielding persistence of crypto scammers plagues the industry and robs users of their hard-earned money. 

In 2021, based on US data, there was a 12-fold increase in the instances of crypto scams, losses were up around 1.000 %. Unfortunately, crypto scams account for the majority of investment-related fraud on the internet, further feeding crypto critics who only see it as a means to promote crime and fraud.  

How to stay safe from crypto scams? Caution and awareness are key. That’s why we cover the most common crypto scams and how to prevent them. 

Cryptocurrency scams make up the largest part of financial scams on the internet. This is a sad fact revealed by a 2021 report by the US Federal Trade Commission (FTC). Worldwide, blockchain analytics firm Chainalysis estimates that crypto scammers made over 14 billion US dollars in 2021 alone (7.8bn in crypto scams, 6+bn in hacks). 

Why is that? Why are crypto scams so popular with fraudsters around the world? It comes down to the characteristics of blockchain: decentralization, immutability and pseudonymity.  

  • Decentralisation makes sure there is no centralized entity that could stop or reverse a payment transaction to a scammer.  
  • Immutability makes sure that all crypto-transactions to scammers are irreversible and final (as opposed to payments between bank account).  
  • Pseudonymity of crypto wallets makes it so that the real identity of a scammer is not revealed. With decentralized wallets, an owner’s identity is unknown; hence, neither victim nor police will be able to find out who the scammer was. 

Plus, there are two more reasons: greed and the lucrative nature of crypto-scams.  

  • Greed and impatience are rampant in the crypto space. In their desire to “get rich quick”, many users will not do the due diligence as they would normally do with any investment.  
  • Lucrative nature of scamming: When a scammer gets access to a user’s backup/seed phrase/private key, he can empty the entire wallet within a few seconds. 

The Most Common Crypto Scams Revealed 

Having discussed the reasons for the popularity of crypto scams, let’s discuss how they usually work and how to stay safe from them. Broadly speaking, there are two types of crypto scams: the first one is accessing your crypto wallet, the second is receiving bogus payments.  

  • Accessing your crypto wallet: Most commonly, crypto scammers will try to get you to reveal your private key or backup seed phrase. That way, they can access your wallet and steal all of your funds within seconds, hence making this a highly attractive scheme.  
  • Receiving bogus payments from you: Similarly equal are schemes where scammers try to get you to make a transaction to their crypto wallet. In exchange, they make a promise of high return in some investment or a giveaway (e.g. “Send 1, get 5.”). Blockchain transactions are irreversible, hence once the money is gone, it is gone.  

The 5 Most Common Crypto Scams Explained 

While this list is not exhaustive, these are the five most common crypto scams and how they work: 

Romance/Dating Scam 

On online dating websites and portals, scammers will pretend to be a woman looking for romance and love. They will interact with a love interest long enough to earn their trust and learn about their financial resources and background. Meanwhile, they themselves often pretend to have a finance/investment/trading background.  

They may then switch the topic to a lucrative investment opportunity and refer their victim to a website that they should use and invest in. This can either be a scam where account credentials should be shared or a transfer payment to be made. 

Generally, never send money to any person you haven’t met in person. If your chat partner on a dating app moves the conversation towards cryptocurrencies, trying to give you tips or investment opportunities, run for the hills! 

The Multiplier/Giveaway Scam 

“Send one BTC, receive five BTC back!” Sounds like a scam, doesn’t it!? Good, because it is! Surprisingly successful, giveaway scams are among the most popular crypto scams. Often impersonating a celebrity, thought leader or crypto influencer, scammers share posts via fake social media profiles or place video ads on YouTube and other platforms. As a reason why users must pay first, they will usually provide a reason like “to verify the wallet address”.  

Needless to say, the money is gone and there’s no giveaway. We shouldn’t have to say this, but any kind of multiplier giveaway scam is just that – a scam! Anyone who asks you to send something first so you will get more in exchange is trying to scam you.  

Phishing scams 

These scams work by sending phishing emails to a crypto user, asking them to log in and share details on a fake website that is supposed to resemble a crypto exchange or wallet provider that they are a member of. If users login and enter their private key or backup seed phrase, the scammers will be able to obtain that data instantly.  

Users must therefore always check the correct URL in the URL bar of their browser. Scammers will often use an extremely similar URL in their attempt to deceive users and imitate a real website. 

Remote access scam 

With this type of scam, scammers will usually call a person, pretending to be from a reputable firm like Microsoft or crypto-exchanges like Blocktrade. They pretend there is an issue with the person’s account and they would help them fix it. To this end, the scammer needs remote access to the person’s device (desktop, tablet, smartphone).  

The victim is then instructed to download remote access software like TeamViewer or AnyDisk. They instruct the victim step by step until they can gain remote access to the PC. Once this is done, they can gain access to the funds in crypto wallets, emptying them potentially within seconds. Therefore, never allow any person you don’t know to get remote access to your PC smart phone or tablet.  

The Recovery Scam 

In this scheme, scammers contact a previous victim of a crypto scam and promise to have a way to help them recover part or full amount of their previous loss. Before they can recover it, however, the user would have to transfer a “recovery service fee”. 

Of course this is a scam, a scheme to make even more money off of prior scam victims. Blockchain transactions are irreversible, no recovery possible. Scammers love to recontact victims as they have proven to fall prey to the scam. Anyone who promises you a recovery of funds lost through scams is lying and a scammer themselves. 

How to Stay Safe 

We have covered for each discussed scam how to recognize and prevent them. Generally, you can protect yourself from crypto scams if you abide by the following principles: 

  • Never share your private keys or backup seed phrase with anyone: Whoever has access to your private key and or seed phrase can simply restore your crypto wallet and thereby access your crypto-funds and steal them from you. 
  • Check the URL of every crypto-website you use. Always make sure when logging in at a crypto service or crypto exchange that you have typed in the exact URL of the official website. Check for typos or different domain ending. 
  • Allow no one remote access to your device: There is practically no necessity at any time for someone to remote access your device, be it smartphone, tablet or desktop. If a stranger calls you and pretends to need remote access to your device, hang up and ideally report it to the police. 
  • What sounds too good to be true always is. Unfortunately, the crypto world is full of false hopes to get rich quick. Anyone who offers you an amazing investment opportunity with insanely high ROI or even to return a multiple of your investment is a liar. Run for the hills! 

Conclusion 

Crypto-scams are a major pain for the entire crypto-industry. Most importantly, they rob the average crypto-user of their hard-earned money. While the problem is growing enormously in size, this doesn’t have to be the case. Crypto-users must be cautious and use common sense not to fall for these scams.  

If it sounds too good to be true, it most certainly is! If you are promised giveaways or amazing ROIs in return for your money, don’t listen! Don’t send money to anyone you don’t know and never share your private key or backup seed phrase with anyone.  

Always be extremely sceptical and cautious when navigating the crypto-sphere. Be sure to check the URL of any crypto-exchange or crypto-service you use to ensure it is not a phishing website.