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17 Cryptocurrency Investment Scams You Must Know About

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The seemingly unstoppable bull run of 2021 has seen Bitcoin regularly reach staggering new highs while taking a whole clutch of other cryptocurrencies along for the ride. The price peaks have been spurred on by increasing institutional investment and the adoption by big-name investors like Elon Musk.

This has brought a flood of brand new retail investors into the crypto sphere, and with it, an explosion in the number of scammers, ready to take advantage of naive new investors. Luckily, we’re here to help and have covered the top 17 crypto scams both new and old investors need to be aware of.

Social Media Scams

Social media is plagued with crypto scammers. One of the most common tricks is for untrustworthy parties to spam tweets and Instagram posts with various crypto hashtags, or pretend to be popular exchanges. The posts will promise free signup bonuses or advice, but will actually contain a malware link. We’d never recommend clicking any suspicious links or engaging with social media accounts unless you can 100% verify the identity of the poster.

Social Engineering Scams

More sophisticated than spam or phishing attacks, a social engineering scam will use psychological tricks to part you from your cash. Hackers will attempt to steal passwords to your cryptocurrency exchange account or pretend to be your online wallet provider in order to get you to hand over information.

In a more blunt form of this scam, the perpetrator will claim to have compromising images of you taken from your webcam and will threaten to release them unless you hand over your precious Bitcoin. Don’t fall for this, and never click on links from unknown addresses.

DeFi Rug Pulls

DeFi is short for ‘Decentralized Finance’ and is an umbrella term for a number of cryptocurrency financial applications. The rug pull scam operates when an organization will lock in your crypto funds over an agreed time period in a smart contract, with promises of a large payout at the end.

While many of these schemes are set up by legitimate actors, they tend to be riddled with vulnerabilities that can be exploited by hackers. When the contract ends, you can find your account has been emptied. If you want to invest in a DeFi smart contract, make sure it’s undergone a full security and vulnerability audit and has a trusted track record.

Fake Bitcoin Exchanges

In most countries, you’re required to buy your Bitcoin from a regulated exchange. Fake organizations might try to lure you in with the promise of zero fees, or the chance to buy crypto at cheaper than market rates. However, once you’ve handed over your cash, you’ll find the exchange has disappeared only a few months later.

Always check that your chosen exchange is fully registered and regulated, and check out online reviews to confirm its validity before you sign up.

Fake Cryptocurrencies

Just about anyone with basic coding skills can create a brand new cryptocurrency from scratch. Scammers will often launch a new coin with promises that it’s going to be the next big thing, or guarantee that you’ll double your investment within a month. Some even offer the chance to win prizes if you buy a certain amount. Fraudsters will target users via email campaigns and social media posts, and once they’ve ‘sold’ enough of their coins, you’ll never hear from them again.

If it sounds too good to be true, it probably is. Always do your due diligence before investing and verify the names behind the project.

Malware

A fairly simple, but all too common Bitcoin scam. Malware is one of the oldest types of cyberattacks and it’s adapted to exploit vulnerabilities in the crypto space. Hackers will attempt to gain access to your online wallet, scan your device for your crypto addresses and even replace the destination address for payments with their own.

Make sure your device antivirus is fully up to date, never touch suspicious attachments and only download programs from legitimate platforms.

Imposter Websites

This is actually quite a sophisticated level of scam where imposters will mimic legitimate websites like exchanges and crypto wallet providers. Designed to look identical to the real thing, users are tricked into entering personal data and financial details.

Red flags to watch out for include: pressure to deposit funds quickly, unsolicited emails with links to the fake site and excessive communication or spam. Always check the URL too in order to ensure it’s legitimate.

Fake Mobile Apps

Similar to imposter sites, fake mobile apps will impersonate real exchanges in the iOS and Google Play stores. Once downloaded, these will farm your data and take payments to a fake account. Thankfully, Apple and Google are pretty good at filtering out the fakes, but if you use another app store, you might find yourself more at risk.

Many of the fraudulent versions will have slightly different names to their legitimate counterparts, and again, you may find yourself pressured to make purchases if you download one.

Bad Tweets and Other Social Media Updates

The majority of cryptocurrency scams on Twitter and other social media platforms come from fake accounts. Some might pretend to be famous influencers, while others might be pretending to be a development firm promising big returns. Most will offer links to click or websites to visit where you can invest in certain projects. We’ll stress again, don’t click on social media links, and don’t trust deals that are too good to be true.

Scamming Emails

Email scams might just be the oldest type of cyber attack there is. They’re usually relatively easy to spot and can include blackmail tactics, get rich quick schemes or simple messages to get you to click a ransomware link. Most email platforms these days are pretty effective at blocking out this type of mail, but if any do sneak through, we’d recommend reporting it as spam and deleting it. Never trust any message from unsolicited sources or unknown parties.

Phishing

While the most popular type of phishing attacks are still via the mass email campaigns we’ve mentioned above, there are other types of attacks to watch out for too. Spear phishing for example will attempt to build up a detailed user profile, gathering info on you such as name, address, bank details and date of birth. It’s quite rare to see individuals targeted, but you can protect yourself by using two-factor authentication and complex passwords for all of your online accounts.

Fraudulent ICOs

ICO stands for ‘Initial Coin Offering’ and will be used when new crypto developers are looking to raise funds to create a new coin, develop an app or launch a new service. It’s estimated that a staggering 80% of ICOs are fake, making it incredibly difficult to find genuine ones. Scammers will usually tout their offering as the ‘Next Bitcoin’ with seemingly unbelievable returns. You’ll instead be forking over money for nothing.

If you’re new to the world of crypto, we’d recommend keeping your distance from ICOs. Experienced investors should do full due diligence on any project before handing over cash.

Bitcoin Blackmail Scams

We’re seeing an increasing number of blackmail scams popping up as fraudsters see opportunities to capitalize on people’s fears. Scammers will claim to have juicy personal information on you such as details of an affair you’re having, evidence of your logins to your PayPal account or claims to have video footage of you from your webcam. The message then demands you send money to a Bitcoin address or your secrets will be revealed to your full list of contacts.

In the vast majority of cases, these will be scammers simply taking a chance, sending thousands of emails and hoping one sticks. These can be safely ignored.

Impersonation Giveaway Scams

The most common impersonation scam will be someone setting up a fake social media account of somebody famous, which will then tweet or post with offers of an investment opportunity. Others will promise bounty rewards or airdrops of Bitcoin for the first sign-ups. However, each link only leads to a fraudster’s account.

Platforms themselves can also be subject to attack, as seen back in July 2020 when a number of high-profile Twitter accounts were compromised. Hackers used the official accounts of Barack Obama, Bill Gates and Apple among others to scam users out of more than $100,000 worth of Bitcoin. Never click on any links, and don’t trust anything that’s too good to be true.

Ponzi or Pyramid Schemes

Ponzi schemes are related to the fraudulent ICOs we mentioned earlier, but work a little differently in that early investors will actually see some initial payouts. Investors will be asked to stump up large sums of cash to purchase a brand new coin and will be rewarded with money brought in by new investors a few weeks or months later.

The initial participants (having seen some good returns) will now be convinced the project is a success and will encourage others to join, as well as putting more of their own money into the scheme. Eventually, the scammers shut it down and make off with the profits. These are pretty easy to spot and you should avoid any new offering that pressures you to recruit fresh investors.

Mining Scams

Bitcoin and all other cryptocurrencies are ‘mined’ via the solving of complex mathematical equations. Individual users can contribute to this process by signing up for a cloud mining service, lending the computing power of their device to the mining operation. Once equipment and electricity costs are taken into account, though, your profits will generally be quite small these days and it’s just not worth it for most.

However, scammers have now stepped in to take advantage of naive investors that don’t know the pitfalls of crypto mining, promising huge returns. These are often just fronts to steal data or will come with multiple hidden fees. If you’re new to crypto, we’d recommend staying away from any sort of mining activity altogether.

Pumps and Dumps

As we’re still in the early days of crypto development and investment, many coins share characteristics with speculative investments, leaving them open to market manipulation. A pump and dump scheme involves a group of coordinated buyers purchasing a particular coin in large quantities, usually smaller altcoins with very small market caps in order to hike the price up.

The scammers will then promote the coin across social media, driving many newbies to invest in the hopes of getting rich quickly. Once the price has been sufficiently inflated, the organizers will dump their entire holding and cash out. This then crashes the price for those that invested late, leaving them with worthless coins.

Keep your eye out for low-market-cap coins that experience a sudden jump in price, and be very wary of social media accounts promoting such products.

How Can You Get Your Money Back After a Cryptocurrency Scam?

If you’ve lost money to a crypto scam, don’t lose hope. While it might feel like the industry is a little like the Wild West, there are multiple ways to recover your investment. Here at PayBack, our team of legal experts specializes in cryptocurrency scam recovery and you’ll be assigned a caseworker to investigate every possible avenue for getting your money back.

A popular method of recovery is to use chargeback, in which banks and card providers can reverse any payments made via your credit or debit card. Payback will conduct a detailed investigation into your case, identifying the scammers, alerting the relevant authorities and using every legal channel available to get you refunded.

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