Crypto Scams to Watch Out For

Hey there, crypto newbie! Welcome to the wild world of cryptocurrencies. While I’ve got your attention, I need to ask a favor. You see, all of my funds are tied up in locked positions right now, and I’d really like to make this move, which is a surefire win. So, if you lend me one ETH right now, I’ll send you two ETH next week!

Pretty good deal for you, right?

Except it isn’t. This is a common crypto scam. 

While crypto is an exciting place with lots of opportunities, it’s also filled with some sneaky folks who are out to scam you. Crypto scams are fraudulent schemes designed to trick you into handing over your hard-earned money or digital assets. 

Knowing about these scams is an important step in protecting yourself and your investments. Let’s break down some of the most common crypto scams.

Affinity Scams 

Affinity scams are where fraudsters exploit your trust in a group or community you belong to. These scammers often pretend to be part of the same group, making it easier for them to gain your trust and trick you. 

For instance, they might join a crypto forum or a social media group you’re part of and then pitch fake investment opportunities.

This is a really common scam on Telegram and Discord. Scammers pose as team members or moderators, ask for your seed phrase, and then drain your wallet. 

Never give your seed phrase out, and keep in mind that most communities have a policy of never DMing a user first. They wait for you to DM them.

How to Avoid Affinity Scams

• Do Your Research. Always verify the credentials of any investment opportunity or person offering financial advice. Check for reviews and feedback from multiple sources.
• Be Skeptical. If something sounds too good to be true, it probably is. Always question high returns with low risk.
• Stay Informed. Regularly update yourself with news and alerts about common scams targeting your specific groups.

Bait and Switch Scams

Bait-and-switch scams involve scammers luring you in with a fantastic offer and then replacing it with something less valuable or even worthless. 

In the crypto world, this often happens with fake initial coin offerings (ICOs) or phishing emails promising lucrative returns.

Real-Life Scenarios

Imagine getting an email promising a new cryptocurrency with 100% guaranteed returns. You click the link, invest some money, and then discover that the cryptocurrency doesn’t exist. That’s a classic bait-and-switch!

While most of these emails will find their way into your spam box, always check with any centralized exchange to make sure they sent the offer. Sometimes, Binance, Coinbase, and others will send out promotional emails.

How to Spot and Avoid These Scams

• Check URLs. Always double-check the website URL to ensure it’s legitimate. Scammers often create fake websites that look almost identical to the real ones.
• Avoid Clicking on Suspicious Links. If you receive an email or message from an unknown sender with a link, don’t click it. Instead, go directly to the official website to verify the information.
• Use Trusted Platforms. Stick to well-known and reputable exchanges and platforms for all your crypto transactions.

Pig Butchering Scams

Pig butchering scams involve scammers “fattening up” their target over time before making the kill. 

These fraudsters build a relationship with you, often posing as love interests or business partners, and then gradually convince you to invest more and more money. Once they’ve squeezed out as much as they can, they disappear with your funds.

Relatable Analogy

Think of it like a farmer fattening up a pig before slaughter. The scammers “fatten you up” by gaining your trust and making you feel comfortable, only to “butcher” you by taking all your money.

How to Stay Safe from These Scams

• Don’t Rush. Never rush into any investment decision, especially if someone is pressuring you. Take your time to research and consult with trusted advisors.
• Know Who You’re Dealing With. Be cautious about sharing personal or financial information with someone you’ve only met online.
• Watch for Red Flags. Be wary of anyone who avoids face-to-face meetings or provides vague answers to your questions.

Pump and Dump Schemes

Pump and dump schemes are a common type of market manipulation in the crypto world. In this scam, fraudsters artificially inflate the price of a cryptocurrency by spreading false hype and then selling it off at a profit, leaving unsuspecting investors with worthless coins.

How It Works

The scammers typically buy up large quantities of a lesser-known currency and then promote it to their followers or through fake news articles. As the price rises, they sell off their holdings and cash out, leaving others with overpriced coins.

Unfortunately, most of these scammers are the teams of new projects. It’s so common that it has practically become a meme. Some investors have made a lot of profit by getting into early projects, knowing they were likely a pump-and-dump, and then trying to get out before the team does what’s called a “rug pull.” 

It’s become gamified scamming, and it is not recommended. You have a 99.9% chance of losing.

How to Avoid Being a Victim

• Do Your Due Diligence. Always research before investing in any cryptocurrency. Don’t rely on hype or blindly follow influencers’ advice. That being said, any new token will be a risky investment with a high failure rate.
• Don’t FOMO. Be wary of sudden price spikes, and don’t let your fear of missing out (FOMO) push you into making impulsive investment decisions.
• Diversify Your Portfolio. Invest in various cryptocurrencies to mitigate the risk of pump-and-dump schemes affecting all your investments. Sticking with “blue chips” like ETH, BNB, and BTC is also a good play.

Fake Wallets and Exchanges

Fake wallets and exchanges are another common type of crypto scam. Although these websites or apps may look legitimate, they’re designed to steal your login credentials and private keys.

How is this a thing? The legitimate teams and owners are actually to blame here. Most crypto websites are pretty basic on the front end. So a scammer must copy a website, register a similar domain name, and buy some cheap links to beat the real website in the rankings.

The user goes to the site they think is legit, signs in to their wallet, permits the site to access funds, and then they’re gone.

This happens way too often, and it shouldn’t even be possible. But it will continue to happen until teams take their websites a bit more seriously.

How to Protect Yourself

• Double-Check URLs. Always verify the URL before logging into any wallet or exchange. Scammers often create fake versions of popular sites with similar-looking URLs.
• Use Multi-Factor Authentication. Enable multi-factor authentication (MFA) whenever possible to add an extra layer of security to your account.
• Read Reviews and Use Trusted Sources. Before downloading a wallet or exchanging platform, read reviews and stick to reputable sources.

Knowing the Scam Is Knowing How to Avoid It

Navigating the cryptocurrency landscape requires vigilance and a keen sense of awareness to avoid falling victim to the scams that are running amuck in the space. 

The potential for deception is ever-present, from phishing emails and fake ICOs to more elaborate pig butchering schemes and pump-and-dump strategies. By following the best practices we mentioned today, you can minimize the risks associated with these scams. 

Take the time to research any investment thoroughly, and don’t fall prey to high-pressure tactics or the fear of missing out. In a rapidly evolving digital world, staying informed and cautious is your best defense against losing hard-earned money to cryptocurrency fraud.