9 Common Cryptocurrency Scams 2022 and How to Avoid Them | Cryptocurrency Training
According to the Federal Trade Commission, over 46,000 investors have lost a combined total of $1 billion (with a B!) to crypto scams since the start of 2021.
Cryptocurrency represents an industry-shaking opportunity for you to achieve the passive income of your dreams (more on that later). Unfortunately, because of its decentralized nature, it’s also a prime target for investment scammers.
If you want to protect yourself and your investments from scam artists, you need to know what you’re dealing with. Luckily, this training guide will give you an overview of which scams to look out for, how to spot them, and how to protect yourself.
Let’s go!
Common Cryptocurrency Investment Scams
Phishing scams
Crypto phishing scams are some of the most common ploys you’ll encounter in the crypto world. Phishing is the fraudulent act of trying to obtain sensitive information like passwords, credit card numbers, or account details by masquerading as a trustworthy entity in an electronic communication.
Crypto phishing scams can come in many forms. Still, they typically take the form of an email, text message, or website that looks similar to a legitimate crypto exchange or wallet provider. The scammers will then get you to enter your login details or private key on their fake crypto wallet (for example), allowing them to steal your coins.
To protect yourself from phishing, always double-check the URL of any website you’re visiting, and be sure to use two-factor authentication (2FA) whenever possible.
Romance scams
Often, cryptocurrency scams aren’t technical — they’re what we call social engineering. Social engineering involves manipulating people into doing things they wouldn’t normally do, like giving away their passwords or private keys.
One common social engineering scam is the romance scam. In a romance scam, someone will pose as a potential romantic partner and try to get you to send them money via cryptocurrency payment. They may even go so far as to send you fake photos or videos to make you believe they’re real.
If you’re ever contacted by someone online who seems too good to be true, do a reverse image search of their profile picture. You know you’re dealing with a scammer if the same picture comes up in other places with different names.
Pump-and-dump schemes
The pump-and-dump doesn’t originate in the world of cryptocurrency, but it’s made its way over.
In a pump-and-dump, scammers will artificially inflate a specific cryptocurrency’s price by buying it in large quantities and then selling it as soon as the price goes up. They’ll then “dump” their coins on unsuspecting investors who bought at the higher price, leaving them with worthless tokens.
Pump-and-dump schemes are often orchestrated through private Telegram or Discord groups and can involve influential people giving their opinions. If you see anyone in a crypto chat group trying to get people to buy a particular coin, be very wary — it could be a pump-and-dump in progress.
An example from just year is $SQUID, the fraudulent crypto based on the hit Netflix series. Recently, scam artists have taken to social media platforms where they can quickly find massive audiences to do their bidding — so be wary of who you follow on Instagram and Twitter.
Ponzi schemes
Like the pump-and-dump, the Ponzi scheme isn’t uniquely a crypto scam — you may have heard of the Bernie Madoff controversy, for example.
In a Ponzi scheme, scammers will promise investors incredibly high returns with little to no risk. They’ll then use money from new investors to pay out “profits” to earlier investors, giving the illusion that the investment is profitable. Eventually, the scheme collapses when there’s not enough new money coming in, and the scammers make off with all the money. An example of one that regulators caught before it was too late was Forsage.io.
If you’re ever approached about an investment that seems too good to be true, it probably is. Be sure to do your own research before handing over any money.
Fake crypto apps
With the rise of mobile cryptocurrency trading apps, fake crypto apps have become popular tools for scammers.
Fake crypto apps will often mimic the design of legitimate apps like MetaMask or Coinbase to trick users into giving them their private keys or login credentials. Once they have your information, they can clean out your cryptocurrency accounts and leave you with nothing.
To avoid fake cryptocurrency apps, only download apps from official app stores like the Google Play Store or the App Store. And be sure to research any app you’re thinking of downloading — a simple Google search can often reveal whether an app is legitimate or not.
Social media scams
Scammers will often take to social platforms like Twitter, Facebook, and Instagram to try and reach a larger audience.
One common social media scam is the celebrity endorsement scam. In this scheme, scammers will create fake social media accounts that look like they belong to celebrities or well-known figures in the cryptocurrency space. They’ll then use these accounts to promote fake ICOs, cryptocurrency-related projects, or fraudulent investment advice to get people’s money.
Giveaway scams
Giveaway scams are one of the most common types of cryptocurrency scams. They usually take the form of a celebrity or influencer tweeting about a crypto giveaway, asking people to send a small amount of cryptocurrency to a specific address to receive a larger amount back.
Of course, there is no actual giveaway — the scammers keep all the cryptocurrency for themselves. And because these scams often use the same address for multiple tweets, they can end up making a lot of money.
To avoid giveaway scams, never send cryptocurrency to someone you don’t know, even if they promise to give you more in return. If it sounds too good to be true, it probably is.
Fraudulent ICOs
An ICO, or initial coin offering, is a way for a cryptocurrency project to raise money by selling tokens to investors. And while there are many legitimate ICOs, there are also plenty of scams.
Fraudulent ICOs will often promise unrealistic returns, or they may not have a working product at all. They may also try to mimic the branding of a well-known project to trick people into investing.
To avoid ICO scams, ensure you research any project before investing, and be wary of promises of high returns with little risk. Also, beware of anyone trying to impersonate a well-known cryptocurrency project.
Meme coins
Over the past year or two, cryptocurrency exchanges have been plagued with memecoins. Memecoins are cryptocurrency projects with no real use case, named after internet memes like Dogecoin.
While there’s nothing wrong with investing in meme coins, many are created as pump-and-dump scams. The people behind the project will buy up a lot of the coin themselves, then start promoting it heavily on social media to get people to invest. Once the price has gone up, they’ll sell all their coins and leave investors holding the bag.
To avoid being scammed by a meme coin, research any project before investing, and don’t invest more than you’re willing to lose.
How to Spot Crypto Scams
Promises of guaranteed returns
As with investing in the stock market, there is no such thing as ‘guaranteed returns’. Anyone who promises you guaranteed returns is almost certainly trying to scam you.
High-pressure tactics
If someone is pressuring you to invest in a cryptocurrency project, or if they’re trying to get you to sign up for a service without giving you time to think about it, that’s a red flag. Legitimate businesses don’t need to use high-pressure tactics to get people to invest.
Unsolicited offers
If you receive an unsolicited offer to invest in a cryptocurrency project, that’s another red flag. Unless you’re actively seeking investment opportunities, you shouldn’t be getting offers out of the blue.
Lack of transparency
If a project doesn’t have a whitepaper explaining what it is and how it works, or if the team behind the project is anonymous, that’s a bad sign. Legitimate projects should be transparent about what they’re doing and who is involved.
Offers of free money
As the saying goes, if something sounds too good to be true, it probably is. Anyone offering you free money — especially if they’re asking you to send them money first — is very likely trying to scam you.
How to Avoid Cryptocurrency Scams
Protect your wallet and crypto assets
The first and most crucial step in avoiding digital currency scams is to protect your wallet and crypto assets. This means keeping your private keys safe and secure and only investing in projects you trust.
Never give away your private keys
Your private keys are what allow you to access and spend your cryptocurrency. They’re like the password to your bank account, so you should never give them to anyone. If you’re asked to give away your private keys, that’s a huge red flag that you’re being scammed.
Only invest what you can afford to lose
Cryptocurrency is a risky investment, and there’s no such thing as a guaranteed return. This means you should only invest what you can afford to lose. If you’re uncomfortable with losing your entire investment, you shouldn’t invest.
Research any project before investing
If you’re thinking about investing in a cryptocurrency project, make sure you do your research first. This means reading the whitepaper, checking out the team behind the project, and looking for red flags.
Keep learning and digging for more info
The world of cryptocurrency is constantly changing, and new scams are always being created. The best way to avoid being scammed is to keep learning and staying up-to-date on the latest news and developments.
Only download apps from official platforms
There are a lot of fake cryptocurrency wallets and exchanges out there, so it’s important to only download apps from official platforms like the App Store or Google Play. If you’re unsure if an app is legitimate, you can check reviews online before downloading it.
Some trustworthy crypto exchanges include:
- Coinbase
- Binance
- Kraken
- Gemini
Protect Yourself from Cryptocurrency Scams in 2022
Cryptocurrency scams are on the rise, and you must be aware of them to protect yourself. To avoid being scammed, you should:
- Protect your wallet and assets
- Never give away your private keys
- Only invest what you can afford to lose
- Research any project before investing
- Keep learning and digging for more info
- Only download apps from official platforms
Following these tips will make you much less likely to fall victim to a cryptocurrency investment scam! However, don’t let existing scam artists stop you from exploring and taking full advantage of everything crypto offers. Looking towards reputable leaders in the space with the right experience can have countless benefits.
Take Dan Hollings, the marketing genius behind the promotion for ‘The Secret’ and the mentor to thousands of Amazon sellers. He’s spent the last three years developing an incredible skill:
Operating platforms and bots to forge passive income from crypto markets.
If you’d like to learn how Dan did it, Sign up for The Plan!
Frequently Asked Questions
How do I get my money back from crypto scams?
If you’ve been scammed, you may be able to get your money back if you act quickly. First, you should try contacting the company or person who took your money. If that doesn’t work, you can file a complaint with the Consumer Financial Protection Bureau or the Federal Trade Commission. You can also report the scam to the FBI’s Internet Crime Complaint Center.
However, many cryptocurrency transactions are irreversible. If your money’s gone, you may never see it again. If nothing works, try to spread awareness to prevent others from falling victim.
Can you get scammed through Bitcoin on Cash App?
Yes, getting scammed when using Cash App to buy Bitcoin is possible. For example, you may send your money to a fake exchange or a fake person. It’s essential to buy Bitcoin only from exchanges and people you trust.
Cash App Bitcoin scams aren’t the only ones; Instagram, Twitter, and even YouTube are all places where you can fall victim.
