How to Safeguard Yourself Against Cryptocurrency Scams

Cryptocurrencies are ripe with possibilities for both novice and seasoned investors. However, with the potential for profit, there are unfortunately also individuals looking to exploit those who are unprepared. Crypto scams pose a genuine risk within the digital currency realm, and numerous scammers have successfully made off with stolen digital wealth. This leads us to a pressing question: How can I shield myself from falling victim to crypto scams? To safeguard yourself against crypto scams, it's essential to conduct thorough research, be skeptical of any propositions that promise significant returns, utilize protective measures such as VPNs, and be cautious of offers presented through dating websites or applications.

Before you dive into a new cryptocurrency investment, arm yourself with insight by checking out our detailed guide on the most frequently encountered crypto scams and ways to steer clear of them.

Top 8 Crypto Scams to Watch Out For

Scammers continue to employ the same tried-and-true methods from other industries, with the key distinction being that cryptocurrencies have become their preferred medium of exchange. One of the primary tactics employed by crypto scammers is investment fraud, where they lure victims into investing in dubious cryptocurrencies and then take off with the funds.

These fraudsters often impersonate business figures, government entities, or even romantic interests, all to pilfer your hard-earned cryptocurrency. Let's delve into some of the more prevalent crypto scams that you need to be vigilant about.

Investment Scams

In this scheme, scammers will dangle the allure of 'easy money' with 'zero risks,' typically initiating contact via social media or messaging apps. However, these scams can also establish their footing through text messages, emails, or even phone calls.

Let’s briefly explore how these scammers execute their strategy:

• An “investment manager” They initiate unexpected conversations, claiming they can significantly increase your funds, but only if you purchase cryptocurrencies and transfer them to their designated online account. The site you’re referred to may look genuine, but it’s as phony as their promises. Once you log into your purported 'investment account,' you’ll find you can't withdraw or transfer your assets, or any attempt to do so will incur exorbitant fees.
• The con artists may pose as famous figures, assuring you they can amplify the cryptocurrency you send them. However, no celebrity is reaching out to you via social media. If you engage with dubious links they send or send your crypto through a scanned code belonging to an alleged celebrity, those funds will wind up solidly in the scammers’ pockets, lost forever.
• A 'virtual sweetheart' might request money or cryptocurrencies ostensibly to invest. Once someone you’ve met on a dating platform starts asking for funds or suggests investment opportunities, it’s crucial to recognize that you are conversing with a scammer. Any supposed investment advice or offers from these individuals are fraudulent. If you do transfer your crypto or any other currency, it’s almost guaranteed you’ll never see those funds again.
• Scammers are known to offer guarantees of profit or highlight seemingly lucrative opportunities. Unfortunately, no one has the ability to ensure or make such claims, especially in a market as volatile as crypto. In fact, there’s truly no such thing as a 'low-risk' investment in this sphere. Therefore, if a company or representative claims you’re bound to make a profit, it’s a clear signal of a scam, even if they appear 'backed' by reputable personalities or showcase glorified testimonials. Both narratives are easily manufactured.
• These fraudsters make grand claims without providing substantial reasoning or specifics. Regardless of the investment pitch you hear, it’s vital to seek clarity on how it functions and inquire about the destination of your investment. Legitimate investment managers or advisors will be more than willing to share this information and offer in-depth explanations.

One crucial piece of advice we at PlasBit consistently emphasize to our clientele is to conduct a thorough online search before proceeding with any investment. Investigate the reputation of the company or individual involved, as well as the cryptocurrency in question, by attaching keywords like 'review,' 'scam,' or 'complaint.'

Dust Attack

In this variation of scam, the aim is not to steal cryptocurrencies directly but rather to extract valuable information that can facilitate future blackmail. By conducting numerous minute 'dust transactions'—which are essentially negligible amounts sent to a particular crypto wallet—the attackers create a trail of data leading to the victim’s hidden information, including their real name, email, and password. This information can then be wielded for various other scams, often involving extortion.

Pig Butchering

This particular scam is relatively recent and combines elements of romance fraud with investment trickery. Initially, you might receive a message on a dating app from someone claiming to be interested in you. As conversations progress, trust begins to build. Eventually, your 'friend' might mention a lucrative business opportunity or ask for your assistance. In these cases, they’ll veer towards persuading you to transfer crypto as either an 'investment' or as 'aid.' Once they've fattened their digital piggy bank (i.e., your funds), they’ll vanish without a trace with your money. The established trust in the relationship is their primary weapon.

Crypto Recovery Scams

These scams often target individuals who have previously fallen victim to crypto theft. Scammers frequently promote their 'crypto recovery' services through advertisements and social media, hunting for anyone expressing dissatisfaction with their prior losses. Once someone reaches out for assistance, they typically require upfront payment for their services, often in the form of cryptocurrency. After the tokens are transferred, victims generally never hear from the so-called 'company' again.

Scammers may also impersonate law enforcement officials and contact potential victims under the guise of 'returning' lost tokens. They will follow a similar process, asking victims for funds before 'recovering' the money and subsequently disappearing.

AirDrop Scams

Airdrop scams are fraudulent schemes where cybercriminals attempt to lure users with fictitious airdrop offers (bogus gifts of digital coins or tokens). They prey on the allure of free tokens to trick inexperienced users into connecting their wallets to harmful sites, transferring their assets to crooks, or exposing sensitive personal data.

Most airdrop scams employ various phishing tactics to draw users to fraudulent websites. Common strategies include:

• Fraudsters create deceptive websites that mimic legitimate airdrop opportunities and then promote them through multiple channels, such as social media and email campaigns. Their objective is to trick users into revealing confidential information or linking their crypto wallets. In essence, they entrap users by offering free tokens in exchange for their participation. Once individuals express interest, scammers will ask for personal details such as wallet addresses or even passwords, under the guise of claiming the airdrop.
• Scammers often masquerade as recognized crypto exchange platforms or influential figures to gain credibility and entice victims into participating in phony airdrop events. They may also hack legitimate social media accounts to exploit followers or subscribers.
• Be cautious if you discover assets in your wallet that you didn’t request or trade for. Fraudsters might send unsolicited cryptocurrencies or NFTs to promote malicious sites. Usually, when victims check their wallets through a block explorer or as part of an NFT image that appears unexpectedly, they end up discovering the scammer’s website. Victims often incur losses while attempting to sell or transfer tokens from these fraudsters. If you receive unexpected tokens, do not engage with them.

Ponzi Scheme

The age-old pyramid scheme has also infiltrated the crypto domain. Through a mix of manipulation tactics, money management, and investor confidence, scammers erect a precarious house of cards. Initially, they market their 'project' across social media and websites by promising enormous returns in a short timeframe. Subsequent investors pour money into this initiative under the belief they will see a significant payout after a set period.

As more people invest, the funds generated are redirected to cover the 'returns' owed to earlier investors, thereby 'validating' the project's claims and cultivating trust. The term Ponzi Scheme is derived from Carlo Ponzi, who, while not the first to employ this trickery, was certainly the first to wield it on such a vast scale that his name became synonymous with it.

Carlo Ponzi's structure had a severe impact on the cryptocurrency community in 2019, a year during which it was responsible for losses totaling $4.3 billion in cryptocurrencies, corresponding to over 90% of estimated scam revenues.

Rug Pull

Since 2019, the hold of Ponzi schemes The classic pyramid scheme has waned, paving the way for newer forms of deceit like rug pulls. This fraud operates on a deceptively simple principle. Scammers introduce a new token or project to that market, accompanied by enticing promises to draw in investors. Those susceptible to their tactics begin investing heavily in the venture, transferring their cryptocurrencies to the schemers.

Once the fraudsters believe they have harvested sufficient funds, they abruptly vanish with the money, effectively pulling the rug from beneath the investors. The ramifications of this type of scam have surged, particularly peaking in 2021 when losses soared to around $2.8 billion, out of a staggering $7.8 billion that scammers accumulated that year. For this reason, being informed and conducting thorough research is paramount when pondering, 'How can I safeguard myself from crypto scams?'

Pump and Dump

A widespread scheme that exists across various markets is the deliberate manipulation of asset prices, and this is the crux of the issue at hand. Con artists target tokens that require minimal investment and subsequently coordinate efforts to promote and acquire these tokens on a large scale. This surge in demand effectively 'pumps' the value of the cryptocurrency, making it seem appealing to additional investors. Once the price has escalated, the scammers offload their substantial holdings, inundating the market and rapidly deflating the value, leading to a quick ‘dump’ of the cryptocurrency.

The accusations directed at Elon Musk serve as a prime example of how celebrity status can be wielded as an illicit tool within financial markets. Back in 2021, he faced allegations of exploiting insider information and manipulating the Dogecoin asset, which ultimately led to significant financial losses totaling millions of dollars.

Investors alleged that Musk leveraged his Twitter platform, engaged influential figures for endorsements, and utilized his high-profile 2021 appearance on NBC’s \"Saturday Night Live\" along with other publicity events to fabricate a lucrative market around Dogecoin, particularly for the digital wallets tied to himself or Tesla. They also pointed out that Musk's actions involved a staggering sale of Dogecoin worth $124 million in April of that same year.

How to Avoid Becoming a Victim

Having outlined the inherent risks, let’s now delve into the core question of this analysis: What steps can I take to shield myself from cryptocurrency scams? Even though these fraudsters continually refine their tactics to become more 'sophisticated', there are fundamental principles we can adhere to in order to sidestep their digital traps.

Guaranteed Profits

Scammers are notorious for being the sole entities that offer guaranteed profits or exceptionally high returns; this marks their primary lure in the world of investment fraud. Be wary of anyone who assures you that you will easily and swiftly reap profits in the crypto landscape.

Love or Business

Never mix online dating especially when it comes to investment tips. If you encounter someone through a dating platform or application who is eager to 'assist' you in investing in cryptocurrencies or requests that you send them digital currency, you can confidently categorize it as a scam.

Beware the Links

Make it a rule never to click on links from unsolicited text messages, emails, or social media communications, regardless of whether they appear to be associated with a recognized crypto project. Scammers excel in impersonating individuals and platforms; thus, it's crucial to maintain skepticism regarding unexpected links.

Thorough Research

Before committing to any cryptocurrency venture or proposal that crosses your path, it’s essential to engage in your own investigative research regarding both the individuals involved and the project itself. Numerous victims could have easily evaded scams by dedicating just a couple of hours to gathering information online.

Don’t Be Greedy

A major weapon in the arsenal of crypto fraudsters is the innate human desire for wealth. This greed is the foundation of Ponzi schemes, as individuals are drawn in by the allure of quick riches, often leading them to invest more funds. As reiterated, steer clear of promises of large or rapid returns. And should you notice your investment growing alarmingly fast, prioritize withdrawing it as soon as possible.

Increase Your Security

Dust attacks have become increasingly rare as cryptocurrency values have risen, rendering these tactics more costly for scammers. Nevertheless, employing privacy measures such as TOR (The Onion Router) or a VPN (Virtual Private Network) can significantly bolster your anonymity and help evade potential tracking.

How We Protect You

At PlasBit, our primary concern is the safety and security of our clientele. We take immense pride in the services we deliver with each transaction conducted on our platform; hence, we make every effort to ensure that every transaction is free from scams. Think of us as your safeguarding allies, conducting video calls for users undergoing KYC to ensure they are not unwittingly falling prey to fraud. Verifying their identity through these calls, combined with inquiries related to our services, forms a crucial part of our protocol to guarantee that every transaction is executed willingly.

The Biggest Crypto Scams in History

Knowledge is paramount when learning how to defend against crypto scams, so in order to enhance the context of the information we've discussed, let's highlight some of the most notorious scams in the cryptocurrency arena. Many of these scams involved platforms that, at first glance, appeared to offer legitimate services. Conversely, others were clearly fraudulent from their inception. Regardless of their initial intentions, they all resulted in devastating outcomes for their investors.

OneCoin

With a global footprint, OneCoin is often regarded as one of the largest scams in cryptocurrency history. Ruja Ignatova, dubbed the 'Cryptoqueen' of OneCoin, was the driving force behind this endeavor, which was initiated in 2014 following Bitcoin's surge in popularity. Ignatova claimed that her ecosystem would surpass all available alternatives by 2016, the year an aggressive marketing blitz was launched.

In 2014, Ignatova and her co-founder Greenwood began to present OneCoin to investors in Europe, New York, and various global locations. They orchestrated online webinars and in-person conferences aimed at persuading potential investors to deposit funds into accounts that would later enable them to purchase OneCoin packages.

OneCoin operated like a multi-level marketing scheme, where investors were incentivized with commissions for recruiting others to buy OneCoin packages. These packages catered to different financial capabilities, ranging from 'beginners' to 'tycoon business managers.'

What ensued was a fervent buying spree. Between 2014 and 2016, investors poured over $4 billion into OneCoin. The façade began to crumble in 2016 when investors encountered challenges in liquidating OneCoin to recover their initial funds.

A year later, the CEO of OneCoin vanished, and regulators’ alerts led to intensified scrutiny from authorities. It is estimated that the project amassed between $4 and $19.4 billion, but the current whereabouts of the funds and Ignatova remain a mystery.

ModernTech

Another notorious pyramid scheme affected over 32,000 investors, primarily in Vietnam. The fraudsters enticed individuals with promises of monthly returns of 40% for initial investments of $1,000 into their homegrown token ICOs. They labeled themselves as the official representatives for two digital tokens, Ifan and Pincoin, and held responsibility for their ICOs in Vietnam.

ModernTech posited that Ifan would operate under Singaporean regulations and would serve purposes such as downloading albums, hosting live events, and ticket sales, aimed at linking celebrities with their audiences. Conversely, Pincoin, a venture that began in Dubai, was promoted as an investment opportunity promising approximately 40% returns each month.

Doubts began to surface when returns started arriving in tokens rather than fiat currency. Disgruntled investors gathered outside ModernTech’s headquarters in Ho Chi Minh City, demanding clarity from the company and the return of their funds. However, representatives informed them that the offices had been empty for a month.

As of now, the whereabouts of the ModernTech team remain unknown.

Bitconnect

The crypto landscape has witnessed the rise and fall of countless coins. While some have maintained stability since their launch, others faded away with minimal acknowledgment. A few proved to be outright scams, one notable example being Bitconnect; a Ponzi scheme that lured investors with the promise of exorbitant returns.

Satish Khumbani, the founder behind the Bitconnect trading platform, orchestrated the deception, enticing investors with a loan scheme that claimed to leverage cryptocurrency volatility for guaranteed profits.

Authorities have outlined that Bitconnect operated as a Ponzi scheme, redistributing funds from new investors to pay returns to earlier ones. According to U.S. regulators, Khumbani ran this operation for about a year before abruptly shutting it down. Following this, he influenced Bitconnect promoters to fabricate artificial demand within the marketplace.

Khumbani and his accomplices concealed the management and location of the profits derived from the scam by utilizing Bitconnect’s crypto wallets and trading across international channels.

Khumbani faced charges including conspiracy to commit wire fraud, wire fraud, conspiracy to manipulate commodity prices, running an unauthorized money transmission business, and engaging in international money laundering, with a potential maximum sentence of 70 years in prison. Regrettably, he returned to India before facing sentencing, disappearing without a trace.

Conclusion

Nearly 90% of financial losses attributed to crypto scams are linked to Bitcoin, Ethereum, and Tether (as reported by the FTC). This high percentage reflects the notoriety of these three cryptocurrencies, which fraudsters leverage to craft deceitful schemes. Bitcoin Does this imply that we can evade scams merely by steering clear of these popular assets? Absolutely not. You can lose money on any project. Scammers can involve you in illegal investment structures while also deceiving you through new initiatives featuring their tokens and proposed roadmaps.

Our discussion isn't centered around projects that fail solely due to mismanagement, insufficient resources, or external regulatory pressures. While the end result might be similar—with financial losses—the underlying motives differ: involvement in a scam wasn't the agenda. Regardless of underlying intentions, it’s crucial for investors to thoroughly research each project before committing funds, employing review platforms like Trustpilot to gather further insights prior to making decisions. The crypto universe is perilous, and every crypto holder is at risk; with PlasBit, you can rest assured that someone is watching out for your interests, as we are the optimal solution to the dilemma of how to shield yourself from crypto frauds.

Please remember that the information shared on this page is intended for informative purposes only and should not be interpreted as legal, tax, financial, investment advice, or any other form of guidance. It’s essential to invest only what you can afford to lose and to consult independent financial advisers if you have any concerns. For more details, we recommend reviewing the terms and conditions as well as the help and support sections offered by the issuer or advertiser. MetaversePost is dedicated to providing accurate and impartial coverage, but market conditions are subject to change without prior notice.