Incremental Threats of Crypto Currency Scams


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Crypto currency scams are similar to any financial scam, except that the scammers are after your crypto assets instead of your cash.

Similar tactics are employed by many crypto scammers employed in other financial scams, like pump-and-dump scams that attract investors to buy an asset with false claims about its value or outright attempts to rob your digital assets.

According to Shane Cummings, wealth advisor and director of technology and cyber security at Halbert Hargrove, this latter type of scam could include breaking into a person’s crypto wallet or convincing an investor to send a digital asset as payment for a fraudulent transaction.

The sole purpose is to influence victims into giving out personal data or transferring valuable digital assets such as non-fungible tokens (NFTs) to the perpetrator’s account.

Professor of computing information systems and business analytics at James Madison University, Chengqi “John” Guo says, “As an instrument, crypto scams are particularly appealing to nefarious agents who enjoy crypto currency’s swift conversion to fiat money, ready-to-use third-party transaction applications and rich obfuscation techniques.”

Types of crypto currency scams

Even though crypto currency is a newer movement, thieves are using traditional methods to steal. Here are some of the common cryptocurrency scams to be aware of:

  1. Bit coin investment schemes

In bitcoin investment cons, scammers reach out to investors claiming to be experienced “investment managers.” As part of the plan, the so-called investment managers assert that they have made millions investing in cryptocurrency and promise their victims that they will generate money with investments.

To begin, the scammers demand a fee. Then, the thieves simply rob the upfront fees, instead of making money. Scammers may also ask for personal identification details under the guise of transferring or depositing funds, gaining access to a person’s cryptocurrency.

Use of phony celebrity advertisements is also another type of investment scam. Scammers use real photos and place them on fake accounts, ads or articles to make it look as if the celebrity is publicizing a large financial gain from the investment. The references for these claims seem legitimate, using well-known company names such as ABC or CBS with a professional-looking website and logos. However, the endorsement is false.

  1. Rug pull scams

Rug pull scams involve investment scammers “amping up” a new project, nonfungible token (NFT) or coin to obtain capital. After getting the money, the scammer disappears with it. According to the scripting for these investments, it inhibits people from selling the bitcoin after they buy it, so investors are left with a worthless investment.

A popular version of this scam was the “Squid Coin Scam,” called after the famous Netflix series Squid Game. Investors had to play to gain cryptocurrency: people would purchase tokens for online games and gain more lately to exchange for other cryptocurrencies. The worth of the Squid token went from 1 cent to about $90 per token.

Trading eventually ceased, and the funds vanished. People tried to sell their token as the token value reached zero. These investors provided the scammers with approximately $3 million.

Rug pull scams are also prevalent with non-traditional assets (NFTs).

  1. Romance scams

Cryptocurrency scams are not uncommon on dating sites. These scams include long-distance or completely online relationships in which one partner takes time to earn the trust of the other. After some time, one party begins to persuade the other to buy or give money in some kind of cryptocurrency.

After obtaining the money, the dating scammer vanishes. These scams are also identified as “pig butchering scams.”

  1. Phishing scams

Phishing scams have existed for quite a while but are still prevalent. Scammers send emails containing malicious links to a fraudulent website to gather personal data like cryptocurrency wallet key information.

Unlike passwords, users of digital wallets only receive one unique private key. However, it is difficult to replace a stolen key. Because each key is distinctive to a wallet, updating this key necessitates the creation of a new wallet.

Never enter confidential information from an email link to avoid phishing scams. Always visit the site directly, no matter how genuine the website or link seems.

  1. Man-in-the-middle attack

Scammers can steal private, sensitive information from users who log in to their cryptocurrency accounts in public places. Any information sent through a public network, such as passwords, cryptocurrency wallet keys, and account information, can be intercepted by a scammer.

A fraudster can gather this private information via the man-in-the-middle attack method whenever a user is logged in. This is accomplished by blocking Wi-Fi signals from trusted networks in close proximity.

The best way to avoid these attacks is to use a virtual private network to eliminate the man in the middle (VPN). The VPN encrypts all data transmitted, preventing thieves from accessing personal information and stealing cryptocurrency.

  1. Social media cryptocurrency giveaway scams

There are numerous fake posts on social media outlets promising bitcoin giveaways. Some of these scams also include phony celebrity accounts advertising the giveaway to attract people.

However, when someone clicks on the giveaway, they are redirected to a malicious site asking for verification to receive the bitcoin. Making a deposit to prove the account’s legitimacy is part of the verification process.

The victim may lose this payment or, even worse, click on a malicious link, allowing their private information and cryptocurrency to be stolen.

  1. Ponzi schemes

Ponzi schemes compensate older investors with the gains from new ones. To get new investors, crypto scammers will entice new investors with bitcoin. It’s a scheme that runs in loops since there are no legitimate investments; it is all about targeting new investors for money.

The main attraction of a Ponzi scheme is the promise of huge profits with minimum risk. However, there are always risks with these investments, and there aren’t any guaranteed returns.

  1. Fake cryptocurrency exchanges

Scammers may lure in investors by promising a brilliant cryptocurrency exchange and potentially even some extra bitcoin. However, there is no exchange, and the investor does not realize it is a scam until they lose their deposit. Because cryptocurrency relies on the block chain for verification and does not pass through financial institutions, it is more difficult to recover from theft.

  1. Employment offers and fraudulent employees

Fraudsters will also mimic recruiters or job seekers to gain access to cryptocurrency accounts. They present a fascinating job but entail cryptocurrency as fee for job training with this ploy.

There are also frauds while recruiting remote workers. For example, North Korean IT freelancers are trying to monetize remote job opportunities by presenting impressive resumes and claiming to be U.S.-based. The U.S. Department of the Treasury issued an alert about this North Korean fraud targeting cryptocurrency companies.

These IT freelancers search for projects that entail virtual currency and have access to currency exchanges. They then hack into systems in order to raise funds or steal data for the Democratic People’s Republic of Korea (DPRK). These workers are also involved in other skilled IT work and use their knowledge to obtain insider access to enable the DPRK’s malicious cyberattacks.

How to Avoid Cryptocurrency Scams

There are numerous ways to avoid being scammed. If you notice any of the warning signs, you shouldn’t enter any links, dial any phone number, reach them in any way, or send them money. Additionally you can follow these tips to prevent cryptocurrency scams:

  • Ignore any requests for your private cryptocurrency keys. These keys are used to regulate your crypto and wallet access, and they are not required in a legit cryptocurrency transaction.
  • Ignore promises of large sums of money.
  • Ignore investment managers who approach you and claim to be able to rapidly grow your money.
  • Ignore celebrities—they will not contact you about purchasing cryptocurrency.
  • If you’re using an online dating website or app, meet your romantic interests in person prior to actually giving them money.
  • Ignore emails and texts from famous or new companies claiming that your account has been frozen or that they are concerned.
  • If you receive an email, text message, or social media message from a government, law enforcement, or utility company stating that your accounts or assets have been frozen and that you must send crypto or money, contact the agency and disregard the message.
  • Ignore job postings for cash-to-crypto converters or cryptocurrency miners.
  • Do not believe claims that they have explicit material of you that they will post unless you send cryptocurrency and report it.
  • Accept no “free” money or cryptocurrency.

The Bottom Line

Many people have compared the mad rush into cryptocurrencies to the Wild West. As the crypto ecosystem grows in size and complexity, it will undoubtedly become a target for scammers.

Socially engineered proposals to acquire account or security settings, and having a victim send cryptocurrency to an altered digital wallet are the two types of cryptocurrency scams.

You should be able to identify a crypto-related scam early and avoid having it happen to you if you understand the common ways that swindlers try to steal your data (and ultimately your money).

Investing in cryptocurrencies or other initial coin offerings (ICOs) is speculative and risky. Because each person’s situation is unique, it is always best to consult with a qualified professional before making any financial decisions.

I am Gennifer, a specialist in the field of scam detection and currently works closely with Financial Fund Recovery. As an analyst, his research work involves studying the nature of scammers, dynamics of how these scams roll out, significant red flags, and more. His and Financial Fund Recovery’s primary motive is to create an awareness among potential victims, making it uncomplicated to identify and prevent a scam. At the same time, they assist scam victims recover from the scam incident.

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