Learn about the most frequent crypto scams you may encounter in 2024 and how to avoid them
Despite its downturn and high volatility, the popularity of crypto keeps growing—including among criminals. According to the US Federal Trade Commission, 46,000 people reported losing $1+ billion in crypto to scams between January, 2021 and June, 2022 alone. “This is about one out of every four dollars reported lost, more than any other payment method.” (Source)
In September 2023, the co-founder of crypto pyramid scheme, OneCoin, was sentenced to 20 years in a US jail for scamming more than $4bn from investors. Meanwhile, $20 bn in Bitcoin have been lost to blackmail scams since 2018.
The scale of these crypto scams has raised concerns about the safety and security of the decentralized financial landscape. This is why it’s more important than ever to make crypto users aware of the biggest risks and red flags.
So, let’s look into the most frequent crypto scams to be aware of next year, and the security tips everyone should follow.
The basic characteristics of cryptocurrencies attract honest users and criminals alike:
The popularity of certain types of crypto scams evolve over time. Let’s observe what you should be aware of in the upcoming year.
Crypto ransomware scams occur when hackers take over a victim’s device or account using malicious software, encrypt it, and then demand payment in cryptocurrency for the decryption key. According to Security Intelligence, ransomware attacks cost companies over $456 million in 2022.
Ransomware scams are dangerous, resulting in data loss or leaks that wreak havoc on users and companies. That’s why it’s important to:
Unfortunately, scammers have the power to decrypt encrypted accounts/data, including backups. In this case, report the attack to authorities and immediately consult with cybersecurity experts.
To get security tips for using blockchain, click here.
Blackmail scams have been on the rise since 2018. This can be when scammers contact the victim claiming to have embarrassing personal information, including private photos or videos, which they will make public if their terms aren’t met.
Usually these scammers promise to keep this information private if the victim sends a crypto transfer straight away. Scammers use threats and other manipulation techniques to make victims pay.
As the US Trade Commission advises, blackmail scammers can lie about the compromising information or content in their possession. So never reply to these emails or messages—or send any crypto transfers. Report these scams to the FBI or other relevant authorities.
Phishing is a classic scam that’s now widespread in the crypto world. It’s used to compromise login credentials, such as crypto wallet keys. Usually scammers send an official-looking email that asks the victim to log in to their account—which is actually a trap. Use link checker tools and check community reviews of unknown websites, if you’re not sure about the sender.
This is when an unknown “investment manager” contacts you promising a great return on investment and asks you to send crypto to their wallet.
These scammers usually have legitimate-looking websites or well-designed apps, using fancy investing jargon to seem real.
This is why it’s important to be vigilant. Here are some due diligence best practices to keep you safe from these scams:
Scammers may create and promote fake ICOs, convincing investors to buy tokens for a non-existent or entirely fraudulent project, and then disappear with the funds.
Crypto scammers can pretend to be a famous person (like Elon Musk giving away bitcoin on Twitter), a government agency, or law enforcement in order to steal people’s crypto. For example, they can impersonate the IRS to convince the victim that their accounts are frozen as part of an investigation—and then request payment in crypto to resolve the issue. They can also say they represent a large company like Amazon or FedEx and demand payment for a “fee”.
A crypto giveaway scam is when fraudsters pose as legit cryptocurrency exchanges, businesses, or notable individuals to deceive victims into sending them cryptocurrency. They typically promise to return double or triple the amount sent by the victim—only to vanish with the funds once received.
These scams are frequently promoted on social media platforms like Twitter and YouTube, and often involve fake websites resembling legitimate exchanges or companies. In some instances, they may impersonate well-known figures in the cryptocurrency community, such as Vitalik Buterin.
Scammers use social engineering techniques to cultivate romantic relationships with their victims online, often using dating apps such as Tinder. The scammer may spend months to gain the victim’s trust, with the aim of gaining their trust and ultimately requesting payment in crypto—only to disappear in the end.
Flash loans are a type of cryptocurrency loan that allows users to “borrow” funds without providing collateral, but there’s a catch—the borrowed funds must be repaid within the same transaction. These loans are typically facilitated through decentralized finance (DeFi) platforms.
Here’s how a typical flash loan scam works:
This is when the value of a crypto asset is artificially inflated by creating “high demand”. Usually, fraudsters use social media to build hype around an NFT or cryptocurrency. This drives up the price, making it difficult for investors to ignore. Once the price is high enough, the scammers immediately sell—or “dump”—the asset, causing a collapse in its price.
Check this article to learn more about blockchain scams.
Crypto scams can take various forms. Fraudsters use various psychological tricks and can be extremely convincing. It’s essential to keep your customers informed, remind them to conduct thorough research, and exercise caution when considering any crypto-related investment or a business opportunity.
Here are some red flags customers of crypto exchanges should watch out for when evaluating a potential crypto opportunity:
Here are several steps to help prevent crypto scams:
If you’ve encountered a crypto scam, it’s crucial to immediately report it to:
When reporting, provide as much information as possible, including details about the scam, the individuals, firms or apps involved, and any communication you’ve had with them (emails, messages, screenshots, transaction records, etc.).
Reporting scams is a crucial step in combating cryptocurrency fraud, protecting others, and potentially recovering lost funds. Besides, educating others about the risks can help with crypto fraud prevention.
Crypto scams work by deceiving individuals through various tactics, such as phishing, fraudulent investment schemes, impersonation, and more. The goal is to trick victims into sending crypto to the scammers, who then disappear without delivering the promised “return on investment”.
You can spot a cryptocurrency scammer by recognizing red flags and warning signs, such as unsolicited offers, lack of transparency, and pressure tactics to make quick decisions, while also conducting thorough research and due diligence before engaging in any cryptocurrency transaction or investment.
Red flags for crypto scams include:
Crypto fraud prevention includes:
The penalties for crypto fraud vary depending on the jurisdiction. They may include fines, imprisonment, asset forfeiture, and civil penalties, or a combination.