9 Crypto Scams To Watch Out For In 2023
Crypto scams are now a billion-dollar industry and line the pockets of both small-time criminals, organized gangs, and even Governments across the globe.
The number of victims who fall victim to crypto scams is increasing every year as the industry grows exponentially, but these official numbers are likely to be the tip of the iceberg.
Many people are too embarrassed or ashamed to come forward and report what’s happened t to the authorities and so their cases go unrecorded. The crypto industry offers rich pickings for scammers for three main reasons:
1. Many people do not understand crypto, how it works, and what to look out for in terms of a legitimate investment.
2. One of the underlying principles of Bitcoin and crypto is that it’s decentralized and thus there is no central authority with oversight of the sector. Also, the nature of blockchains means transactions are irreversible.
3. The crypto sphere is still largely unregulated and as such there aren’t the same protections offered to investors as there are in the tradfi (traditional finance) sector, although this is beginning to change.
These issues hammer home why it’s vitally important to educate yourself before delving into crypto investing and adding digital tokens to your portfolio.
Part of this education involves understanding the type of scams you’ll encounter, and the methods used by fraudsters to steal your hard-earned cash.
What are the most popular crypto scams?
Scammers are smart and they’re agile. As one scam shuts down, many more are waiting to be deployed by the fraudsters.
They also know how to gain your trust and how to apply psychological and emotional pressure to get you to do what they want.
Which is why you need to stay constantly vigilant.
You should also familiarise yourself with my checklist of how to spot a crypto scam before investing.
Common crypto scams right now include:
Also known as the ‘sha zhu pan’ scam in China, pig butchering crypto scams are incredibly popular amongst fraudsters.
The scams generally start when a victim is contacted at random by a stranger via a social media platform or through a dating website before being befriended.
The scammer will gradually lure the victim into trusting them and they may also express a romantic interest in them.
After a while, the scammer will raise the topic of investing, specifically in cryptocurrency, and mention a platform or app they know of which offers huge returns for very little risk.
The victim will be directed towards an app or website that purports to be a crypto investing platform and they’ll be encouraged to invest in the scheme.
Initially, the victim will see a profit accumulating in their account but if they try to withdraw their funds it’ll be blocked.
The scammers will then demand fees to release the cash, but no money will ever be forthcoming.
The victim has been ‘fattened up’ by the scammers before all their funds are stolen.
Fake ‘work’ platform scams
This is another popular scam where fake apps are set up claiming to offer people work opportunities involving posting pre-written reviews or star ratings.
This may be for products or holiday destinations, and the scammers invariably claim the work is on behalf of big-name companies such as Amazon or Tripadvisor.
Victims will be told they can earn crypto for performing the tasks, however, each task costs ‘credits’ to perform.
Initially, they’ll be given free credits, but once these run out, they’ll need to pay to carry on ‘working’.
The scammers also claim that the more the victims pay the higher the earnings will be from the tasks they’re given.
They’ll also let victims make small withdrawals at the start as a way of building confidence in the scam.
But the aim is to get victims to deposit much larger sums, at which point their account will be blocked and they’ll lose access to their funds.
Fake work platform scams are sometimes referred to as ‘pay to play’ scams.
Celebrity endorsement crypto scams
The rapid development of deepfake and AI technology has meant that scams are getting ever harder to spot.
Fake images of celebrities and well-known figures purporting to endorse a crypto platform or investment have been around for a while.
However, manipulated video is becoming more prevalent amongst crypto scammers, and it’s becoming harder to spot.
In both cases, the scammers will use fake adverts or videos to convince would-be crypto investors that their scheme is completely genuine as it has been endorsed by the great and the good of the entertainment industry or business world.
Unfortunately, these ads are often shown on mainstream platforms such as Facebook, which will profit from them, for quite some time before they’re removed.
Although there have been several high-profit awareness campaigns, often featuring the celebrities shown in the ads themselves, people are still falling victim to this type of scam.
I’ve touched on this briefly above under pig butchering scams, but love is big business for scammers.
They understand that people using dating apps are susceptible to manipulation by a romantic interest as they may be emotionally vulnerable, especially if they’ve just come out of a relationship or are going through a divorce.
The scammers will present themselves as a prospective love interest using the victim’s profile as a guide to what they’re looking for.
They’ll create a fake profile using stolen photos and videos of someone they think the victim will be interested in and strike up a relationship with them using that persona before turning the conversation to crypto investing after a few weeks or months.
If the victim balks at their idea of investing, the scammer will press the right buttons and use emotional blackmail to persuade them. They may question the victim’s trust or even threaten to end the relationship.
Other romance scams involve getting the victim to ‘pay for flights’ in crypto so their love interest can come and visit, or assist them with the ‘medical bills of a sick relative’, again in cryptocurrency.
Romance scams can be a very slow burner and develop over several months. The scammer may even call frequently but will often give a reason as to why they can’t complete a video chat.
This type of scam is all too common in the crypto world and is often centered around social media.
It works when a number of people join forces to shill a cryptocurrency and build up hype across multiple social media platforms, which then feeds into the narrative.
As more people get excited by the project and FOMO kicks in, the price of the token starts to rise until at a certain point the original team cash out at the same time, causing the price of the coin to tumble.
The original investors will have bought the coin while the price was still low and will make a large profit by selling at the peak of the price-driven hype.
A rug pull is where a new digital token is created and then launched to much fanfare, with a devoted legion of social media evangelists urging people to buy the coin.
As soon as enough money has been plowed into the crypto by unsuspecting investors, the scammers will shut the scheme down and vanish, taking all the funds with them.
Rug pulls can also apply to the launch of NFT (Non-Fungible Token) collections as well.
If you’ve ever received a random email from someone claiming to have hacked your webcam and filmed or photographed you in a compromising position, you’ve been targeted by a blackmail scammer.
Another popular ruse is for the scammer to claim they’ve accessed your internet search history and is now threatening to reveal all to your friends and loved ones.
The scammer’s message will include a demand for a crypto payment to be made within a short time frame otherwise the compromising material will be revealed to the world.
Unless they’ve shown you actual evidence of any embarrassing material, this is highly likely to be an opportunist email that will have been sent to thousands of people.
Unfortunately, the law of averages means that someone somewhere will pay up. If only a tiny percentage of people who receive the email meet the blackmailer’s crypto demands, it’ll make the scam worthwhile.
Bitcoin or crypto mining is the process by which new coins are minted, often using vast arrays of specialist computers to perform complex calculations to process transactions and secure a blockchain.
There are a couple of common scams involving crypto mining – fake mining apps and fake cloud mining contracts.
The fake mining app scam involves the promise of harnessing your device’s spare processing power to mine crypto, but in reality, the scammers are simply taking the coins for themselves.
With fake cloud mining, the scammers will set up a website resembling a genuine cloud mining company and sell bogus mining contracts to investors.
However, no coins are ever mined, and the scammers simply run off with any cash that’s been invested.
Another popular mining scam involves websites claiming to mine USDT (Tether). In fact, this stablecoin can’t be mined.
One tactic employed by crypto fraudsters that’s common across a variety of scams is the use of fake Bitcoin wallets and balances.
This is where the scammer will create a realistic-looking crypto wallet app that they control to make it appear as if the victim’s funds are safe in their account.
Another trick is creating worthless crypto, which is surprisingly easy to do, which the scammers can transfer into the victim’s genuine crypto wallet to again create a fake balance of coins. The actual cash value will be zero though.
I’ve written more about fake crypto wallets and balances to help you spot this ruse.
How to spot a crypto scam
Fortunately, many scams are actually quite easy to spot if you know what to look for.
I’ve written extensively about how to spot crypto scams and there are many resources on Chargebackpros that you may find useful, some of which I’ve listed at the bottom of this article.
My ultimate guide to spotting a crypto scam is a good starting point, but for now, here are a few things you should look out for:
- Being contacted at random: Be suspicious of anyone who contacts you out of the blue online, especially if they try to get you to invest in something.
- Unrealistically high or guaranteed returns: If it sounds too good to be true, it probably is. Apply this adage to any investment opportunity you’re offered. Plus, no investment returns can be guaranteed in any sector.
- A platform that’s new or poorly designed: A brand new platform is a definite red flag. Also, if the design is amateurish, such as pixelated graphics, or the content is riddled with spelling mistakes, walk away.
- Social media groups shilling a platform: Scammers often set up a group on a channel such as WhatsApp where there appear to be many people talking about their successful investments on the scam platform. This is all part of the fraud.
- A website that lacks important information: Often scam platforms omit things like addresses or contact details, relying on a single Gmail address or similar as a point of contact.
- No reviews or online chat: Genuine crypto investing platforms will have lots of reviews online, together with threads on platforms such as Reddit. If you can’t find any ‘chat’ about a platform, leave it well alone.
- Pressure to invest: If someone is claiming that an investment is time sensitive, and you’ll miss out on huge profits if you don’t act immediately then it’s highly likely they’re pushing you towards a fraudulent scheme.
It’s important to report crypto scams because it could potentially help you and others.
I’ve written a guide on how to report a crypto scam which will give you some useful contact information.
It’s important to keep as much information as possible about the scam that’s affected you, including screenshots, names, contact details, crypto transaction IDs, and crypto wallet addresses.
Scammers will often get you to open an account on a genuine crypto exchange which you then use to convert cash from your bank to crypto. They’ll then get you to send this crypto to a wallet they control.
If you’ve been scammed, you should report it to the police, your bank, and the legitimate exchange you used for any crypto transactions.
Recovering your crypto if you’ve been scammed
Crypto scammers often go to great lengths to hide their identities making securing the return of your stolen cash or crypto very difficult.
However, the traceability of many cryptos is improving and there are many companies that can help track your stolen coins using a variety of forensic techniques.
My article on crypto recovery firms will give you an idea of what to look out for in a crypto tracing company and how to avoid scams in this sector as well.
Bear in mind that actually getting your coins returned and seeing the crypto scammer caught is still very difficult, so manage your expectations when talking to the police, bank, exchange, or recovery firm.
You can also read my article on how to recover lost Bitcoin which will give you some more information on what to do if you get caught out.
Some of the key ways you can avoid being scammed are to educate yourself, do your own thorough due diligence, and apply a healthy dose of common sense to any so-called ‘golden opportunity’.
Check, double-check, and triple-check any platform or crypto investing scheme before parting with your money, and always be suspicious of anyone who’s approached you online.
Arming yourself with knowledge and a healthy dose of cynicism will go a long way to preventing you from experiencing a potentially devastating financial loss.
If you’re still stuck and would like some advice and help navigating the world of crypto and avoiding scams, then check out the services we offer.