What Are Cryptocurrency Scams?

The internet can be an amazing place. The level of communication and access to information that we currently have is unprecedented in human history. It’s possible to make money and even build a career entirely online.

The emergence of cryptocurrency, money that’s hosted entirely online in digital wallets and whose value is not backed by any government, has led many people to make a lot of money by getting in on sensational “crypto coins” early on. However, the desire to get rich quick by getting in on the ground floor of a crypto opportunity is often taken advantage of by criminals who are just trying to steal your money.

The particular type of criminal we’ll be discussing is called a scammer. This person will try to trick you into giving them money through lies, deceit, and conning. Scammers are always searching for new ways to fool unsuspecting internet users, so you should always be suspicious of unknown calls or emails. However, some common scams may look like communications from potential romantic partners, trusted corporations, or businesspeople offering an enticing money-making opportunity. If you’re browsing the internet, you should always be aware of the current techniques that scammers use.

What sets cryptocurrency scams apart from phishing scams is that the cryptoscam deals in digital currency, not government-backed notes such as the U.S. dollar, the British pound, the euro, or other national currencies. That said, some phishing scams cross over into crypto fraud, when the scammer starts talking in cryptocurrencies.

Although you can stay generally safe online by having antivirus software, no program can protect you from social engineering – a malicious activity achieved through manipulation with the goal of obtaining money or sensitive information.

In this article, we’ll be going through how cryptocurrency can potentially be dangerous and what scammers will do to try to get your money.

3 Common Types of Crypto Frauds

Rug Pull Scams

This common scam hinges on the desire for people to get rich quick by investing in a new cryptocurrency project early on and making a lot of money when it’s built up. The idea is that the scammer will convince you that the project will blow up and make a ton of money, relying on FOMO, or the fear of missing out. Once they receive some initial investments from you, they “pull the rug out,” by shutting down all communications and disappearing with your money. Are crypto rug pulls illegal? Yes.

How to spot a crypto rug pull scam:

Rug pull scams will often prey on people who are not educated about cryptocurrency and looking to make money easily. If you’re not aware of how online currencies work, you shouldn’t be investing in them.

Reputable businesses will use real identities that you can look up on social networking sites to get an idea of their experience level and their past successes. Scammers, on the other hand, will use pseudonyms and be cagey about their track records. They may also grow hostile if you question their legitimacy, threatening to cut contact entirely and questioning whether you’re even worth spending their time on.

Check legitimate cryptocurrency exchanges like Coinbase to see if the cryptocoin you’re being pitched or their previous projects are hosted on there. You should also be extremely cautious of NFTs and NFT rug pulls, as they also have no inherent value, similar to cryptocurrency.

Report potential securities fraud to the U.S. Securities and Exchange Commission.

Pig Butchering Scams

The pig butchering scam is similar to the rug pull scam, but the scammer will instead contact you through dating apps and social media. They “fatten up” victims by pretending to be romantically or socially interested in them, while hinting at making money through cryptocurrency. Eventually, they’ll offer a huge investment opportunity that may seem to have hundreds of active investors and promises to pay huge dividends. After investing small amounts of money, scammers will then issue a fake tax statement for a huge amount of money in order to continue investing. Upon paying the tax, scammers will commence the “slaughter” where they cease all communications and run off with the money.

How to spot potential pig butcher scams:

Scammers will create a false identity of a rich, single person or investment mentor that shows off their wealth in subtle ways. Look out for bad grammar and poor English, as well as unsolicited mentions of cryptocurrency and extreme wealth. Legitimate investors will not contact you through social media, by the way.

Pig butchering scams commonly occur over dating apps or WhatsApp, which are difficult to trace back to an original identity.

Scammers will never video chat with you. They also will try to get a sense of your current financial situation.

Phishing Scams

If you’ve received a suspicious email or text before, you know that scammers can easily pose as legitimate companies or services that you often use. These emails, often sent en masse to illegally obtained databases, will inform you that your account is at risk or otherwise compromised and that you need to “verify your login information.” The scammers will include a suspicious link that may install a virus or lead to a webpage set up to exactly mimic the login screen for a banking or crypto wallet site. The scammer will then obtain your information and compromise your account.

How to spot potential phishing scams:

Phishing emails may look official in the subject line, but will often be sent from a suspicious email address. The email address may look like a nonsensical collection of numbers and letters, or be set up to look very similar to an official company’s email. For example: [email protected]

Phishing scams will prompt you to click a suspicious link. Never click links from untrusted sources on your computer or mobile device.

Crypto exchanges and other websites will never ask for your login information directly. Always go directly to the wallet site, rather than through emails.

Reporting Potential Cryptocurrency Fraud Cases

If you spot a cryptocurrency scam or are contacted by a suspicious email, you can report fraud at reportfraud.ftc.gov or www.ic3.gov/Home/FileComplaint. If you want to learn more about cryptocurrency and other common scams, the Federal Trade Commission has an official article on the subject.

Remember to always be diligent while browsing the internet and to not be enticed by the fear of missing out. If you’re seriously interested in making money through cryptocurrency opportunities, do research beforehand in order to understand what makes a good crypto coin investment.