What is a cryptocurrency scam?

Cryptocurrency scams are a form of financial fraud that uses cryptocurrencies as bait to lure people into scamming schemes.

Crypto scams can take many forms, but they all have one thing in common: they use the promise of getting rich quickly with cryptocurrency to convince people to send money and personal information.

Scammers often create fake websites or social media accounts that impersonate legitimate companies and individuals, such as crypto exchanges or even celebrities.

Crypto scammers are increasingly using social media and email to target victims and they are also targeting people with low knowledge of crypto, or those who have been affected by a recent price drop in their investments and are looking to recover.

The aim is simple: get your money and run.

Unsurprisingly, these types of scams have recently become more prevalent because of how easy it is for criminals to manipulate content online through bots and other means. Many investors have lost hundreds of thousands or even millions of dollars.

All in all, you need to be aware of how these schemes work, so you don’t become a victim.

Types of Crypto Scams

There are many types of crypto scams, and it’s important to know how to spot them so you can avoid being scammed.

1. Crypto pump-and-dump schemes

Also known as “Rug Pull” scams, pump-and-dump scams involve artificially inflating the price of an asset before selling it at a profit. In the case of cryptocurrency, this could mean artificially inflating the price of one coin by promoting it on social media channels or in chat groups using false information about its potential, use cases, etc.

The scammers will buy up large amounts of the cryptocurrency at artificially low prices, then sell it later at higher prices to make a quick profit once investors have been lured in by the hype.

2. Phishing Scams

Phishing scams are a type of fraud whereby a cybercriminal sends out fake emails or messages posing as a reputable company to trick people into clicking on links that will take them to a phishing website.

The aim is for victims to enter their details, such as private keys, which are then stolen and used by the scammer. The emails are often very well-made, so it can be hard to tell that they’re fake.

They may also include a logo or other official branding from the real company to make them more convincing. In recent years, there has been an increase in phishing schemes targeting cryptocurrency users. These scams usually involve an email asking for private keys or promising free coins that don’t exist.

3. Crypto Ponzi schemes

Ponzi schemes are investment opportunities that promise high returns on investments, but in reality, they take money from new “investors” to pay off existing “investors.”

Crypto Ponzi schemes (or pyramid schemes) often take the form of “staking” or “cloud mining” systems where users are asked to deposit coins into an account and are promised a high return on their investment as soon as they reach a minimum threshold. In reality, these projects don’t exist, and they can’t generate profits because they don’t own any assets.

These schemes rely on attracting more and more people with promises of higher returns, which quickly become unsustainable and collapse when it becomes impossible to meet those promises.

4. Giveaway scams

There are a few different types of giveaway scams that target crypto users.

The first type is where someone pretends to be a well-known figure in the space and offers to give away a large amount of cryptocurrency if you send them a smaller amount first.

The second type is related to phishing, where someone creates a fake website or social media profile that looks like a legitimate exchange or wallet service and asks you to deposit funds into it to receive a larger amount of cryptocurrency.

The third type is where someone promises to double your cryptocurrency if you send them half of what you own. These scams are common because they prey on people who are new to the space and may not be aware of how these things work. They also target people who are eager to get their hands on some free cryptocurrency.

Be sure to do your research before sending any funds to anyone, regardless of who they claim to be.

5. Blackmail or extortion crypto scams

If you’re being blackmailed or extorted, chances are the scammer is demanding payment in cryptocurrency.

They may threaten to release sensitive information or damage your reputation unless you pay up. These scams can be especially effective because they exploit our natural fears and desires to keep our secrets hidden.

However, crypto extortion emails are typically a scam, and the supposed information they possess about you isn’t, in fact, real. So, you can just ignore these emails, and don’t send them any crypto.