3 Crypto Scams That Could Cost You Thousands

Due to a lack of knowledge and patience, many people see cryptocurrency as a “Get rich quick” scheme. They think they can put $10 or $50 and take out 10 to 100 times more as soon as possible. But this mentality has just helped the scammers create a trap that nobody can deny. 

More than 30% of traders say they have fallen prey to scams at least once. Since cryptocurrency is an inevitable asset to invest in, a new user may fall prey to scams. Hence, you should be more vigilant while tackling such situations, even if you’re getting freebies out of it. So let’s look at three crypto scams that are common nowadays. 

Also read: Bitfinex Report Highlights Pros and Cons of BRC-20 Token Standard

Top Three Scams That Could Cost You a Fortune

#1 Ponzi or Pyramid Schemes

A Ponzi scheme, also commonly referred to as a pyramid scheme, is an age-old fraudulent practice. This deceptive arrangement rewards individuals for recruiting others into a cryptocurrency venture. The funds obtained from new participants are then utilised to pay off those who joined earlier. Ultimately, the scheme typically collapses when no further victims can be found. 

The scheme perpetuates itself by continuously targeting and roping in new victims, as legitimate investments are nonexistent. The main draw of a Ponzi scheme lies in the promise of enormous profits coupled with minimal risk. Nonetheless, these investments always entail risks, and there are no guarantees of returns. So if you see that a project is asking you to invite others to earn, ensure to go far away from the project. 

#2 Rug Pull Frauds 

A rug pull is a type of cryptocurrency scam where the creators of a particular cryptocurrency suddenly vanish, taking all the invested tokens and funds with them. The rug pull scams typically involve fraudulent individuals artificially inflating the value of new crypto projects, non-fungible tokens (NFTs), or coins to attract investments. Once they have acquired the funds, they disappear, leaving investors unable to sell their tokens. 

One well-known variant of this scam was the Squid coin scam, named after the popular Netflix series Squid Game. The value of the Squid token soared from 1 cent to approximately $90 per token. However, trading eventually ceased, and the scammers vanished, resulting in the token’s value plummeting to zero. The scammers profited around $3 million from unsuspecting investors.

#3 Pump-and-Dump Scams

Pump-and-dump scams involve malicious groups artificially inflating the value of a token and then selling off their holdings to make a profit. Insiders who initiated the fraud sell their tokens at an inflated price, leaving traders with worthless coins. The scam is often executed through mass email campaigns or social media platforms, where the fraudulent promotion entices traders to invest. 

These scams involve manipulating the price of a token through the hype and attracting investors, only to dump the tokens and leave traders with nothing but disappointment. After the scammers sell off their holdings, the coin’s value crashes rapidly, sometimes within minutes. Traders should be wary of sudden price surges and be cautious when engaging with currencies promoted through mass communication channels.

Two More Crypto Scams to Watch Out For 

Pig Butchering Scam

The “Pig butchering” scam takes advantage of people’s interest in cryptocurrency by targeting those new to the field. Scammers use flashy fake messages, photoshopped bank profiles, and images of luxury items to entice victims into sending them money. Once the victim falls into the trap and transfers money, the scammer disappears and severs all communication. 

This leaves the victim at a loss with no way to recover their funds. Another tactic involves fake celebrity endorsements, where scammers use reputable company names and create fabricated endorsements to trick victims into investing. Individuals must be cautious and sceptical of too-good-to-be-true investment opportunities and endorsements, especially in cryptocurrency.

Airdrop or Giveaway Scam

Airdropping tokens to cryptocurrency supporters is a common practice to foster a network of followers. However, accepting such airdrops can make your crypto investments vulnerable to scams. When you receive an airdropped token that seems valuable and attempt to exchange it for a more established token, you unknowingly grant additional permissions to a protocol of your crypto wallet.

In a giveaway scam, scammers lure individuals by promising to match or multiply the cryptocurrency they send. The scammers present the opportunity as a rare chance for instant returns, pushing people to transfer funds hastily in hopes of benefiting from the supposed once-in-a-lifetime opportunity. Be wary of such schemes and exercise caution to avoid falling victim to these fraudulent tactics. 

How to Avoid Crypto Scams? 

By following the below-mentioned practices, you can conduct thorough research, enhance security, and make informed investment decisions in the crypto space. 

• Conduct independent research: Take the initiative to research a project before investing. Look for reliable information, reports, and insights into its legitimacy.
• Crowdsource the project info: Find credible resources to assess its development stage, reputation, and the team behind it.
• Utilise online resources: Gather information from Reddit, Twitter, and other platforms. Engage with the crypto community, ask questions, and seek opinions from reputable sources.
• Implement two-factor authentication: Set up 2FA or MFA to enhance account security and prevent unauthorised access.
• Invest in established cryptocurrencies: Consider well-known projects with a proven track record and a strong development team.
• Verify project links: Be cautious of manipulated URLs. Double-check and verify the authenticity of links before clicking on them.

Frequently Asked Questions

How Do I Know That I Have Been Exposed to a Crypto Scam? 

If you have been offered to earn profits by investing your money through a social media platform, you have most likely witnessed a crypto scam. Also, if you have clicked on a link that looks fishy, you might have exposed your information to the scammer. Make sure to clean or reset your phone before valuable information gets wiped. 

Why Shouldn’t I Try Pyramid Schemes, Which Are Profitable for Some? 

Pyramid schemes can be profitable, but only for the first few. You might lose your investment when there aren’t many people to fool. And earning a few hundred dollars is not worth risking a couple thousand. So beware and be far away from the scams explained above. 

How to Recover My Money if I Have Been Scammed? 

If you have sent someone money from your bank account or an online payment provider, you can contact them immediately and inform them of the scam. They have the power to reverse the transaction if reported early. Any payments made in cryptocurrency cannot be recovered as they are untraceable, and there is no law for such scams yet.