What are the types of crypto scams? Everything you need to know

by Arthur · October 22, 2022

The growing interest of people in cryptocurrencies has increased over the years, but along with the positive aspects of the new trends in cryptocurrencies, there are some risks that investors should be aware of.

Aside from the highly volatile nature of the crypto market witnessed in recent years, there is a plethora of scams related to the industry.

Given the increasing number of scams reported in recent days, many of us may know the types of scams related to digital currencies.

Let’s look at some common types of crypto scams and how traders can avoid falling for them:

Fake platforms or websites:

Crypto fraudsters often build fake crypto platforms, websites or even fake crypto wallets to lure investors. The fake platforms are generally similar to the official platforms, but they may have a different domain name or something that is difficult to decipher and differentiate.

These types of platforms ask the investors or users to provide details such as passwords for their cryptocurrency wallets and other related information, and within minutes their holdings are withdrawn by the fraudsters.

Rye pull scam:

Investors who have been in the crypto market may have heard the term. The scammers pump up crypto, NFT, etc., to receive funding in these scams. However, after receiving the money, the websites or coins disappear and the investors lose their deposits.

Many scammers often create fake accounts or pretend to be celebrities to gain investors’ trust in a fake project. The investors, having trusted the support of the project, invest to increase the inventory, but end up losing their deposits to the fraudsters.

Romance Scams:

Romance scams are nothing new, and scammers are now targeting dating apps and social media to find their victims. Scammers lure the other person into a relationship with them and often get details of their crypto wallets and additional financial information and withdraw all their holdings.

According to the FTC report, $139 million in romance scams were reported in 2021.

Giveaway Scam:

Like the phishing scams mentioned above, many giveaway scams on social media and other platforms are also popular now. The scammers claim to have hosted giveaway events, where users are asked to provide their wallet details, etc.

Moreover, some of the giveaway scams also ask the investors to deposit money or cryptos to access the giveaway prize.

Ponzi scheme:

Another popular form of fraud, Ponzi schemes, are the scams where the fraudsters pay the existing traders with income received from the new investors. The scammers often promise higher returns with very less or sometimes no risk to attract investors towards a project.

Bottom line:

According to a June report by the Federal Trade Commission (FTC), over 46,000 people have lost more than $1 billion in crypto-related scams since the beginning of last year. Around half of these total scams reported were through advertisements, emails or social media posts, the report showed.

Another report by Chainalysis showed that the year 2021 was a record year for crypto-related fraud, with frauds amounting to over $14 billion in 2021 alone. That was around double the level of the previous year.

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