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Digital Fraud Wiki

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How to Spot a Cryptocurrency Scam

What are cryptocurrency scams?

Cryptocurrency scams are financial frauds that steal from victims using digital currency. These scams take advantage of the anonymity and decentralized nature of cryptocurrencies.

How do crypto scams work?

Crypto scams work, like most financial scams, through manipulation. Scammers exploit victims’ trust, lack of knowledge, and desire for quick profits—or in some cases all three.

In any crypto scam, the fraudster starts with a compelling offer. Many times that’s promises of significant, “easy” returns or exclusive opportunities. They might claim to be an insider with information on a revolutionary new crypto service. They could pose as a new crypto market offering promotions for first-time users. They’ll even rely on the tried and true romance scam to exploit trusting victims who’d never imagined using crypto in the first place.

Scammers create professional-looking websites or platforms that look legitimate at first. These websites often use persuasive language to convince users of their credibility. In reality, they’re packed with malware that can steal personal information or digital currency from the victim outright.

Scammers like to impersonate well-known individuals, influencers, or reputable projects to gain trust. In some cases to gain trust, scammers will allow victims to withdraw actual money. The goal of course is to keep them involved in the scam to increase their final fraud payout.

Most common cryptocurrency scams


Scammers use fake websites or emails that imitate legitimate cryptocurrency exchanges or wallets. These trick users into providing login credentials and private keys, allowing scammers to gain access to their funds. Once the scammer has control of a victim’s wallet, especially if the victim was tricked into authorizing the transfer, the money is theirs.

Ponzi Schemes

These schemes follow the classic Ponzi setup by promising high returns to attract investors. Early investors are paid with funds from new investors, creating an illusion of profitability. As with any Ponzi scheme, it collapses with too many victims, causing significant financial losses for those who joined later.

Pig Butchering Scams

Scammers reach out through cryptic messages or dating apps and work to gain a victm’s trust. After they’ve built rapport, they bring up crypto investing and promise easy or large returns in a short period. They may claim to have a unique trading algorithm, insider knowledge, or a revolutionary new cryptocurrency.

Many victims receive early payouts from the scammer which keeps them trusting that the opportunity is legit. In the end, the scammer keeps the victim in the scheme for as long as possible, fattening them up before the final reveal where they steal everything.

Fake Initial Coin Offering (ICO) Scams

ICOs are fundraising events where new cryptocurrencies are offered to investors. Scammers create fake ICOs, collect funds, and then disappear without ever delivering a token at all.

Pump and Dump Schemes

Another new spin on a classic scam. First, a group of individuals inflate the price of a low-volume or low-value cryptocurrency they own. They spread false information or rumors in places like Discord and Reddit where novice investors share tips. Once they boost the token’s price, the group sells their holdings. The resulting crash leaves other investors with significant losses.

Fake Exchanges or Wallets

Scammers create fake cryptocurrency exchanges or wallets that appear legitimate. When users deposit their funds, the scammers steal them and vanish.

Malware and Ransomware

Malware infecting a user’s computer or mobile device give scammers access to private keys and wallets. Ransomware encrypts files and demands payment in cryptocurrencies to restore access.

Fake Airdrops and Giveaways

Scammers start by impersonating well-known cryptocurrency projects or influencers. They’ll claim they’re giving away free tokens or cryptocurrencies. Users are asked to send a certain amount of cryptocurrency as a fee or to provide their private keys, but the promised rewards never materialize.

How to spot a crypto scam

Spotting Cryptocurrency scams requires careful observation and skepticism above all. Here are some warning signs to watch for:

  • Unrealistic Promises: Be cautious of schemes that guarantee high returns with little or no risk. If an investment opportunity sounds too good to be true, it likely is. Legitimate investments come with risk, and returns are not guaranteed or excessively high.
  • Lack of Transparency: Legitimate projects share their team members, partnerships, and development progress. If information about the project, its team, or its goals is vague or absent, it could be a red flag.
  • Pressure to Act Quickly: Crypto scammers love to create a sense of urgency or FOMO (fear of missing out). They may pressure you to invest immediately without giving you time to conduct proper research. Take the time to thoroughly investigate before making any decisions.
  • Poor Website Design and Security: Scam websites can have poor design, spelling errors, and broken links. They also often lack proper security measures like SSL certificates.
  • Unsolicited Contact: Be suspicious of all unsolicited emails, messages, or social messages. Legitimate projects usually do not randomly contact individuals with investment offers.
  • Negative Reputation or Reviews: Research the reputation of the project or platform online. Look for reviews, comments, and experiences shared by other users. If there are many complaints or warnings about the project’s legitimacy, exercise caution.
  • No Whitepaper or Roadmap: Whitepapers and roadmaps are essential documents for legitimate projects. They outline the project’s concept, technical details, goals, and timelines. If these documents are missing or poorly written, it could mean it’s a scam.
  • Lack of Community Engagement: Legitimate cryptocurrency projects often have active communities. Their social media presence and engage with their supporters will reflect this. If a project lacks community engagement or its online presence seems inactive, it may be a sign of a scam.
  • An investment is too good to be true: Remember, if something feels off or too good to be true, trust your instincts an d not your FOMO. Ask knowledgeable individuals or trusted sources within the cryptocurrency community before investing.

Remember to staying informed, conduct thorough research, and be skeptical. If you have any doubts or suspicions, it’s best to err on the side of caution. NEVER give out sensitive information to someone you don’t truly trust.

Preventing cryptocurrency scams

As with any financial fraud, preventing crypto scams is a challenge. But, AI is one of the most valuable tools in identifying potential crypto scams. Machine learning can analyze large amounts of data, detect patterns, and spot potential scams.

AI-powered Natural Language Processing analyzes and interpret text data like social media posts, forum discussions, and news articles to identify potential scams. It can spot patterns of scam-related keywords or phrases, enabling early detection and warning.

AI-based image and video analysis helps identify manipulated visuals associated with scams. This is useful in spotting fake websites, ads, or deepfake content.

Phishing and malware detection are cornerstones of AI. These help detect and block phishing attempts by analyzing email content, links, and attachments. It can also identify malicious software or ransomware by scanning files and network traffic.

Consumer education and AI-powered fraud platforms are key in fighting against Cryptocurrency scams. To learn more about how leading platforms help fintechs fight fraud, chat with one of our team’s experts.