Guide to Cryptocurrency Scams

As the adoption of cryptocurrencies continues to increase, more and more malicious parties are entering the space to scam unwary crypto investors. Perpetrators of cryptocurrency scams will find new ways to compromise your data and steal your assets.

One sure sign of a scam is anyone who pressures you into paying with cryptocurrency. That’s because if you pay in cryptocurrency, there’s almost no way to get that money back. And that – is what the scammers are counting on! 

In this article, we’ll be discussing the different types of cryptocurrency scams, how their schemes are set up, and how you can avoid them.

Phishing Scams

Starting off this list with what is arguably the most common type of scam, the phishing scam.

Phishing involves scammers sending out highly convincing messaging in the form of email, text messages, and/or social media posts in an attempt to steal your credentials or sensitive information.

These phishing attempts will seem very convincing for those who are not aware or unable to tell the difference between a real and a fake one.

Below is an example of a scammer trying to impersonate Easy Crypto.

One giveaway to tell this is a fake email is the address. And most importantly, Easy Crypto will never send out emails or any type of messaging requesting for private and/or sensitive credentials such as your login or password.

Below is another example of a phising attempt, where a scammer is impersonating Easy Crypto.

Again, Easy Crypto will never send out this type of messaging in any form. If you suspect or doubt any type of messaging on our behalf, please contact us directly.

How to avoid phishing scams:

• Always double-check the URL of any website before entering your information.
• Be wary of unsolicited messages or emails, especially those asking for personal information or offering free cryptocurrency.
• Enable two-factor authentication (2FA) on your accounts for an added layer of security.

Investment and business opportunity scams

There are companies and/or organisations out there that will make claim to net you lots of money in a short amount of time if you follow a specific guide from them.

While the idea of financial freedom is enticing, when something sounds too good to be true, it usually is.

These schemes are often backed by a group or individuals claiming to be a financial gurus, coaches, or mentors.

For these scammers, look out for claims like the ones listed below to help you spot the companies and people to avoid:

• Scammers guarantee that you’ll make money. If they promise you’ll make a profit, that’s a scam. Even if there’s a celebrity endorsement or testimonials. (Those are easily faked.)
• Scammers promise big payouts with guaranteed returns. Nobody can guarantee a set return, say, double your money. Much less in a short time.
• Scammers promise free money. They’ll promise it in cash or cryptocurrency, but free money promises are always fake.
• Scammers make big claims without details or explanations. Smart business people want to understand how their investment works, and where their money is going. And good investment advisors want to share that information.

Before you invest, check it out thoroughly. Research online for the name of the company and the cryptocurrency name, plus words like “review,” “scam,” or “complaint.” See what others are saying. And read more about other common investment scams.

A subset of investment scams that we all need to be aware of are recovery scams, which we’ll cover below.

Recovery scams

These scams target people who have previously been victims of a previous scam, usually a fake investment scam. They claim to be able to recover funds that have been previously been lost to scammers and claim that they have traced the crypto and know where it is.

They will ask for a recovery fee to start to get the funds back and perhaps slap an additional tax cost on to it as well.

With the public nature of the blockchain it is correct that that funds can be traced, however it is extremely difficult to get cooperation from different parties to return previously stolen funds.

Anyone can see where they are, but only certain companies have the connections with international exchanges and law enforcement to take action.

A legitimate recovery company will only take a fee if they are successful with getting the funds back and will never EVER take an upfront fee.

Cybera is a leading cyber-security reporting platform that can collect the information of previous scams and provide information about if funds are recoverable. To engage with their services please file a report here SCAM:help.

Any organisation requesting a fee upfront to recovery previously lost funds is a recovery scam.

Related: Read our article on fake crypto gurus (or Furus) and how you can identify them.

Social media scams

Nowadays, we spend most of our waking hours connecting with our peers on social media. Well, guess what, scammers know this and will try to take advantage in places where you least expect it.

There are no shortage of social media scams out there. Cyber attacks in social media are getting more and more sophisticated and you need stay vigilant.

Below are a list of red flags that can help you identify potential malicious cyber attacks on social media:

• A request to deposit sum of money into a specific wallet address.
• An influencer or public figure that claims to promise you a guaranteed investment return.
• A social media post offers a reward incentive for depositing money.
• Private message that contains very specific instructions to perform a series of actions.
• Any private message that invites you to join a group outside of the platform that persuades to you disclose your personal information.

In short, if anything that reads or sounds remotely suspicious – it might as well be. Whenever possible keep your social media profiles private and never disclose or share information that may compromise your personal identification.

We’ve got a whole article on this. Read our guide on avoiding social media scams.

Multi-Level-Marketing (MLM)

For these scammers, you may find them reaching out to you via social media channels or it could just well be someone you actually know!

These scammers typically demonstrate the following traits:

• Tell you to pay in cryptocurrency for the right to recruit others into a program. If you do, they say, you’ll get recruitment rewards paid in cryptocurrency. The more cryptocurrency you pay, the more money they promise you’ll make. But these are all fake promises and false guarantees.
• They tell you that they can help you grow your money if you give them the cryptocurrency you’ve bought. Sometimes they asked that you deposit directly into their “holding account”.  But once you log in to the “investment account” they opened, you’ll find that you can’t withdraw your money unless you pay fees or that it is being “locked away”.

This type of scams are also commonly known as pyramid or ponzi schemes (see below).

Ponzi and Pyramid Schemes

These schemes promise high returns with little risk by recruiting new investors to pay returns to earlier investors.

Eventually, they collapse when there aren’t enough new investors to sustain the payouts.

How to Avoid:

• Be skeptical of investment opportunities that promise guaranteed high returns with little or no risk.
• Research the company and its business model thoroughly before investing.
• Avoid opportunities that rely heavily on recruiting new members to generate profits.

Read more: Everything you need to know about multi-level-marketing (MLM).

Job scams 

These scammers advertise (made-up) job descriptions online where they promise you a job (for a fee). Of course, the fee is typically paid in cryptocurrency and there is a 100% chance they walk away with your crypto and your personal information.

For this particular scam, I have to admit, I was definitely shocked when I first learned about it. Be sure to take note of the warning signs:

• You are offered a job without having to do an interview, or the interview consists only of a few emails.  A legitimate job offer will often require an interview and a reference check. 
• The pay offered is higher than usual for the type of work being offered. 
• The “company” uses a web-based email address to conduct business.  Addresses such as [email protected] or [email protected] are fake.
• You are asked to send them a crypto fee. 
• Or that the advertised job involves the person receiving and/or sending money to other places. In the case of crypto, “moving cryptocurrencies on behalf of clients”.

Phone scams

These scammers will contact you via your phone and exhibit the following traits:

• Pretend to be from a government department (e.g Inland Revenue Department), your bank, or a well-known company, and ask for your personal information. 
• They then ask you for personal information such as your date of birth or your address. 

The purpose of doing this is similar to a phishing scam (see below) where they attempt to gather your financial information.

Computer virus scams

For these types of scam it usually involves your computer. The scammer will:

• Give you a phone call saying your computer has been infected with a virus.
• The caller will claim that they can fix your computer as long as you give them you provide them with remote access to your computer.
• The person may ‘crypto jack’ your computer, this is where they make you download some kind of computer script and they are able to use your computer and internet to mine cryptocurrencies.

Money mule

Money mule scams are usually involved in conjunction with other scams such as investment or romance scams. The scammer will likely persuade you to do one or more of the following acts:

• Send you a sum of money or cryptocurrencies and tell you to send the rest onto them. 
• If you question the source of the funds, these scammers may come up with an elaborate story about how they’ve amassed such wealth while trying to cover up the fact that these funds are usually stolen or not legitimate. 
• They will offer to deposit cryptocurrencies into your wallet and ask that you sell the crypto for them.
• For your “effort” and “involvement”, they will offer that you keep some portion of the fiat money yourself while transferring the remaining money into their (domestic or international) bank account.

In New Zealand, Money mules may be prosecuted for participating in criminal activities and sentenced to jail time.

Money mules’ own personal information may be stolen by the very criminals they are working for and used for other criminal activities

Learn more: Read our case study on crypto money mules.

Romance scam

Romance scammers use a fake profile account on dating apps or social media sites. And yes, that good looking picture you see online; that’s probably not them.

With this fake profile, these scammers quickly find a target and start to connect with them through direct messaging. And these are some of their typical characteristics:

• They shower you with compliments and tell you how fond they are of you.
• They start sharing their plights and troubles with you and how they wish they were with you.
• They ask you for money to cover some type of immediate or emergency expense.
• Throughout the online relationship, the scammer will make excuses about why a face-to-face meeting can’t happen. Saying the scammer is in the military and stationed in a different country is a common excuse.
• The person provides inconsistent details about his/her life.

Romance scammers are very patient and very persistent. We’ve learned that it is not uncommon for victims to send romance scammers money multiple times over a period of time.

Romance scams are a type of psychological scam that can be very devastating for vulnerable victims.

Fake Initial Coin Offerings (ICOs) and Tokens

Scammers may create fake ICOs or tokens to lure investors into buying worthless or non-existent cryptocurrencies. They often use slick marketing and promises of huge returns to attract victims.

How to avoid fake ICO’s and tokens :

• Verify the legitimacy of the ICO or token by checking if it is listed on reputable cryptocurrency exchanges.
• Research the team behind the project and their track record.
• Read the project’s whitepaper carefully and look for signs of a well-thought-out plan and realistic goals.

Pump and Dump Schemes

In these schemes, scammers artificially inflate the price of a cryptocurrency by spreading false information or coordinating large purchases.

Once the price has risen, they sell off their holdings, causing the price to crash and leaving other investors with significant losses.

How to avoid pump and dump schemes:

• Be cautious of investment tips or recommendations from unknown or unverified sources, especially on social media.
• Do your own research before investing in any cryptocurrency.
• Be wary of sudden price spikes that are not supported by solid news or developments.

What to do if you think you’re being scammed?

Cryptocurrency scams can be sophisticated and convincing, but by staying informed and vigilant, you can protect yourself from falling victim.

Always double-check the legitimacy of any investment opportunity, and never share your private keys or personal information with anyone you don’t fully trust.

By following these tips, you can safely navigate the exciting world of cryptocurrencies and make informed decisions about your investments.

If you find yourself in this situation – or if you’re ever in doubt, follow the procedures below:

1. Block Contact from Scammers: Stop all contact with the scammers and treat any future contact from unknown people with extreme caution.
2. Report the Incident to Your Bank: Contact your bank immediately.
   Inform them about the suspected scam and provide details like the account(s) involved and the nature of the scam attempt.
3. File a Report with SCAM:help: In partnership with Easy Crypto, Cybera is a leading cyber-security reporting platform. By quickly completing this report you will be able to gain important information about what is happening. This report can also be forwarded to other organisations for assistance, like us and the Police.
4. Get in touch with NetSafe: This New Zealand organisation is dedicated to online safety. Visit their website (https://netsafe.org.nz/) for information on how to get in touch with them and support.
   Their freephone number is 0508 638 723 (NZ only).

We are also here to help you If you’re in doubt, feel free to reach out to our helpdesk team and one of our team members will assist.

Further reading: Learn how you can identify DeFi scams.