Crypto scams and how to avoid them

Sep 23, 2020 01:36 AM ET
Crypto scams and how to avoid them


As with anything that is heavily popular on the internet, bitcoin scams have become prevalent recently. Since bitcoin is a cryptocurrency with no real physical product, plenty of unsuspecting victims have fallen prey to simple and complex scams. 

Cryptocurrencies all require a robust level of knowledge to understand and to be successful, either using, trading or investing in them. Promises of set monetary returns are some of the core inducements that many of these scams manipulate. Such appeals, unfortunately, become the shortfall of those that lose their hard-earned money in these scenarios. Bear in mind, there are many other variations of these scams, but most of them follow identical principles.

  1. Investment programs

Investment programs

These types of scams can take numerous arrangements, but all predicate in a kind of pyramid scheme or multi-level marketing structure. The first form, as with many financial investments, would be a multi-tier investment programme offered by a scammer for investors who may not want to trade cryptocurrencies directly. 

The scammer may present themselves as a very successful crypto investor or trader who hypothesize guaranteed returns on a daily or weekly basis. While they could be, unless a financial services regulator licenses them, they wouldn’t be legally allowed to handle other people’s money. This fact is one of the main red flags.

The second system would be new cryptocurrencies that have no technology or value underlying them. Massive scams that occurred in recent memory include the likes of OneCoin, BitConnect, and PlusToken, to name a few. Typically, the coin is tradeable on an exchange where users will somehow receive a set daily payout due to the value increase of the coin. In these cases, like with the first example, the head honchos of the whole scam operation are merely paying new investors with old investors’ money until the cycle stops, which is how a classic Ponzi scheme eventually crumbles. 

  1. Cloud mining scams

Cloud mining scams

Cloud mining scams are simple operations to run on the internet. As it’s common knowledge that normal computer mining is an expensive endeavor, cloud mining is seen as an alternative since it eradicates much of the expense part. The attraction of legitimate cloud mining is for any participant to join a mining pool. By buying a certain portion of hashing power, users would get rewarded according to their contributions when a block of the coin exists on the blockchain.

Bogus cloud mining companies present a convincing website highlighting price packages for different hash contributions and guaranteed daily or weekly returns. However, the money contributed by customers is never used for actual mining but is instead either kept by the scammer or circulated as newer customers keep coming in. Of course, if the scammers are caught, most of those that invested never receive any money back.

  1. Crypto wallet and exchanges scams

Crypto wallet and exchanges scams

Conmen are well aware of the existence of wallets and scams since these are the top ways that consumers transact with crypto.  In nearly all cases, the scammers would present genuine-looking websites and marketing media identical to some other well-known wallets and exchanges such as Binance and Coinbase. Whether for mobile or desktop, they are also able to create actual applications that run very much as established wallets and exchanges do. They’d initially gain the trust of users as they make payments, but will eventually start defrauding. As a form of a subset, another growing issue with wallets and exchanges is transactional anonymity, making it even harder to track the fraudsters.

  1. Phishing scams

Phishing scams

Phishing is also common with cryptocurrencies. The archetypal scenario involves unsuspecting emails that state someone has won some crypto. The catch is that the winner would have to access their crypto wallets to retrieve the reward. However, the links would turn out to be fake and a trap to access their personal information or to significantly deplete much of their real funds in the wallets.

Tips to avoid crypto scams

The most straightforward tip to avoid these scams is knowledge. All of these tips mainly involve thorough research and verification to ensure safety and authenticity.

For investment programs

  • Any promises of set targets by trading the markets are one of the giant red flags.

  • So-called money managers or investment firms must be licensed to handle money from other people.

For cloud mining scams

  • It’s imperative to verify the domain name of a cloud mining website and whether it registers with a traceable founder. Several methods of researching domain names can achieve this. Furthermore, it’s also imperative to research any directors or founders attached to the company and whether legitimate associations exist.

  • Again, we should consider any offerings of guaranteed daily returns or even promotions as major red flags.

  • Looking at different reviews not associated with the site and speaking to previous customers is also useful.

For crypto wallet and exchanges scams

  • Be sure you’re using registered and highly reputable crypto exchanges and wallets

For phishing scams

  • Never click on unverified and potentially dangerous site links and consequently provide any of your personal information.

A few other scams that are variations of the above mentioned exist. Yet again, many of the tactics to avoid the previous scams are also effective for these below:

  • Blackmail

  • Malware

  • Meet in person

  • Money transfer fraud

  • Free or prize giveaways

  • Ransomware

  • Scam coins


Sometimes it doesn’t take much effort to thoroughly research anything on the internet before making any form of commitment, especially monetarily. Cryptocurrencies have created much euphoria worldwide, making it a breeding ground for scammers to thrive. Utilizing different research and verification methods ensures that no one should part with any of their money or personal information. 

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