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

October 22, 2022 11:18 PM AEDT | By Rupam Roy
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  • A flurry of crypto-related scams has been seen in recent years.
  • Around US$ 139 million in romance scams in crypto was witnessed in 2021.
  • The year 2021 had been a record-breaking year for crypto scams.

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

Apart from the highly volatile nature of the crypto market that has been witnessed in recent years, there is a flurry of scams related to the industry.

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

Let's look at some common types of crypto scams and how traders could avoid falling into them:

Fake platforms or websites:

Crypto scammers often build fake crypto platforms, websites, or even fake crypto wallets to lure investors. The fake platforms generally look similar to the official platforms but they might carry a different domain name or something hard to decipher and differentiate.

These types of platforms ask the investors or users to enter their details like passwords for their cryptocurrency wallets and other related information and within minutes their holdings are withdrawn by the scammers.

Rug pull scams:

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

Many scammers often create fake accounts or pose to be celebrities to gain investors' trust in a fake project. The investors, after trusting the endorsements of the project, invest in increasing their holdings but end up losing their deposits to the scammers.

Romance Scams:

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

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

Giveaway scams:

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

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

Ponzi Schemes:

Another popular kind of scam, the Ponzi schemes, are the scams where the fraudsters pay the existing traders with proceeds received from the new investors. The scammers often promise higher returns with very less or sometimes no risks to attract investors toward a project.

Types of crypto scams and ways to avoid itSource: ©Kalkine Media®; © Canva Creative Studio via Canva.com

Bottom line:

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

Another report by Chainalysis showed that the year 2021 was a record-breaking year for crypto-related scams, with over US$ 14 billion worth of scams took place in 2021 alone. It was around twice the level in the prior year.

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