Types of Crypto Scams and How to Avoid Them

Types of Crypto Scams and How to Avoid Them

Like any other financial investment, digital assets are also prone to scammers and hackers. As a newer financial investment class, the crypto industry is still largely unregulated, while at the same time attracting millions of people worldwide who want to invest in these virtual coins. This wealth of opportunity, combined with a lack of regulation, creates an opening for crypto theft.

According to Reuters crypto scams recorded an all-time high of $14 billion, a 78% jump from the $7.8 billion stolen in 2020.

With more investors entering the market, new variants of crypto scams continue to generate . Fortunately, there are ways to identify and avoid such scams. Let’s discuss the most common types of crypto scams, and how to avoid them.

What are cryptocurrency scams?

Cryptocurrency scams are tactics employed by individuals or companies that manipulate victims into sharing their data or transferring their digital assets to the perpetrator’s wallet.

Since cryptocurrency is a newer, unregulated market, it is relatively easy to influence and take advantage of unsuspecting people, compromise their wallets, and steal their assets.

Types of cryptocurrency scams

There are mainly two broad categories of crypto scams: scams that try to access someone’s wallet, and scams that aim to steal from someone directly.

Gaining access to the victim’s wallet

In this scenario, scammers try to access a victim’s digital wallet by stealing their wallet authentication information like passwords, private keys, and recovery phrases, or they try to infiltrate the hardware.

Directly steal from the victim

Here, the perpetrator will try to steal directly from the victim’s wallet and transfer assets to another wallet through fake investment opportunities or impersonation.

Some common types of crypto scams

Fake websites

Scammers often lure investors by advertising fake websites that guarantee huge returns. These websites appear legitimate, and it can be incredibly difficult to distinguish their legitimacy. These websites use domain names that are very similar to the original sites they try to copy, such as popular exchange domains. Initially, these sites also allow the users to withdraw and earn some amount just to gain trust (all while accessing their personal information and account details). After a while, as the user invests more, the site shuts down or declines user requests, and the user loses all the assets.

Fake emails and mobile applications

Email scams are quite common. Many scammers send emails to users while posing as legitimate companies, asking them to make immediate payments or to confirm their account information.

For mobile applications, when a user downloads these apps, these apps then compromise their personal information and account data. For example, a fake app of the crypto exchange Poloniex existed on the Google Play Store, and numerous Poloniex users lost valuable assets as a result.

Pump and dump schemes

In these schemes, someone will artificially hype a particular crypto coin, typically a new coin that does not have much trading history, to inflate the price and subsequent demand for the coin. They “pump” the coin up using social media like Twitter, Telegram, and emails to drive investors. As more investors buy the coins, the fraud company then “dumps” the coin by selling at high prices. This process crashes the asset's value, and its price may fall dramatically within a few minutes.

Romance scams

According to FTC (Federal Trade Commission), 2021 reported romance scams cost users $139 million, which is a 5-fold increase from the previous year. Scammers use dating apps to draw parties in long-distance relationships, and convince their romantic target to buy and invest in crypto. Initially, the investments pay off, but after some time as the victims try to withdraw funds, they realize that they have been duped.

Ponzi schemes

Ponzi schemes are named after Charles Ponzi, a con artist in the 1920s who proposed an investment program that promised returns of 50-100% within 90 days. Initially the program paid off its first group of investors, luring new investors into the program. However, the first group was actually paid with the investments made by the new group - there were no actual returns. Ponzi stole more than $20 million dollars through this pyramid scheme. Ponzi schemes appear legitimate enough to attract new investors, but always falls through for the vast majority of victims.

“Celebrity” Impersonations

Scammers use fake social media accounts of big celebrities on Facebook and Instagram and encourage fans to spend money on tickets to private concerts, chances to meet the celebrity, or charity donations - none of which is actually real.

Giveaway scams

These scams are promoted through social media channels like YouTube or Twitter. They use fake accounts of celebrities or famous influencers and urge investors to spend money on a crazy “opportunity”. One such dubious scheme scammed over $2 million in 2021 through impersonating Elon Musk.

Tips to spot crypto scams

Look out for these warning signs:

  • Non-existent whitepaper - The crypto project does not have a detailed white paper, or the white paper simply does not exist. A legitimate project should provide all the details about the ICO (initial coin offering).

  • Over-the-top guarantees – The project guarantees lavish returns which are too good to be true in a short period of time.

  • Heavy marketing – Every business use advertising to promote itself. But if a new project is using too many endorsements and extravagant claims, it’s a big red flag.

  • Free giveaways – Investment projects that promise free money are scams.

  • Unsecured websites – Websites that do not have a valid IP address or start with “HTTPS” are scams.

  • Payments through social media – Hackers often ask investors to pay through social media accounts.

  • Ask for login details – Established institutions will never require login details through email or any other communication outside of their website.

How to avoid crypto scams

The key to avoiding crypto scams is to stay alert and aware of warning signs.

Do adequate research

Do not invest in a project without doing proper homework. The research includes knowing your company, and team members, and their trading history. Try to gather as much information as possible.

Keep your wallet safe

If you are using a digital wallet, use one that has private keys and multi-layer protection. If you are sending any money through a wallet app, try sending a small amount first to check the legitimacy of the app. Use proper antivirus applications to protect your wallet and passwords.

Avoid emotional manipulation

Scammers often use high discounts, bonuses, messages, and exciting one-time opportunities to allure investors. Do not be hasty in investments. Pause and do a thorough background check before investing in such projects. Avoid cold emails that guarantee amazing returns and ask you to log in through suspicious links.

What to do if you are scammed?

If you are a victim of a crypto scam, it’s important to alert the relevant authorities:

  • Contact your bank to block the debit or credit card you have used to make the crypto payment.

  • Provide your transaction IDs (TXIDs) to the investigating body that can help to find your crypto transaction address.

  • Give all possible details about the transaction to aid an investigation.

Protecting your Cryptohopper account from hacks and scams

When you think your Email or Phone number could be compromised, you can always check yourself if you need to change your information. One of the best tools to check if your account got hacked is ‘ have I been pwned?’ The site checks your email account and mobile phone for any data breaches. Head over to their website and enter your email address or phone number. The website will check if there are any data breaches. It also checks if your account details are revealed to the public online.

Ensure your 2FA is enabled to add a secure layer to your account. To learn more about the data security of your account, visit our blog about How to Secure Your Account from Cyber Attacks.


Crypto scams have become increasingly common. The crypto market is buzzing with promising projects, and has become a high ground for scammers and fraudsters. The best way to avoid scams is to stay attentive, protect your wallet, and do adequate research before making investments.

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