What Are Cryptocurrency Scams? How to Avoid Them

Over the years, cryptocurrency has become a popular form of investment. Digital currency is unregulated, which is one of the attractive features of these types of investments. Unfortunately, that has left the door open for unscrupulous individuals to scam people out of money. They have been using sophisticated tactics to trick people out of their hard-earned coins. Let’s take a look at these scams so that you can protect yourself from them. 

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What Is a Cryptocurrency Scam?

These types of scams are a form of investment fraud. In most cases, the criminal steals money from individuals who want to invest in digital currency. Many crypto services and assets are not regulated by governmental agencies, meaning that the Federal Trade Commission does not protect them. If you lose money to these scammers, it is unlikely that you can recover any of it from these criminals.

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Some of the most common cryptocurrency scams include:

Celebrity Endorsement Scams

In some cases, fraudsters will use the image of a celebrity to promote their cryptocurrency investment scam. They use these videos or pictures to target people on social media. They claim that the individual has endorsed their scheme with a celebrity photo. These ads direct to a professional-looking website that tries to persuade people to buy non-existent traditional or digital currencies. When the investor has given these scammers money, their account is closed, with the con artists running away with their investment dollars. Some scams will want the investor to provide them with more money. Once that money is added to the account, the scammers will disappear without a trace. 

Related: Why You Should Invest in Crypto Wallets You Trust

Phishing Cryptocurrency Scams

Email is a popular way for investors to reach potential victims. Scammers will contact people via email, offering a great investment opportunity. Once again, the email will direct the person to a professional website promoting the fake investment scheme. Some fraudsters will ask for an investment to be made in a specific cryptocurrency, while others request for traditional currency. 

Often scammers will contact people randomly via email, offering a can’t-miss cryptocurrency investment opportunity. As you may have guessed, the criminal will cease all communications with the investor when the monies are received. 

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Private keys are used to secure cryptocurrency wallets, and thieves will try to ask investors to share them. Once a scammer has access to those keys, they can steal their cryptocurrency. If you need to download a crypto wallet, it should be from an official website. Some scammers will attempt to clone accounts to steal your information. You always want to check the domain name to ensure it is an official website. 

Exit Scam

Another type of scam is called an initial coin offering. The fraudsters often promote a new kind of cryptocurrency that promises to be the next big investment with high returns. As soon as the investors give money, these criminals vanish with those funds. Scammers use an exit scam to launch a new platform, and they will share this information in hopes of earning money from potential investments in the form of ICO.

After a large amount of money has been raised, the thieves vanish with those investment dollars. These scams are prevalent with digital currency since there are listing requirements, and hard to trace the missing funds. This scam is a version of a Ponzi scheme, giving new investors an illusion of an excellent investment. Many of these scams will go on for an extended period, but the result is the same, with the fraudsters disappearing with all the funds. 

Cryptocurrency Cloud Mining Scam

Cryptocurrency can be mined through a computer by solving complex mathematical problems. Often, this process involves expensive hardware and massive amounts of electricity to mine a single unit. Some criminals have targeted crypto miners to help mine for the currency without the need for electricity or expensive equipment. Criminals will set up fraudulent cloud mining software to steal the mined crypto from a miner. 

Related: How To Avoid Crypto Theft? 

Avoiding Cryptocurrency Scams

Many of these scams are becoming more convincing and sophisticated. If you are not careful, you could become a victim of these criminals. Here are a few tips to protect yourself from a cryptocurrency scam. 

First, protect your wallet and those private keys. If an investment firm wants you to share your keys, then there is a good chance it could be a scam. 

Never answer cold calls. Many scammers will contact victims out of the blue about an investment opportunity. You should never give away personal information or give transfer money

If something sounds too good to be true, it probably is a scam. These scams promise to give you a high return from your initial investment. Get-rich investments are almost likely to be fraudulent. 

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Take your time with an investment. You should never feel pressured to make quick decisions. Some criminals will offer discounts or bonuses if you invest your money right away with them. That is a tell-tale sign that the investment could be fraudulent. 

Always avoid any advertising on social media. Most scammers love to advertise on social media for their fraudulent opportunities. It is easy to create a profile to convince people to invest in the company. Once they have the money, they will disappear with those funds. 

Related: Initial Coin Offering (ICOs): How Do They Work?

Don’t Fall for Those Crypto Scams

Unfortunately, scams are common in the world of cryptocurrency. However, you can take a few steps to protect yourself and your investments. If something sounds suspicious, don’t fall for it. In many cases, it could be a scammer trying to find a way to steal your crypto funds. 

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