10 Common Crypto Scams and Ways to Avoid Them

Blog / 10 Common Crypto Scams and Ways to Avoid Them

Scammers are constantly on the lookout for new ways to steal money, and the huge expansion of cryptocurrencies in recent years has offered numerous opportunities for crypto scams. If you are interested in crypto, you should be aware of the crypto scams. Please continue reading to learn more about common crypto scams and how to avoid them. 

Common crypto scams

Common Crypto Scams

There are numerous types of crypto scams. Among the most common are:

1. Bitcoin Investment Schemes

Fraudsters contact investors in Bitcoin investment schemes. As part of the scam, the so-called investment managers claim to have made millions of dollars investing in Bitcoin and promise their victims that they will profit as well.

To get started, the scammers want a charge. The crooks then simply steal the upfront payments instead of making money. Scammers may also ask for personal identity information under the guise of transferring or depositing payments and gaining access to a person's cryptocurrency. Another sort of crypto scam is the use of phony celebrity endorsements. Scammers utilize real photographs and post them in false accounts, advertising, or articles to make it appear as if the celebrity is promoting a substantial cash return on investment. The sources supporting these assertions appear to be authentic, as they use respected brand names like ABC or CBS, as well as professional-looking websites and logos. The endorsement, however, is a forgery.

2. Rug Pull Scams

The rug pulls crypto scams involve investment con artists' boosting up a new project, non-fungible token (NFT), or coin in order to obtain money. Scammers steal money and then vanish with it. Because the code for these investments prevents customers from selling Bitcoin after they purchase it, they are left with a useless investment.

A notable form of this fraud was the Squid coin scam. To earn cryptocurrency, investors had to play: they had to acquire tokens for online games and then exchange them for other cryptocurrencies. The value of the Squid token has risen from one cent to over $90 per token.

Trading ended ultimately, and the monies were gone. The token value sank to zero as users attempted but failed to sell their tokens. These investors provided the scammers with around $3 million. Rug pull scams are also frequent with non-traditional assets (NFTs).

NFT faces money laundering issues in the art market due to the ease of portability and opacity

3. Phishing Scams

Crypto phishing scams have been around for a while and are still prevalent. In order to collect personal information, scammers send emails containing harmful links to phony websites. To avoid these scams, do not enter secure information via an email link. Always go directly to the website, no matter how authentic the website or link appears to be.

4. Investment Scams

Investment crypto scams frequently promise a lot of money with 'zero risk,' and they frequently begin on social media or online dating apps or sites. Of course, these scams can begin with an unexpected text, email, or phone call.

5. Fake Apps

Scammers also use fake apps available for download to dupe cryptocurrency investors. Although these fake apps are quickly discovered and removed, that doesn't mean they are not having an impact on many businesses.

6. Giveaway Scams

In what is known as giveaway crypto scams, scammers offer to equal or multiply the cryptocurrency transferred to them. Wise messages can create a sense of legitimacy and urgency. This seemingly 'once-in-a-lifetime chance may entice people to send assets immediately in hopes of a quick return.

7. Man-in-the-middle (MITM) Attack

Any information exchanged over a public network can be intercepted by a scammer. When a person is logged in, a thief can access this sensitive information by utilizing the man-in-the-middle attack approach. This is performed by intercepting Wi-Fi signals from nearby trusted networks. To avoid these assaults, the only way is to deploy a virtual private network to eliminate the man in the middle (VPN). The VPN encrypts all data transmitted, making it impossible for hackers to access personal information or steal cryptocurrency.

8. Fake Crypto Exchanges

Scammers may tempt investors by promising spectacular crypto and possibly even some more Bitcoin. However, there is no exchange, and the investor is unaware that they have been duped until they lose their deposit. Stick to well-known crypto exchange markets to avoid an unfamiliar exchange. Conduct some research and visit industry websites before inputting any personal information to discover more about the exchange's reputation and legitimacy.

potential AML risks associated with cryptocurrency exchanges and red flags for AML and CFT

9. Employment Offers And Fraudulent Employees

To gain access to Bitcoin accounts, scammers will mimic recruiters or job seekers. They promise an exciting career but want cryptocurrencies as payment for work training with these crypto scams.

When recruiting remote labor, there are additional scams to be avoided. There are more frauds to avoid while recruiting remote labor. North Korean IT freelancers are attempting to capitalize on remote job opportunities by presenting beautiful credentials and posing as being located in the United States. The US Treasury Department issued a warning about a North Korean scam targeting Bitcoin firms. These IT freelancers seek out assignments involving virtual currency and take advantage of their access to currency exchangers. They then hack into networks to raise revenue or steal data for the DPRK. These individuals also perform other professional IT tasks and use their skills to get insider access, allowing the DPRK's hostile cyber attacks to take place.

10. Blackmail Scams

Blackmail crypto scams are another tactic used by scammers. They send emails claiming to have a record of the user's visits to sexual websites and threatening to expose them unless they reveal private keys or send cryptocurrency to the fraudster.

Ensuring KYC Compliance

There is no denying that crypto platforms represent the world's digital future, and it is critical for authorities to govern this vital sector. Using the Customer Due Diligence (CDD) strategy to combat bad actors in the crypto industry could be a potential solution. It would not only assist authorities in verifying users' genuine identities, but it will also retain a thorough record of all their financial transactions.

Furthermore, Know Your Customer screening techniques should be integrated into the overall system to validate all users when onboarding via their documents in real-time. A good KYC system biometrically validates a customer's identity and compares it to the one on their identification documents. Only users with the necessary information are allowed to join, and criminals are effectively eliminated from the system.

Sanction Scanner offers solutions that support you to comply without harming the customer experience.

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