Cryptocurrency Scams: What They Are and How to Avoid Them

Cryptocurrency Scams: What They Are and How to Avoid Them

Cryptocurrency has experienced a massive surge in interest over the past decade, particularly with the explosion of the non-fungible token (NFT) market that began in 2021. However, such high levels of activity have also led to increasing numbers of cryptocurrency scams.

According to the Federal Trade Commission (FTC), investors have been duped out of more than $1 billion by crypto scams since 2021. This is higher than all other forms of payment and includes average losses of $2,600 per person. In order to avoid losing money to this fraudulent activity, it’s important to first understand what crypto scams are and how to avoid them.

Types of Cryptocurrency Scams

In many ways, the most common crypto scams use the same methods of manipulation and deception that have proven successful in the past. However, the rise of cryptocurrency adds a new dynamic to the equation, and perpetrators have taken advantage of the developing nature of the technology to mislead victims who would most likely recognize other forms of fraud.

If you have an interest in crypto investments, it’s crucial that you are aware of the most common kinds of scams.


Phishing scams are nothing new, but they are effective and thus remain an active weapon in the scammer’s arsenal. In this kind of scam, you receive a message or email with a link. While the email address for the sender or the information in the link might resemble one of your actual contacts, there are typically slight variations or misspellings that are easy to overlook.

If you click the link, it will lead you to a page that steals your credentials, often by directly requesting your username and password. In the case of crypto phishing, the scammer would obtain access to your crypto wallet, allowing them to steal your currency as well as any NFTs that you might own.

Rug Pulls

Rug pull scams have proven especially costly and damaging, so much so that reports have shown that they resulted in $2.8 billion of all scamming revenue in 2021. In this scam, also known as a pump and dump scheme, a developer seeks out investors for a crypto project, creates massive enthusiasm and hype, and encourages significant investments. However, once money has been invested, the developer abruptly pulls out of the project. The price of the token drops to zero, leaving the investors with a completely worthless asset.

ICO Fraud

When a developer launches a new cryptocurrency, it is referred to as an initial coin offering (ICO). ICOs capture the interest of investors because they are exciting and have potential, but they also provide an opportunity for deception. While every ICO presents a certain level of risk, some are guaranteed to lead to financial loss because they are fake.

ICO scams can take different forms. In some cases, scammers create a phony form of crypto and entice investors with excessive advertising via social media and emails. Alternatively, you might come across a spoof of a legitimate form of cryptocurrency. Fraudsters pretend that there is an ICO forthcoming from a well-known currency and trick investors into sending money via a fake website or email address. While they believe that they are purchasing an ICO, they are in fact sending their money straight to criminals in exchange for a non-existent asset.


Celebrities often use social media to interact with their fans, a fact that has not gone unnoticed by scammers. They capitalize on the trust that fans automatically give to people with fame and offer giveaways to smaller or newer investors while impersonating a celebrity or well-known cryptocurrency investor. Once they have a victim’s interest, they promise to multiply or match a cryptocurrency investment that is shared with them. However, once the currency is sent, it vanishes, as does the supposed celebrity.


Scammers also turn to the age-old practice of blackmail to extort cryptocurrency. They take advantage of a person’s fears, typically of repercussions from releasing embarrassing or damaging information. A victim might receive an email threatening to publish a record of visiting adult websites unless a crypto payment is made.

Cloud Mining

Crypto mining is an expensive prospect, and cloud mining seems like a reasonable alternative as it doesn’t require an investment in the necessary hardware. Unfortunately, cloud mining as a whole is a risky way of obtaining crypto and may never reap any profits. As a result, cloud mining sites are notorious for scams and can be especially successful because it may take a while to realize that you have been deceived. In addition, scammers use cloud mining sites to steal your payment details, allowing them to take money directly from your account.

Signs of a Cryptocurrency Scam

Although scammers are devious by nature, and therefore difficult to catch, there are often clear signs of fraud if you know where to look. When dealing in cryptocurrency, keep an eye out for:

  • Excessive amounts of advertising in multiple forums
  • Unrealistic promises and guarantees of financial returns or free money
  • Inadequate information, such as the people involved in an investment prospect
  • Lacking documentation, such as an insufficient or missing crypto whitepaper

If you come across any of these indicators, it is likely that you have encountered a crypto scam. Protect yourself and avoid any further interactions with individuals that you suspect are attempting to defraud you.

How to Avoid Cryptocurrency Scams

While other forms of theft and fraud are often investigated by the police, crypto scams have not yet gained the full attention of law enforcement. For example, The Washington Post investigated a scam that they allege resulted in $66 million in losses for various investors, but police have been reluctant to intervene. This is, in part, because the technology is relatively new, regulations are limited, and the process to investigate and prosecute remains somewhat blurry.

The burden of protection against fraud thus falls to every individual involved in cryptocurrency. When pursuing new investments, it is critical that you:

  • Protect and monitor your wallet to ensure that there is no unauthorized access or suspicious activity.
  • Use AMLBot or AMLSafe to check the crypto project’s wallet or smart contract and ensure that no one has previously flagged the address as unsafe.
  • Avoid mysterious investments, even if they sound promising.
  • Use official platforms for app downloads
  • Regardless of the platform, carefully examine apps and read user reviews before committing to any downloads.
  • Stay informed about legitimate cryptocurrencies and conduct thorough research if you are interested in investing in a new kind of currency.
  • Disregard cold emails and messages about new opportunities as they are most likely scams.
  • Don’t be swayed by flashy advertisements, which can be created and distributed by essentially anyone.
  • Resist the urge to act rashly just because a message indicates that an opportunity will only be available for a limited amount of time.
  • Be realistic about the potential profits that you can make from cryptocurrency.
  • Remember that if it seems like a crypto developer, market, or app is overpromising returns, you have most likely discovered a scam.

Cryptocurrency can be a worthwhile and profitable investment, but only if you proceed with awareness and caution. If you do fall victim to a crypto scam, AMLBot can investigate and try to retrieve your lost funds. If you spot one but are able to avoid it, help protect others by reporting fraudulent activity to AMLBot or the FTC.