I am sure you have heard of people losing their money to scammers who always come up with new ways to rip off their unsuspecting victims. 

The same is happening in the world of digital currency. The majority of users still haven’t gotten a grip on cryptocurrency. Scammers know this, and they are taking advantage of it. It turns out that what you don’t know does hurt you after all. 

Reports show that in 2021, scammers took home a whopping $14 billion.  The numbers are likely to rise in 2023. We are here to make sure you are not part of these stats.

In this article, we’ll discuss some of the most common cryptocurrency scams in the market and how to avoid them. Let’s get right to it.

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Common Cryptocurrency Scams in 2022

A cryptocurrency scam happens when someone deceives you to get your tokens. The best way to avoid this is to know the techniques scammers use. 

These scammers lure potential victims into sending them their personal information or digital currency. They mostly use social media and the internet at large. Here are some of the common ways crypto scams happen.

1. Initial coin offering scams

Crypto companies use Initial coin offerings to raise capital for developing their crypto projects. The truth is that it is tricky to differentiate between a legitimate crypto start-up and a scam project.

Initial offering scammers collect funds from investors and then leave the crypto project unfinished. The projects are often highly publicized to catch the attention of the market.

One of the ways of identifying a legitimate crypto company is by looking at the whitepaper. The whitepaper contains data that helps convince investors to fund a project. The document shows that the company is professional and legitimate. It has a detailed plan of the project timeline.

That said, you should still remain cautious. Why? Some scammers go to the lengths of copying the white papers of other promising crypto tokens and sharing them with their customers.

If a large part of the Initial coin offering goes to venture capitalists and project developers, there is a high chance that the project will only last for a while. The developers tend to disappear without communication.

2. Pump and dump scams.

Pump-and-dump cryptocurrency scammers convince their potential customers to buy crypto and promise its price will rise.

Some of the most common pump-and-dump scams use celebrities to endorse their crypto tokens. They mislead the public into thinking the project has enormous potential. 

The hype created when many people buy the tokens causes a high demand. Investors rush to purchase crypto tokens at a low price. Gradually, the crypto token increases in value. The developers sell their shares at the peak and leave the project after they make a killing. The price eventually goes down.

For instance, Kim Kardashian posted an asset called Ethereumax tokens on her Instagram. The post caused thousands of her followers to invest in it. She was found guilty of touting crypto tokens. Kardashian agreed to pay $1.26 million for her charges in court at the time of writing. 

3. Phishing scams

Phishing is a trick used to steal information, money, passwords, login credentials, and private keys in the case of cryptocurrency. 

The most common phishing methods include sending links on email and platforms like WhatsApp or Telegram. They use these links to lure their targets to their websites so that they can get the information they require.

Some scammers use search engines to lure their targets. They sponsor ads with URLs that are similar to established cryptocurrency companies.

The scammers send emails or text messages claiming they are from a legitimate crypto company. They will give you an offer too good to refuse with a link to their website. They’ll ask you to enter your details.

A famous phishing scammer, Monkey drainer, stole 700 Ether tokens in October 2022. The stolen tokens were an equivalent of around $1 million at the time of writing.

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How to avoid crypto scams

Do proper research

Do your due diligence. I know this looks like something Harvey Specter from Suits would say. Researching the token you are interested in before investing will save you money and time.  

A genuine Cryptocurrency probably has a whitepaper to support it. You can read it to find out how it was created and works. Additionally, look up the project team members. A look at their social media profiles and search engines will tell you their credibility.

A further look into its tokenomics will help you evaluate whether you can invest. Tokenomics is the economics of crypto tokens. It has elements of mathematics, human behavior, and investors’ interest to give you a balanced economic model. 

Knowledge about the token utility, the total supply of tokens in the market, and the distribution method are all part of Tokenomics.

You can further check online reviews to see other people’s experiences with the token. 

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Secure your Cryptocurrency wallet

The main intention of Crypto scammers is to steal your tokens. They can easily do that by accessing your crypto wallet. To avoid this, you need to ensure your wallet is secure.

An excellent place to start is to ensure your digital wallet has multi-factor authentication. It ensures that a code is sent to your phone or email before you access the wallet. 

An alternative method would be to use a hard or cold wallet that is stored offline. You can hold tokens on a USB drive. However, you should make sure you don’t forget your password since you would risk losing your crypto tokens.

Avoid using public Wi-Fi to access your cryptocurrency wallet. Hackers can steal your information, especially when the Wi-Fi is not encrypted. Using a good VPN could come in handy when using public Wi-Fi.

Look out for fake website links.

Scammers trick their potential victims into thinking they are legitimate businesses. They use websites with a similar URL to a reputable cryptocurrency company. Their goal is to get information like Login credentials and private keys.

Therefore, to avoid falling prey to their tricks, use the correct website URL before entering your login credentials. Search for the website URL instead of clicking links sent via email or social media.

To avoid such mistakes, save the correct links on your browser favorites or bookmark. You can identify fake and unsecured websites by checking if they have an HTTPS security protocol enabled.

FAQs

Can you track crypto scammers?

It is possible to track down a scammer on a cryptocurrency exchange. The exchange has the KYC information of all its users. Contacting the Crypto exchange about the scam can help you get their information.

What are cold and hot wallets?

Hot wallets are connected to the internet, while cold wallets are not. Cold wallets are considered safer than hot ones.