Unmasking the Top Crypto Scams in 2023 & How to Evade Them

Scams and fraud are sadly persistent problems in the crypto ecosystem. For many outsiders, the very first and only thing they hear about crypto from traditional media is about some grandmas getting scammed on Bitcoin. This, of course, sheds a not-so-great light on crypto as a whole. It is therefore important to keep ourselves educated on the newest scam strategies in order to protect ourselves and also to share this information with our friends and family.

This article will lift the veil on the most prevalent crypto scams today, shedding light on their inner workings and the potential damage they can inflict. Learn about the dangers lurking in the crypto-verse and, most importantly, how to avoid falling victim to these cunning schemes.

What Do All Crypto Scams Have in Common

Although there exists a plethora of various crypto scam strategies, there are some common elements we can track down across the different schemes. Knowing these will serve you well not only in dodging the already established scam strategies but also in recognizing innovative attempts. 

Someone makes first contact - Examples include cold calls, cold emails, or messages. If the offering has no connection to you whatsoever (interests, previous experience, etc.) it should raise critical questions. Of course, there also exist legitimate cold offerings, but it is important to scrutinize them carefully.

Guaranteed high returns - Anyone claiming to provide guaranteed returns on markets is a major red flag. Returns can be estimated based on a bunch of factors, but are never guaranteed with certainty!

Use of overly complex language or technical jargon - This can be a sign that the person is trying to hide some insufficient qualities by confusing you with big words. Some people might actually say “It is complicated and therefore it must be a good investment”, which is, of course, not true.

Submitting your private keys or account details - At some point, scammers may ask you to provide your private keys or CEX account login details. No legitimate service would instruct you to do this, because it gives the other party full control of your assets. If you encounter this type of suggestion, immediately exit the situation.

Heavy marketing or shilling - Especially on social media, often promoted by influencers. These projects are usually of low quality and very often end up being scams.

Main Types of Scam Strategies in Crypto

In this section, we will talk about the basic types of scam strategies that are nowadays very common. You may already know some of these, but others might be completely new.

Investment/Business Opportunity Scams

Investment or business opportunity scams present themselves as unique chances to invest in promising cryptocurrency projects or companies. They often come with enticing promises of high returns in a short time period.

• Common Scenario - A common scenario might involve someone pitching you an exclusive opportunity, often through social media or email. They might claim you could double your investment in a matter of weeks but require you to deposit cryptocurrency into a specific wallet address. Once you transfer your coins, they disappear.
• How to protect yourself - Always do your own research before investing in any cryptocurrency opportunity. Be wary of get-rich-quick schemes and anyone pressuring you to make an immediate decision. Remember, if it sounds too good to be true, it probably is.

Phishing

Phishing is a common online scam where fraudsters impersonate a legitimate organization or service to steal your sensitive information like login details or private keys.

• Common Scenario - You might receive an email or text message that appears to be from your crypto exchange or wallet provider. The message prompts you to click on a link, which leads to a fake website where you're asked to input your account details. Once you do so, the scammer immediately misuses your sensitive information.
• How to protect yourself - Never click on suspicious links or download attachments from unknown sources. Always double-check the sender's details and the website's URL. Use two-factor authentication when available and never share your private keys.

Rigged Smart Contracts and Fake Apps

Scammers create rigged smart contracts or fraudulent apps that appear legitimate but are designed to steal your cryptocurrencies. Smart contracts may contain backdoor functions that may completely drain your wallet.

• Common Scenario - You find a new wallet app on your app store or a promising small-cap DeFi protocol. Once you transfer your assets to this new service you soon find out that they cannot be withdrawn. Developers have disappeared together with client funds.
• How to protect yourself - Use verified and well-known cryptocurrency platforms. Be skeptical of new apps, especially if they don't come from a trusted source. Check if the smart contracts are open-source and if the service has been audited by an independent, established auditor.

RugPulls, Pump and Dump Schemes

In a rug pull, developers abandon a project and drain the liquidity pool, leaving behind worthless tokens. Pump and dump schemes work similarly, but with artificially inflating the price (pump), followed by a rapid selloff (dump).

• Common Scenario - You invest in a new cryptocurrency project that seems promising. However, after a sudden increase in price, the value plummets, liquidity disappears, and the developers are gone.
• How to protect yourself - Avoid investing in projects without a clear roadmap, transparent team, or established history. Be skeptical of sudden price surges based on hype rather than tangible developments. Always diversify your investment to minimize risks.

The Bottom Line

We have gone through the basis of crypto scams, the basic types, as well as how to protect yourself from them. It is, however important to note that scammers are evolving very fast and many new schemes are invented right as you read this. The common elements listed in the first chapter should give you a good amount of understanding of how scams work on a more general level, use them to scrutinize any suspicious events or offerings you might get.

On the other hand, the established scam categories each contain numerous scenarios of what could happen. These scenarios tend to be very believable and you will feel like the situation is very much concerning you. That's why it's important to stay vigilant and critical at all times when operating in the crypto-ecosystem.

Do you know what really pisses scammers off? Education! Share this article with your social group and help them educate themselves about this threat (hopefully, you can make some scammers very angry)