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5 Crypto Scams To Watch

Out For
By Coryanne Hicks Benjamin Curry
Contributor Editor Reviewed By

Updated: Jan 3, 2023, 1:21pm

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Scam artists know no bounds—that also

applies to stealing your cryptocurrency.

Swindlers exploit various schemes to lure

victims into fraudulent crypto investments.
They even go as far as entering into fake
relationships through dating apps like Tinder.

Headlines like “Crypto and Romance Scams

Continue to Cost Victims Billions” and “A
Romance Scammer Took Her Life Savings in
Crypto” are becoming commonplace.

In fact, crypto romance scammers conned

victims out of $139 million last year, according
to a 2022 report by the Federal Trade
Commission (FTC). But that’s just one type of
scam of many.

The FTC also found that more than 46,000

consumers reported losing more than $1 billion
in crypto between Jan. 1, 2021 and March 31,
2022. And that might be just the tip of the
iceberg—there are likely more victims out there
who didn’t report their incidents.

Aaron Cohn, partner at Weinberg Wheeler

Hudgins Gunn & Dial, a law firm focused on
financial fraud, says his practice has seen a
strong increase in victims seeking help with
hacked crypto accounts.

“Retail investors considering crypto

investments need to understand the elevated
risks and should employ heightened safeguards
to help ensure they do not become the next
victim,” Cohn says.

To avoid schemes that prey upon crypto

enthusiasts, here’s a guide to common crypto
scams.

What Are Crypto Scams?

Crypto scams are like any other financial scam,

except the scammers are after your crypto
assets rather than your cash.

Crypto scammers use many of the same tactics

employed in other financial crimes, such as
pump-and-dump scams that lure investors to
purchase an asset with fake claims about its
value or outright attempts to steal digital
assets.

This latter type of scam could involve breaking

into a person’s crypto wallet or getting an
investor to send a digital asset as a form of
payment for a fraudulent transaction, says
Shane Cummings, wealth advisor and director
of technology and cybersecurity for Halbert
Hargrove.

The goal is always to manipulate victims into

divulging personal data or transferring
valuable digital assets like non-fungible tokens
(NFTs) to the perpetrator’s account.

“As an instrument, crypto scams are

particularly appealing to nefarious agents who
enjoy cryptocurrency’s swift conversion to fiat
money, ready-to-use third-party transaction
applications and rich obfuscation techniques,”
says Chengqi “John” Guo, professor of
computing information systems and business
analytics at James Madison University.

Types of Crypto Scams

Crypto scams can take many forms. Here are a

few of the most common examples.

Investment Scams
Investment scams involve a bad actor enticing
people to send their cryptocurrency to the
fraudster with promises of “huge gains.”

Scammers can play many parts, such as an

“investment manager,” a celebrity or even a
love interest on an online dating site. Whatever
role is assumed, they promise to grow your
investment if you transfer your cryptocurrency
to them.

If you follow through with their request, kiss

goodbye to your crypto.

Investment scams include pump-and-dump

schemes. A fraudster entices you to buy an
obscure crypto at a “low price,” with promises
that the asset’s value will soon go through the
roof.

When you buy, the price rises, at which point

the scammer dumps their holdings at the new
higher valuation, which causes the price to
collapse, leaving you and any other victims
underwater.

“Typically, the new token is worth a few cents,

or even fractions of a cent. But a little bit of
momentum can drive it up the charts on sites
like CoinMarketCap.com to make it look like
the sky’s the limit on price appreciation,”
Cummings says.

“Given the speed at which new coins are

created and marketed to investors on the
internet without regulation, some investors
looking to earn a quick profit are drawn in by
reports of triple-digit percentage gains in a
digital asset over a short period of time and
want to jump on the bandwagon,” he says.

To spot an investment scheme, look for

promises of excessive profits or zero risks.

These schemes often begin on social media or

online dating sites, so be wary of anyone
contacting you out of the blue about your
crypto assets. Watch out for anyone talking up
a particular crypto asset on Reddit or other
social media platforms, too. These are known
as socially-engineered scams.

Phishing Scam
Phishing scams are an old favorite among
scammers. Fraudsters are aiming to access
your account details, including your crypto
keys. As any crypto user knows, he who holds
the key holds all the crypto.

Phishing scammers often lure you into clicking

on a link to a fake website, where they can then
steal your account details. They can
impersonate well-known companies, like
Amazon or your bank, utility companies, or
even government agencies, and may post links
on social media or contact you directly.

For example, they might send you an email or

text saying a withdrawal was initiated and give
you a link to cancel the transaction.

“The link directs to a fraudulent website and

harvests the investor’s account credentials,
allowing thieves to login and withdraw assets,”
Cummings says.

Anyone can fall prey to a phishing scam and

any digital asset can be the target of such a
scam, as actor and film producer Seth Green
realized earlier this year when four of his Bored
Ape NFTs were stolen.

Upgrade Scams
Software is constantly being updated, and
cryptocurrency platforms are just a form of
software. Since many have become accustomed
to upgrades in the digital age, scammers can
easily trick crypto holders into giving up their
private keys as part of an “upgrade.”

Upgrade scammers can piggyback on

legitimate migrations, such as the recent
Ethereum merge, which had both the
Ethereum Foundation and Robinhood
concerned enough to issue a warning that users
be on “high alert” for upgrade scams.

SIM-Swap Scams
SIM-swap scams are among the newer crypto
scams taking place today. They occur when a
scammer gets access to a copy of your SIM card
and can access all of your phone’s data.

“That information can be used to receive and

use the two-step authentication codes required
to gain access to crypto wallets and other
accounts without the victim knowing,” Cohn
says. “When this happens, the victim’s crypto
accounts can be hacked and wiped out without
the victim even being contacted.”

Fake Crypto Exchanges and Crypto

Wallets
“If you browse your social media handles, you
will come across sites that advertise cheap
Bitcoin (BTC),” says Martin Leinweber, digital
asset product strategist at MarketVector
Indexes. They may advertise cryptocurrencies
at 5% below market value and promise huge
savings when you buy through the site—but
sometimes, these platforms are fake crypto
products.

These fake crypto products often quote

outrageous returns on investment, and users
are typically required to pay a high initial fee
and then frequently asked to invest more and
more.

And when you try to withdraw your funds,

you’ll likely find they’ve vanished.

“A fake crypto wallet is a malware scam,”

Leinweber says. “Scammers use it to infect a
computer and eventually steal the user’s
private key or password.”

To avoid such scams, stick with reputable

exchanges and wallets with long user history.

“If a wallet’s website tries to resemble a

reputable brand, you should consider it a scam
and move on,” Leinweber says.

How to Report Crypto Scams

“Since a lot of the perpetrators of crypto scams

are outside of the U.S., our law enforcement
institutions can only do so much,” Cummings
says. But you should still report any crimes.

You can report crypto scams to the following

places:

Federal Trade Commission

Securities and Exchange Commission
(SEC)
Commodity Futures Trading Commission
(CFTC)
Internet Crime Complaint Center (IC3)

You can also file a complaint to the crypto

exchange you used to send the money.

“Usually, for a claim to be subject to proper

investigation by your brokerage, a formal
complaint is required,” Cohn says. “The
investor needs to figure out whether that is
required and how to do it, and quickly.”

You can also reach out to the media and invite

them to cover the event, Guo says. “Doing so
can raise the public’s awareness of the crime
and assist in mitigating future criminal
activities.”

Just be sure to share with the discretion of

safeguarding your own privacy, he adds.

How to Avoid Crypto Scams

Given the heightened risks with digital assets,

prudence is essential. To avoid crypto scams,
follow these tips:

Don’t respond to unsolicited contact.

“No matter who contacts you from your
crypto brokerage—or any financial
institution, for that matter— the best
practice is not to respond,” Cohn says.
“Look up the official number for the
institution and initiate independent
contact.”
Check before you click. Don’t open
hyperlinks or attachments from unfamiliar
senders.
Keep accounts separate. Don’t link
crypto brokerage accounts and traditional
bank accounts permanently.
Place a hold immediately. “If you
receive notice of unusual activity on an
account, do not wait to place a hold on any
future transactions based on fraud,” Cohn
says.
Use reputable companies. To ensure
your information and crypto security, use a
wallet from a reputable company,”
Leinweber says. He points to Exodus and
MetaMask as reputable hot wallets or
Ledger, Trezor or Bitbox as reputable cold
wallets.
Look for HTTPS. HTTPS—as opposed to
just HTTP—in a crypto exchange or wallet
URL indicates the site has secured and
encrypted traffic, Leinweber says.

How to Get Money Back from

Crypto Scams

Getting your money back from crypto scams is

tricky. “As transactions on a blockchain are
immutable, the likelihood of getting your coins
back is pretty low,” Leinweber says.

That said, he still recommends reporting

crimes to legal authorities. “When you report a
scam, the government might track down the
criminals and get your funds back for you,” he
says.

Ultimately, the best recourse is to take extra

precautions with future assets so that you don’t
become a victim again.

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Coryanne Hicks
Contributor

Coryanne Hicks is an investing reporter, finance

writer and ghostwriter whose work appears in
Forbes Advisor, U.S. News & World Report,
Kiplinger, Business Insider publications. Hicks
has ghostwritten white papers and financial
guidebooks for dozens of industry professionals.
Her U.S. News video series on how to start
investing at any age won an honorable mention
at the 2019 Folio: Eddie & Ozzie awards for best
Consumer How-To video. She was also a 2019
SABEW Goldschmidt fellow for business
journalists. Previously, Hicks was a fully-
licensed financial professional at Fidelity
Investments.

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