The 8 Most Common Types of Crypto Scams

How to spot a scammer and how to avoid falling a victim

Ellie Geo
Ellie Geo
May 3 · 7 min read

As the world of the digital currencies has observed a whole bunch of scams in the past decade, mainly due to the lack of institutional regulations, the entire industry is often suffering from being labeled “scam” and “dirty pool”. And for those of us who are strongly involved in this business and are trying to encourage the healthy growth of the ecosystem, that’s quite annoying and even offensive. In the end, Blockchain is meant to bring back trust in a trustless system.

Yet, the best way to protect yourself from falling for some fraudulent crypto scheme is by gaining enough knowledge about the most popular ones and learn how to recognize them.

Here is a list of 8 crypto scams you should be aware of! Read on and yes, you can thank me later!

1. Fraudulent ICOs

Image source: https://blokt.com/news/over-700-french-savers-duped-of-35-million-via-fraud-crypto-investment-schemes

This is perhaps the most common crypto scam in the last 2 years as the ethereum is fertile soil for the faux Initial Coin Offerings. A quickly-fabricated ICO, copying someone else’s whitepaper and creating a hype in the social media channels that urges people to buy. Sounds easy, right? This was the case of Modern Tech (raised $660mln & disappeared), OneCoin (this one is a hybrid — fake ICO & Ponzi. More on Ponzi schemes later in the article), PlexCoin, Confido, Centratech (shilled by DJ Khaled, raised $32mln), Benebit, Vernam, and many other fraudulent ICOs.

And even though Ethereum creates a favorable environment for them, let’s face it — the open-source project is not the one responsible but the total confusion of the beginners in crypto investing who dream of immense gains in no time.

Luckily, there are some certain signs that can warn you about a faux Initial Coin Offering, such as a copied whitepaper; no road map presented; unidentified members of the team; obvious rush in the execution; lack of solid reasons for the token economy and more.

2. Fraudulent cryptocurrency exchanges

The fraudulent exchanges for digital currencies are another type of scam that’s growing bigger and uglier nowadays.

Image source: https://news.bitcoin.com/guide-avoiding-bitcoin-fraud/

So, in order to keep your funds safe, no matter which type of exchange you choose (either direct trading, trading platform, or through brokers), it’s essential to do a bit of homework before you start trading professionally. And the thing you should always assess first, before fees, verification requirements, and payment methods, is the reputation of the particular crypto exchange.

The shady exchanges that are blowing up for a night and then start bragging are something every newbie crypto enthusiasts needs to stay away from.

Stay away from these shadowy exchanges: Nettocrypto, Btc-cap, Capital-coins, Coinquick, Crypto-banque, Cryptavenir, Crypto-infos, Ydconsultant, Cryptos.solutions, Patrimoinecrypto, Cryptos-currency, Ether-invest, Eurocryptopro, Finance-mag, Gme-crypto, Good-crypto, Mycrypto24, and Gmtcrypto.

Meanwhile, some of the exchanges for digital coins, considered as reliable and trustworthy, are Binance, Coinbase, Cex.io, and Kraken.

Always check the security status of the web address!

3. All kinds of Ponzi schemes

For a crypto sage, this might be the easiest-to-spot scam, however, many people are still falling for it.

Ponzi scheme, also called crypto pyramid, is every project that pushes you to recruit new investors in order to maximize your own profit.

Those crypto projects, often promoted as “risk-free”, that are offering an unbelievably high “guaranteed” return on investment, are also Ponzi schemes.

Yet, the best way to prevent yourself from falling into this crypto trap is by seeking to increase your investment knowledge.

Learn your lessons from the past. Remember BitConnect? Basically, you can follow Charlie’s rule of thumb:

Charlie Lee’s tweet about the Ponzi recognition

4. Honeypot crypto trading

The honeypot scam is quite popular in the crypto world. It includes placing a bait that would draw in investors — the honey pot — and when they try to embrace the alluring opportunity a ‘trap’ arouses and so the honey potter takes all the money.

Image Source: https://blog.ipswitch.com/honeypots-catch-winnie-the-pooh-and-hackers-too

There is a great example of a crypto trader who once posted a private key to a wallet with $5 000 worth of ERC20 tokens in Telegram group’s chat, seemingly by accident.

Allured by the opportunity, the rest of the users in the chatroom tried to access the wallet that the key was associated with. However, this wallet had no ETH so if anyone wanted to take the tokens, they would need to transfer ETH first, as you know you need GAS to fuel the transaction.

The scammer, though, put in place a smart contract that was sending all ETH funds directly to another address. Finally, the $5 000 remained untouched while the honeypot mastermind ran off with the ETH collected from his greedy victims.

5. Phony crypto wallet

Shortly after the launch of Bitcoin, countless fake wallets have shown up on the Google Play Store, aiming to steal your private keys and rip you off your BTC too.

Image source: https://blog.avast.com/cryptocurrency-wallet-scams-found-on-google-play

As a result, in Q3 of 2018, Google officially banned the mobile virtual currency mining from Play Store, followed by an update in the developer guidelines of the tech titan, Apple Inc., which officially forbidden iPhone users from mining digital currencies as well.

On the side, if you don’t want to get your funds wiped out by one of those, never flip over for a wallet that promises to take care of your digital money without proper due-diligence.

Further, make your own solid research and find enough legit information from several sources. Asking for recommendations someone who’s deep into the crypto ocean is also not a bad idea.

6. Fake airdrops

Image source: https://steemit.com/airdrop/@voiloo/how-to-detect-scam-airdrop

Airdrops are a general means adopted by new crypto projects to raise awareness and popularity through the distribution of free tokens.

Just remember, there is no such thing like a free lunch! In the case of airdrops, you trade your private info and your “like” and “follow” commitment if it is a real one. If it is a fake one, the price can be much higher. Scammers are making evil-twin-accounts of popular crypto projects and announcing fake airdrops which aim to collect sensitive information about their victims.

And here is where the crypto scammers come into play. Precisely, they contact users informing them about a fake airdrop and asking for the usual credentials required, along with some extra details that will endanger the security of the user’s account.

Unfortunately, some unsuspecting or ignorant people are able to hand over this information in no time.

No one’s saying you should be skeptical about all airdrops, just make sure you know which personal details are really needed.

7. The great impersonators

The impersonator is the most refined sort of scam, without a doubt.

Here, the scammers, who managed to make up to $5000 in ETH per night in the first half of 2018, create a fake social media account, usually on Facebook or Twitter, trying to mimic an actual legit crypto business or its executive.

In recent years, fake accounts of Vitalik Buterin, John McAfee, Elon Musk, and Barry Silbert have appeared. The Binance exchange has also happened to be cloned.

The impersonators’ scam reached such an extent, Vitalik Buterin had to change his Twitter handle to Vitalik Non-giver of Ether.

8. Shady files sent in crypto groups

Image source: https://www.linkedin.com/learning/cybersecurity-awareness-malware-explained/what-is-malware

For some of you, this might sound like a useless warning, however, there are still loads of people who are downloading files from unknown sources, send in some crypto groups or Telegraph chatrooms. An extremely bad idea!

Moreover, these files, often contain a message claiming there is a piece of interesting information about a crypto trend, or that they are official programs or wallet for digital currencies.

In the worst case scenario, by downloading such file, you would allow access to your personal information and ultimately your private accounts.

In the end, I’d like to advise you to stay sane and take good care of your funds of digital currencies. And remember — crypto frauds are exceptions, not the rule!

As you understand, 8 is a number that is way too small to include all sneaking dangers when it comes to crypto scamming, so if there is any other fraudulent scheme we should warn the community about, let us know via one of our social media channels:

AE Ventures

AE Ventures is an investment company providing initial funding, acceleration and advisory support to blockchain projects. The company also runs æternity Starfleet — a full-service global acceleration program for seed stage startups utilizing blockchain.

Ellie Geo

Written by

Ellie Geo

🌈

AE Ventures

AE Ventures is an investment company providing initial funding, acceleration and advisory support to blockchain projects. The company also runs æternity Starfleet — a full-service global acceleration program for seed stage startups utilizing blockchain.

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