Top cryptocurrency scams to be aware of

Any time there’s money involved, you can be sure thieves are close behind. The cryptocurrency market is no different. To purchase safely, you need to be aware of some of the most common cryptocurrency scams to avoid falling prey to them.

Fake coins 

A scam coin marketed to cash in on FOMO for the next "big thing."

With so many different types of coins out there, it’s easy for scammers to try to hook you in with a fake coin. You may be looking to add different types of cryptocurrency for diversification. You may also think that there’s a higher potential return if you buy a new coin versus one that has already seen its price soar. 

Scammers prey on FOMO, fear of missing out. They'll point to Bitcoin and other coins that have already soared, get you imagining you'd bought in early, then tell you their coin is the next big thing.

• Pitched around fear of missing out and "getting in early"
• No real use case, whitepaper, or identifiable team
• Pressure to buy immediately‍

Fake exchange

A trading platform built to take deposits without ever letting you trade or withdraw.

Scammers can also fake the exchange itself. The goal of a fake exchange is to get you to deposit your cryptocurrency without you actually buying anything.

Some are simple: a convincing website tricks you into an initial deposit. Others are more elaborate, faking real trading activity so you keep depositing money without realizing anything's wrong. 

BitKRX is one of the most famous examples. KRX is a legitimate South Korean trading platform for more traditional assets. BitKRX was a total fabrication that wanted its victims to believe it was affiliated with KRX. Many victims deposited money only to find out that they couldn’t withdraw it. 

• Name is a near-copy of a well-known exchange
• Trading activity looks real, but withdrawals are blocked or delayed
• No verifiable license or registration

ICO scams 

A fake coin launch that collects funds for a token that never delivers.

An ICO is an initial coin offering. This works similarly to fake coin cryptocurrency scams. The scammers announce that they have a new coin, collect funds, and then disappear. Customers never actually get anything of value. 

The distinction from a fake coin scam is that an ICO promises a new coin, while a fake coin scam usually offers a coin that supposedly already exists. Since the coin in an ICO is new, customers never suspect anything is wrong with it not having a trading history.  

The largest ICO scam was the Petro-scam. It took its customers for US$735 million. 

• No trading history to check
• Vague or missing technical documentation
• Funds collected, no product ever shows up

Exit scams 

An ICO scam that keeps running just long enough to build trust before disappearing.

A cryptocurrency exit scam is the next level of an ICO scam. In an exit scam, the scammers also launch a fake new coin.

The more elaborate versions keep running after the initial offering, letting people trade the fake coin among themselves. The scammers wait for the price to climb, then pull their money out, and everyone left holding the coin realizes it was never real. 

DeFi100 made the crypto news headlines as a potential exit cryptocurrency scam. There is debate over whether the founders ran off with US$32 million raised in an ICO or if hackers have temporarily disrupted operations and took the money while the founders were continuing to try and get the new coin going. 

• Coin trades normally for a while, then goes silent
• Founders become unreachable once prices rise
• Team identity is anonymous or unverifiable

Impostor websites 

A near-identical copy of a real site built to steal your login or funds.

Another tactic scammers use involves trying to replicate a legitimate website so that you give your money and even sensitive information to them instead. They will create a near replica with a URL that is often just one character different from the real URL. 

One common way for scammers to get you onto an impostor website is via email. They send an advertising offer or pretend to be giving you information about your existing account. If you click the link thinking the email is legitimate, you may not realize that you have ended up on a scam website instead. 

• URL is one character off from the real one
• Arrived via an unsolicited email or ad
• Asks for login details or a seed phrase

Fake apps 

A fraudulent or malware-loaded app posing as a legitimate wallet or exchange.

Fake apps work similarly to impostor websites. They might pretend to be a legitimate exchange or a tool that helps you use a legitimate exchange. The app could also be an entirely fake exchange. Once you download the app, scammers try to get you to deposit money or collect your information. The app may also contain malware. 

The Poloniex exchange has been hit with several fake app scams. Even with the exchange working with the app stores, fake apps keep slipping through until defrauded users start flagging them. Be sure to look for apps with the correct credentials and double-check third-party sources to confirm. 

• Not published by the official developer account
• Requests unusual permissions
• Reviews mention missing deposits or app store removal

Technical support impersonators 

Scammers posing as support staff to trick you into handing over account access.

There are two types of technical support impersonators. Some are trying to get you to find them, and others reach out to you. 

One version of the scam is to create a website giving solutions to common problems. For example, you may have forgotten your password, or the website may not function correctly on your browser.

The page ranks in search results with a partial answer, but the contact info on it belongs to the scammer, not the real company. Call that number thinking you're reaching support, and they'll ask for your account details, then use them to drain your account or steal your identity. 

Other scammers will contact you. They may have found your email or phone number, or they could just be spamming everyone and hoping people with accounts respond. They tell you that there is a problem with your account and that they need to verify your information. 

• Unsolicited contact claiming to be "support"
• Asked for account details or passwords
• Pressure to act immediately on an "urgent" problem

Extortion 

A threat demanding cryptocurrency payment to prevent supposed harm.

Cryptocurrency is a good medium for extortionists because it’s irreversible and hard to trace. The scammer will threaten to do something unless you pay them in cryptocurrency. This could be to release your private photos or to drain even more money out of your bank account that they say they have the password to. 

One common extortion scam is the IRS scam. The scammer, usually in another country, says that you owe tax and will be arrested if you don’t pay immediately.

• Payment demanded specifically in crypto
• Claims to have compromising material or account access
• Creates urgency ("pay now or else") 

Pump-and-dump 

Coordinated hype that inflates a coin's price before insiders cash out.

A pump-and-dump is where holders drive up the price of an asset far above its actual value so that they can sell their own shares at a large gain. This is accomplished through combinations of fake news and people placing trades at inflated prices.

Celebrity endorsements are a common tactic too. Once the price soars, the scammers cash out, and whoever bought in last, right before the crash, is left holding the loss. (See our crypto slang glossary for more terms like this.) 

Pump-and-dump scams are harder to identify because trading is speculative and unsuspecting coin holders participate in driving up the price. One way to protect yourself is to have as much information as possible before trading so that you can try to figure out if price swings make sense. 

• Sudden, unexplained price spike with heavy promotion
• Celebrity or influencer endorsements with no substance
• Price crashes shortly after the buying frenzy

How to Protect Yourself From Cryptocurrency Scams  

In the world of cryptocurrency, as with any type of investing, it is better to be safe than sorry. The best way to protect yourself against crypto scams is to keep your security features up to date, choose a reputable wallet, and educate yourself on the risks so you can move with confidence, not "trade" with it, per your brand voice guide.