The Down and Dirty on Crypto Scams and How to Avoid Them

Written by BTSE

February 16, 2024

The cryptocurrency market has experienced meteoric growth over the past few years, emerging as a promising financial ecosystem that fosters decentralization and innovation. With its unique blend of cutting-edge technology, disruptive potential, and unbridled optimism, digital currencies have attracted millions of investors and enthusiasts worldwide. However, just like any groundbreaking frontier, the cryptocurrency landscape is not without its dark side: scams.


These malicious schemes have hampered the development of the cryptocurrency space, with nearly US$4 billion in crypto stolen in 2022, leaving a trail of disheartened users and empty wallets in their wake. As the adage goes, with great power comes great responsibility; thus, it is crucial for individuals participating in this digital breakthrough to protect themselves from scams and navigate the market with informed caution. 


In this article, we will dive into the down and dirty of crypto scams, then provide valuable guidance on how to avoid falling prey to digital predators.


Common Types of Crypto Scams
In order to better understand and protect oneself against nefarious schemes, it’s essential to become familiar with the most common types of crypto scams. By shining a light on what is lurking in the shadows, we can empower individuals to make informed decisions and minimize their risk exposure. Always remember to do your own research (DYOR).


Here are six types of scams that have impacted the crypto space:


  • Fake ICOs (Initial Coin Offerings): The popularity of ICOs as a means for startups to raise capital has given rise to many fraudulent ICOs. Scammers create elaborate yet fictitious projects and websites with the sole purpose of duping investors into parting with their funds. To avoid falling for fake ICOs, it’s important to thoroughly research the project, its team, its whitepaper, and social media channels before investing. 
  • Ponzi and Pyramid Schemes: These classic scams have found new life in the crypto market. Both Ponzi and pyramid schemes rely on a constant influx of new investors to pay returns to existing ones, eventually collapsing when new investments dry up. High-profile examples of such scams include OneCoin and Bitconnect, both of which left investors with significant losses after their inevitable implosions. Always be cautious of investment opportunities that promise unrealistic returns or require the recruitment of new members or investors. 
  • Pump and Dumps: Also known as a rug pull, this type of scam involves artificially inflating the price of a cryptocurrency through coordinated buying and promotion, followed by a sudden sell-off by individuals holding large quantities of the token. Unsuspecting investors are lured in by the promise of quick gains, but are oftentimes left holding the bag when the price sharply falls, as seen with $SQUID, one of the largest pump and dumps ever. Be aware that even celebrity endorsements can be misleading and might promote scams, as seen with the notorious case involving Kim Kardashian. To avoid schemes such as this, be wary of sudden price spikes and do not rely solely on social media hype for investment advice. 
  • Phishing Scams and Fake Websites: Scammers often create fake websites and emails that closely mimic legitimate platforms, attempting to trick users into divulging sensitive information, such as their private keys, login credentials, or information about the user. To guard against phishing scams, always double-check a website’s URL, use a secure browser, and enable two-factor authentication (2FA).  
  • Social Media and Impersonation Schemes: In this form of scam, fraudsters impersonate famous or trustworthy figures or companies in the crypto space to deceive their targets. They may ask for donations, promote fake giveaways, or claim to offer exclusive investment opportunities. Scammers are particularly adept at exploiting hype surrounding trending subjects, such as ChatGPT and Bing AI, using the excitement and curiosity of individuals to further their schemes. To protect yourself and your funds, always verify the authenticity of social media accounts and never send funds to unverified recipients. 
  • Ransomware and Malware Attacks: Cybercriminals can use ransomware to infect devices, encrypt valuable data, and demand payment in cryptocurrencies for its release. They can also use malware attacks to infect a user’s device in order to drain their resources. It is worth noting that 98% of ransomware payments are made in Bitcoin. To prevent these types of attacks, keep your software up to date, use reputable antivirus software, and avoid clicking on suspicious links or downloading unverified files and software.


By remaining vigilant and informed about these common types of crypto scams, users can better safeguard their assets and steer clear of the traps set by unscrupulous actors.

Warning Signs of Crypto Scams

Having explored the common types of crypto scams, it’s essential to equip ourselves with the knowledge to identify the red flags that may indicate a potential scam. By being aware, you can better protect yourself and your investments.


A key sign of a possible scam is excessive marketing. While legitimate projects will naturally promote themselves, scams often rely on overly aggressive advertising to lure in unsuspecting investors. Be wary of projects that use flashy promotions and bombard you with advertisements, as they may be compensating for a lack of substance.


Unrealistic promises and guarantees are another red flag. Scammers may attempt to entice investors with promises of extremely high returns, minimal risk, or guaranteed profits. It is crucial to remember that the world of cryptocurrency is inherently volatile and no legitimate project will guarantee profits. 


Moreover, a lack of transparency and information is another key indicator. Legitimate projects will typically provide detailed whitepapers, roadmaps, and information about the team. If a project’s whitepaper or other materials are poorly written or difficult to understand, or if the team members are unreachable or have dubious credentials, it’s best to exercise caution. Similarly, suspicious websites and social media profiles can also raise concerns. Be on the lookout for URL mismatches or profiles with limited activity.


High-pressure sales tactics as well as unsolicited contact and offers should also be treated with skepticism. Scammers often use aggressive direct messages, Twitter mentions, or other forms of contact to pressure potential investors into making hasty decisions. Additionally, if a wallet transaction requires excessive asset transfers, it’s a strong indicator that something is amiss. Always do your due diligence, and remember that if something seems too good to be true, it probably is.


Protecting Yourself from Crypto Scams
To prevent yourself from falling prey to crypto scams, conducting thorough research is of paramount importance. Investigate the project’s team and track record to examine their expertise and experience in the industry. Reading the whitepaper is also crucial, as it allows you to evaluate the technology behind the project and gauge its potential for success. Additionally, verifying information with reliable sources, such as industry experts and reputable news outlets, can help you make well-informed decisions.


Utilizing secure wallets and exchanges is another essential step in safeguarding your investments. Opt for platforms that have established a reputation for security and reliability. Enabling 2FA can provide an extra layer of protection, ensuring that only you have access to your accounts. It’s vital to regularly update your security measures and stay up to date on the latest developments in the field.


Maintaining strong online security practices can significantly reduce the risk of falling victim to scams. Use strong and unique passwords for all of your accounts and be cautious when clicking on emails and links you are unfamiliar with, as they could lead to phishing sites or contain malware. Protecting your wallets by using cold storage solutions, such as hardware wallets, and recording your seed phrase physically and storing it securely can help you keep your assets safe from potential threats.


Lastly, it’s crucial to remain skeptical and vigilant. Trust your instincts and be wary of projects that seem too good to be true or raise concerns. Don’t give in to pressure or succumb to FOMO (fear of missing out) when making investment decisions. If you encounter suspicious activity, report it to the appropriate parties, as doing so can help protect yourself and the wider crypto community. 


Ask yourself these questions before investing:

  • How did I first hear about this project? Was it through a reputable channel?
  • Do I understand the project? Can I explain it in simple terms to my peers?
  • How will the project create real value?
  • Does the project need to utilize blockchain technology? (Or, is it in Web3 for the sake of being in Web3?)
  • Is the team behind the project forthcoming about who they are? What is their track record?
  • Does the roadmap make sense? Does it look achievable?


By adhering to these guidelines, you can navigate the dynamic and often complex world of crypto with confidence and security.


Educating Others on Crypto Scams

The importance of raising awareness about crypto scams cannot be overstated, as it plays a crucial role in creating a safer and more secure environment for everyone involved in trading digital assets. By educating ourselves and others on the warning signs and best practices for avoiding scams, we can minimize the risk of falling prey to fraudulent schemes and encourage responsible investing. This, in turn, can contribute to the growth and success of the broader cryptocurrency landscape.

Sharing experiences and knowledge is a powerful way to help others navigate the complex world of crypto. By openly discussing encounters with scams or fraud, we can learn from one another’s mistakes and develop a better understanding of the tactics scammers employ. This collective wisdom can serve as a valuable resource for new and experienced investors alike, providing a solid foundation for making well-informed decisions and avoiding potential pitfalls.


In conclusion, using a reliable exchange like BTSE can significantly reduce the risk of scams, providing a secure environment for cryptocurrency traders. Engaging with a trusted community, such as BTSE’s Discord server, offers valuable insights, empowering you to make informed decisions and avoid potential pitfalls. 

Throughout this guide, we’ve examined the common types of crypto scams and outlined essential protective measures to safeguard your investments. By encouraging responsible participation in the crypto market, we can work towards a safer and more secure environment for all. Remember to stay vigilant, conduct thorough research, and maintain robust online security practices. Join BTSE and its community to contribute to a more trustworthy and resilient ecosystem and to experience a secure and dependable platform for your digital asset needs.

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