How To Spot A Crypto Scam

Crypto scams come in many forms and are continuously evolving with innovative new technology. It is becoming easier for scammers to meet their goals as people are completely clueless about the scams out there and how to spot them. This is worrying, especially when it comes to crypto investing as people are getting hundreds of thousands of pounds taken from their secure wallets. To avoid this from happening, it is essential that you understand when and how you are being targeted for these crypto scams. In this article, we will discuss how to spot a crypto scam. 

Types of Crypto Scams

There are two main categories of scammers out there. These are:

  1. Initiatives that aim to get access to a digital wallet or authentication details. This form of scam aims to get all the relevant information to access your crypto wallet so that they can withdraw your funds. 
  2. This scam involves scammers building trust and then aims for you to directly transfer currency through impersonation.

Social Engineering Scams

Social engineering scams use the art of manipulation to get what they want and are one of the most popular forms of scams in circulation at the moment.  They use deceit and psychology to manipulate you into gaining secure information on your user accounts. This form of scam will act as a reputable company and will condition you to think it is a real company such as government websites or tech support or anything that they feel is relevant. 

Scammers will use any angle they can and they won’t rush anything. They know you are going to do it, so they won’t push as this aims to build trust with the unfortunate person. If you have anyone or any business asking for crypto details, it’s going to be a scam. 

Phishing Scams

Phishing scams are also in circulation and are scamming people out of millions. In 2021, it was recorded that over $44m was scammed by phishing scams which means more people need to know how to spot them. These scams aim to also gain information for your crypto wallet. More specifically, scammers are after your private key so they can access your funds and assets. 

They do this by impersonating a company or person and sending an email with a link to a privately made website that is a copy of a real one where you have to put in your private key, with this information, they can steal your assets.  

Romance Scams

Dating apps have been around for a long time now so it shouldn’t be a surprise that they are no strangers to crypto scams. These scams involve long-distance relationships that are strictly online. One party will spend a lot of time building trust with the other party to the point where the innocent party will be persuaded to either buy something or give money in the form of cryptocurrency to the scammer. 

Once the party has sent over the money, the scammer will disappear off the face of the earth never to be seen or heard from again. This form of scam is also called a “pig butchering scam”.

How To Spot Cryptocurrency Scams?

Cryptocurrency scams can be difficult to spot if you don’t know what you’re looking for. Legitimate cryptocurrency will always have disclosure and details regarding the project such as associated tokens. Here are some tips on how to spot a cryptocurrency scam:

Read The White Paper

Cryptocurrencies have a developmental process, but before this, there is usually a whitepaper published. The whitepaper is a published document that includes the protocols, blockchain and outlines and explains the whole network and how it works. If the currency you are looking at investing in doesn’t have this, then it is a scam. There are some that do have whitepapers, but they are not well written, have figures that don’t check out and will often look different to a legitimate white paper. 

Identify Team Members

When you are looking at the whitepaper, it will clearly outline the members of the team and the developers behind the project. There are some instances where an open-source crypto project will not have any named developers, but this is typical for open-source. Some forums and applications are used for these projects, so look around. If you can’t find the whitepaper or don’t have the members outlined, it is probably a scam. So avoid this.  

Examine the Marketing

Cryptocurrency is not seen as a money maker in general as they originate from projects with a purpose. Crypto coins or tokens are designed to help the function of the blockchain. If you are unsure whether a project is legit or not, check social media. If the project is regularly posting on social media and building itself up saying they’re the next big thing, ignore it and move on. It’s a scam. 

You may find that some projects update users on blockchain developments or new security measures being used. If the project updates users on monetary values or how much they have raised, chances are this is not legit and you should do some more research before investing. Most reputable cryptocurrencies will not market their coin, they simply post documents outlining the purpose of the cryptocurrency. 

How to Avoid Cryptocurrency Scams?

If you are worried about falling for a crypto scam, then here are some tips on how to avoid them. If you notice any of these signs, avoid them by not clicking any links, contacting them by phone or in any other way and don’t send them money. Here is a full list:

  • If you have been asked to give your private crypto key, ignore it. This secure key controls your wallet and crypto access. Nobody apart from you needs to know these, and they wouldn’t be normally asked in a legitimate transaction, just like a shop wouldn’t ask for your card pin. 
  • If a project promises the world or offers to make a lot of money and doesn’t have a plan to show how they are achieving it, ignore them. 
  • Ignore investors who say they can grow your portfolio quickly and make you lots of money.
  • Ignore celebrities, these celebrities will not contact you about cryptocurrency. 
  • If you find someone on a dating app, meet them before sending any money. 
  • Ignore texts and emails from well-known businesses that say your account has been frozen, or are worried about security.
  • Some people will receive texts, and emails or are contacted on social media by impersonated government agencies, law enforcement agencies or utility providers contacting you regarding a frozen account and you need to pay crypto or money to unfreeze it. When faced with something like this, contact the agency in question by googling the correct number and reporting the message. 

For many, the rush of crypto has resulted in the whole territory feeling like the wild west. As the market gets larger and more people to start investing, it is apparent that scammers will be here to stay, and they will be learning and creating new methods to scam people. If you have been subject to a scam, speak to an investment fraud lawyer as they can help to recover your losses.