Top 8 Cryptocurrency Scams to Watch Out for in 2023

Jay Crypto

Blogger

Cryptocurrencies have revolutionized the ways of making transactions and trades without any dependency on centralized financial entities like banks, thanks to blockchain technology and decentralization. However, this decentralized nature of cryptocurrencies makes them more vulnerable to the scams as there is no central authority to track or foresee these attacks. With the evolution of blockchain technology, scammers have also evolved and they keep looking out for new ways to rob newbies or even the experts. There are numerous types of crypto scams and if you are interested in cryptocurrencies, you should be aware of these attacks and know how to avoid them.

Types of cryptocurrency scams

Here we have listed the top 10 common ways of cryptocurrency scams to watch out for in 2023.

I. Rug Pull Scam

This is the most common type of crypto scam where scammers create hype around a project, collect investments for a new crypto project or a non-fungible token, and then vanish. The term “rug pull” refers to the sudden removal of liquidity from a liquidity pool which makes the token’s price plummet, leaving investors with nothing. One notable example of a rug pull scam is the Squid coin scam, named after the popular Netflix series Squid Game. Capitalizing on the popularity of the series, a coin known as $SQUID was launched by an unknown group in August 2021. Investors had to play to make cryptocurrency; they had to buy in-game tokens and then trade them for other cryptocurrencies. The value of the $SQUID skyrocketed, reaching an all-time high of over $2,800 on September 18, 2021. However, trading suddenly stopped, and people were unable to sell their tokens as the coin's value plummeted to zero.

Reports indicate that scammers executed a rug pull and disappeared with approximately $3 million.

II. Bitcoin Investment Schemes

In Bitcoin investment schemes, individuals pretending to be agents of large Bitcoin investment agencies often contact potential victims and promise high returns on their investments within a short period of time. First of all, they demand upfront money but instead of making money, they simply steal the money. Scammers may also request personal information, including personal identification numbers, bank account details, and other sensitive information, in order to gain access to their victims' crypto wallets. Investment scheme scams may also involve fake celebrity endorsements of a crypto project: scammers download pictures of a celebrity from the internet and photoshop them to make it appear as if the celebrity is the brand ambassador of the project, in an attempt to lend credibility and legitimacy to the fraudulent scheme.

III. Phishing Scams

Phishing scams are the oldest type of crypto scam and people are still falling victim to such scams. To get personal information and crypto wallet key, scammers send a link to a fake website through emails.

When users accidentally open this link, scammers can gain full access to the victim's private key to their crypto wallet. This private key is a unique combination of characters, and anyone who knows it will have full access to the cryptocurrency in the wallet.

IV. Social Media Cryptocurrency Giveaway Scams

In social media crypto giveaway scams, scammers create fake accounts of celebrities and well-known crypto enthusiasts, promising supposed giveaways to lure in potential inexperienced traders. When users click the given link, they are asked to pay an upfront fee to avail themselves of the supposed giveaways.

In this way, users not only lose their payment but also put their personal information at risk by clicking on the link.

V. Ponzi Schemes

Ponzi schemes are everywhere in the traditional payment system and cryptocurrencies are no exception. In Ponzi schemes, scammers trick people into thinking that they are making a legitimate investment; however, they simply take investments from new investors to pay off old ones. Ponzi scammers promise high returns with little or no risk at all; in fact, there are always risks in Ponzi schemes without any guaranteed returns.

VI. Blackmail Scams

In blackmailing scams, scammers claim to have private information of the targeted user’s visit to sexual websites and they threaten to leak the information unless the target reveals his or her crypto wallet keys or sends crypto to the scammers' personal crypto wallet.

VII. Fake crypto exchanges and crypto wallets

In these types of scams, scammers lure inexperienced users into investing in a new high-value cryptocurrency exchange opportunity that promises high returns. The scammers advertise the coin at a price lower than the market's, and before the investors realize that it is a trap, they have already lost their money. Scammers may also use a fake crypto wallet, which is malware; once it is attached to a computer, scammers can have full access to all the information on that computer which may include private keys to the user’s crypto wallet.

VIII. Attack by a man-in-the-middle

When you connect your mobile device to a public Wi-Fi network while making a cryptocurrency transaction, there is a risk of losing all of your crypto assets. Scammers can intercept the public network to gain access to your crypto assets.

How to avoid these scams

Cryptocurrency scams are easy to spot when you know how. Here are some tips on how to avoid these scams. • Watch out for projects which promise high returns without any significant risk. • Legitimate crypto projects would not ask you to pay in advance. • Never click on any unknown link or website. • Always use a virtual private network (VPN) to carry out any crypto transaction. • Never share your private wallet keys with anyone. • Research the crypto token or coin you want to invest in including reading its whitepaper, social media presence, and the team behind the project. • Do not accept free money or crypto as it may be a phishing attack.

Conclusion

Dealing with cryptocurrencies is a risky business as it is not backed by any government or central authority. The best course of action before investing in any crypto project is to confirm its legitimacy and be cautious. Additionally, it is crucial to conduct thorough research and due diligence on the crypto project and the individuals or team behind it.