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How to detect Crypto Scams

How to detect Crypto Scams

There are a lot of very sophisticated cryptocurrency scams in the blockchain industry. Bitcoin scams in particular are quite popular, since BTC is the largest and most popular cryptocurrency.

In this article we’ll explore 10 of the most common crypto scams, and explain how you can stay safe and detect crypto scams before they happen.


    Top 10 Bitcoin Scams to Avoid in 2021

    The following are 10 of the most common Bitcoin scams, ranked in no particular order.

    1) The crypto address swap scam

    There is a well-known computer virus that can swap a copy-and-pasted crypto address for an address that the hacker controls. For example, you copy your Bitcoin address from your wallet and paste it into an exchange.

    However, the virus replaces the address you copied and substituted the hacker’s address in its place. If you click send without double-checking the address, you’ll send your coins straight to the scammer!

    The copy and paste crypto virus works for multiple cryptocurrencies, not just Bitcoin, and it’s a fairly common crypto scam. That’s why it’s important to double-check that the address you paste is the same address you copied.

    2) The seed phrase scam

    The seed phrase is a set of 12 or 24 words that you can use to recover your crypto if you lose access to your wallet. However, if a scammer gets your seed phrase they can use it to steal all your crypto.  

    That’s why some scammers ask people to share their seed phrase so that they can “restore” their accounts. Alternatively, a scam website may ask you to enter your seed phrase to “load” your account.

    Never share your seed phrase, it’s a trap!

    Sharing your seed phrase is a trap! IMG source 


    If a website, email, or live chat text box ever asks you to share your seed phrase, don’t do it! There’s almost no reason you’ll ever need to share this information. Anyone who asks for it is trying to steal your crypto.

    3) Keeping your coins on an exchange

    Keeping your coins on an exchange isn’t a scam, however, it is an easy way to lose your crypto. When you keep your Bitcoin on an exchange there are any number of things that can go wrong.

    • The exchange can get hacked. Binance getting hacked for $40 million Bitcoin is just one example of many
    • Exchanges can block withdrawals so that you can’t get your coins when you want them
    • Exchanges can go insolvent, as happened with QuadrigaCX
    • Coins on an exchange are more vulnerable to phishing

    Instead of storing your crypto on an exchange, move your cryptocurrency to a hardware wallet or a non-custodial wallet like Exodus. If you do need to put your crypto on an exchange, check the exchange’s reddit and telegram communities first. If they are full of people complaining about unresolved problems, be careful.

    4) Phishing scams

    In a phishing crypto scam, the hacker tries to get the login information for your cryptocurrency exchange. Scammers have several methods that they use to try and steal your email and password.  

    • Send a fake email which appears to be from your cryptocurrency exchange. There is a link in the email which, if you click on it, takes to you a phishing website designed to look like the exchange
    • Promoting a phishing website via a search engine. If a user searches for FTX, for example, a link to a phishing website could appear in the promoted search results

    Once a hacker has your email and login information they will attempt to access your exchange account and steal your crypto. To prevent this scam, set up 2FA (Two Factor Authentication) and always check that the address for your exchange is correct. Also, be wary of clicking on any links that you receive to your inbox.

    5) Guaranteed return scams

    Although each crypto scam is different, there are some common themes to the guaranteed return scam. Typically the scammers promise that if you send your Bitcoin or other cryptocurrency to their platform, they will give some guaranteed rate of return. Sometimes the rate of return is reasonable, like 10% per year. Other times the scammers promise huge gains of 100% or more per year.  

    Usually the scam involves getting a lot of people to deposit their coins onto the platform. Once enough people have deposited their crypto, the scammers steal it all and disappear into thin air. One of the most brazen examples of this scam happened just recently, when two South African men absconded with $3.6 billion worth of Bitcoin.

    Anytime a platform promises a guaranteed rate of return, especially on a highly volatile cryptocurrency like Bitcoin, it’s probably a scam. Follow the old adage “if it looks too good to be true, then it probably is,” and always do thorough research before jumping in.

    6) New coin cryptocurrency scams

    In a new coin scam, a group of people create a cryptocurrency to defraud everyone who invests in it. Once the founders have launched the coin, they begin to promote it hoping that people will buy it and drive the price up.

    If the scammers are lucky the buying pressure can generate a feedback loop that drives the price of the coin higher in a short amount of time. At this point the “team” behind the coin sells everything and takes off with their profits. This is also known as a “rug pull.” It happens often in liquidity pools, where investors farm token rewards which become useless once the team dump their liquidity, and the value of the token plummets.

    Although new coin scams can be quite sophisticated, a few signs can alert you that everything might not be legit.

    • A website that seems to use too many stock images and looks a bit strange, like it’s been created from a template. Frequently you’ll find stock images for team members that don’t match the actual person (or invented team members altogether)
    • Claims of extravagant partnerships even though the cryptocurrency just launched a month ago
    • A website that focuses on what’s going to drive the token’s price higher, rather than explaining the technology

    7) Twitter crypto scams

    Someone who *appears* to be Vitalik Buterin leaves a comment on Twitter saying, “As a thank you to all of my Ethereum fans out there, send me 1 ETH and I’ll send you 2 ETH back!”

    Although this seems like an obvious scam, a surprising number of people fall for it. The scammers usually buy (or hack) a blue checkmark Twitter account and then change the profile picture and description to match the account of someone famous (and wealthy). Vitalik Buterin and Elon Musk are two of the most common accounts that scammers copy, but it could be anyone.

    Suffice to say, send your ETH to one of these accounts and you’ll never get it back.

    8) Fake hardware wallets

    Since it requires a lot of investment this Bitcoin scam isn’t very common, but it can happen. Hackers have been known to distribute compromised hardware wallets. Scammers have access to the device, and if someone uses it the scammers can steal all of the crypto.

    Here’s an article on Nasdaq which shows a picture of a compromised device that someone received in the mail.

    Scammers may also sell compromised hardware wallets via a merchant like Amazon or eBay. Because of the possibility of buying a hacked device, you should always buy a hardware wallet directly from the manufacturer’s website.

    9) Celebrity endorsement scams

    Celebrities have a lot of influence with their followers, which is why it’s unfortunate that they sometimes promote blockchain scams. For example, Kim Kardashian has been criticized for promoting the “Ethereum Max.” coin.

    Ethereum Max is an obvious crypto scam, yet Kim promoted it to her followers, many of whom lost money. The coin is down significantly from its price when Kim was pumping it.

    Giving them the benefit of the doubt, when a celebrity promotes a crypto scam they’re probably doing so unwittingly. Celebrities, just like most people, are not blockchain experts and they might not know the difference between a scam and a real project. They are also being paid to endorse projects, and may not even have vetted them beforehand.

    As a rule of thumb, if a celebrity is promoting a cryptocurrency that you’ve never heard of, it’s probably not a good investment. Why would a coin that is vital to the crypto world need celebrity endorsement?

    10) Fake mobile apps

    In the fake mobile app crypto scam, hackers upload a fake crypto wallet or crypto application to the app store. Since there is less control over apps in the Google play store, this scam is more common for Android users.  

    When users download the compromised app and send crypto to it, the hackers can steal all of the coins. It might not happen right away though, since that would draw attention to the application. The scammers may wait weeks or months for more users to deposit crypto before they take it all.

    To avoid this scam, only download verified apps that have a long history of positive reviews.


    How Scams Affect Bitcoin’s Price

    Cryptocurrency scams hurt the price of Bitcoin and other coins since they destroy people’s faith in crypto. When someone loses their crypto to a scam, they’re less likely to become a convert to blockchain technology.  

    Large scams can also accumulate so many coins that when they sell they can drive down prices. We saw this happen with the Plus Token scam, which accumulated more than $2 billion worth of Bitcoin.


    What to Do if You Get Scammed

    Thanks to blockchain technology you get to be your own bank. That’s fantastic since nobody else has control over your money. However, one of the largest downsides of crypto is that the transaction cannot be reversed if you make a mistake. If scammers find a way to get your crypto it’s most likely gone for good.

    For that reason it’s imperative that instead of focusing on what to do if you get scammed, you should instead focus on not getting scammed in the first place:

    • Don’t leave your coins on an exchange
    • Double check your crypto address before sending
    • Always check the address bar for any crypto website you’re visiting. Are you on the real website or a phishing website?
    • Never give out your seed phrase
    • Don’t download new crypto apps that have very reviews or verifications

    And perhaps the number one rule in crypto: if something seems too good to be true, it probably is. Elon Musk doesn’t want to give you 2 ETH and no platform can honestly promise 800% returns on Bitcoin.

    This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.

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