A Guide to Common Crypto Scams

The increased popularity of cryptocurrency has unfortunately led to a rise in fraud, including scams, phishing attacks, and Ponzi schemes. Because crypto transactions are often irreversible and there is no central bank to appeal to, scammers are drawn to this space. Understanding their tactics is the first and most important step in protecting yourself (Agarwal et al., 2024).

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Investment Schemes

These are the most common and costly types of scams. They often promise huge, guaranteed returns with little to no risk.

• Ponzi Schemes: These scams dispense alleged "profits" to early investors using funds obtained from new investors. Organizers often entice newcomers with promises of significant returns, but the system inevitably collapses when they can no longer attract enough new money. Famous examples include GainBTC and BitConnect, which cost investors billions (Agarwal et al., 2024).
• Fake Initial Coin Offerings (ICOs): An ICO is like a crowdfunding campaign for a new crypto project. Scammers create fake ICOs for projects that don't exist, using professional-looking websites and fake celebrity endorsements. After receiving substantial funds from investors, the organizers simply vanish.
• Pump and Dump Schemes: This involves a group of individuals artificially inflating the price of a little-known cryptocurrency ("pumping") through misleading positive statements and hype on social media. Once the price is high, they sell ("dump") all their coins at once, causing the price to crash and leaving new investors with worthless assets.

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Social Engineering Scams

These scams rely on manipulating human psychology rather than technical exploits.

• Phishing Schemes: This is a classic. Fraudsters create fake websites and emails that look identical to legitimate ones (like a crypto exchange or a wallet provider). They trick you into entering your private keys or login details, which they then use to steal your funds.
• Crypto Romance Scams ("Pig Butchering"): Scammers build a romantic relationship with a target over weeks or months. Once trust is established, they offer "investment advice" and guide the victim to send money to a fraudulent website or wallet, before disappearing with the funds.

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