Types of Cryptocurrency Scams

Generally speaking, cryptocurrency scams fall into two categories:

1. Initiatives aiming to obtain access to a target’s digital wallet or authentication credentials. This means scammers try to get information that gives them access to a digital wallet or other types of private information, such as security codes. In some cases, it can include access to physical hardware, such as a computer or smartphone.
2. Schemes that involve transferring your cryptocurrency directly to a scammer, prompted by impersonation, fraudulent investment or business opportunities, or other malicious means.

Social Engineering Fraud

For social engineering scams, the perpetrators use psychological manipulation and deceit to gain control of vital information relating to user accounts. Successful scammers condition people to think they are dealing with a trusted entity, such as a government agency, a well-known business, tech support, a community member, a work colleague, or a friend.

Scammers will take as much time as necessary to gain the trust of a potential victim. Then, they may eventually ask the individual to reveal private keys or send money to their digital wallet. When one of these "trusted" entities demands cryptocurrency for any reason, it is a sign that something's amiss.

Frauds Promising Romance

Scammers often use dating websites to make unsuspecting individuals believe they are in a real relationship, whether a new or long-term one. Once the individual trusts the scammer, conversations often shift to supposedly lucrative cryptocurrency opportunities and the eventual transfer of either coins or account authentication credentials.

The FBI found that in 2022, over $735.8 million was lost in romance scams, and in 2023, more than $652.5 million was stolen.12

Imposter and Giveaway Scams

Moving down the sphere of influence, scammers also try to pose as celebrities, businesspeople, or cryptocurrency influencers. To capture the attention of potential targets, many scammers promise to match or multiply the cryptocurrency sent to them in what is known as a "giveaway scam."

Well-crafted messaging from what often looks like an existing social media account can create and spark a sense of validity and urgency. This mythical "once-in-a-lifetime" opportunity can lead people to transfer funds quickly in hopes of receiving an instant return. Impersonators claiming to be from the cryptocurrency exchange's support or security teams also contact crypto owners to trick them out of funds.3

Phishing

Within the cryptocurrency industry, phishing scams target people using crypto software wallets. Specifically, scammers need a crypto wallet's private keys—a string of letters and numbers that act like a password and are required to access cryptocurrency.

Phishing scams are the most common attacks on consumers. According to the FBI, more than 300,000 people fell victim to phishing scams in 2022 and 298,000 in 2023. Collectively, those people turned over $52.1 million to scammers in 2022 and more than $18.7 million in 2023.12

Their method follows the playbook of many standard scams: They send an email with links that lead holders to a specially created website and ask them to enter private keys. Once the hackers have this information, they steal the victim's cryptocurrency.

Blackmail and Extortion Schemes

Blackmail is another popular social engineering method scammers use. Blackmailers make the claim to potential victims that they have a record of adult websites or other illicit web pages the user frequents. The blackmailers then threaten to expose the individuals unless they share their private keys or cryptocurrency with them. Such cases represent a criminal extortion attempt and should be reported to a law enforcement agency.

Fraud Involving Investment or Business Opportunities

The adage "if something sounds too good to be true, then it probably is" is one to remember for anyone venturing into investing in general. This is especially true for cryptocurrencies. Countless profit-seeking speculators turn to misleading websites offering "guaranteed returns" or other setups for which investors must invest large sums of money for even larger "guaranteed" returns. Unfortunately, these bogus guarantees often lead to financial disaster when individuals find they can't get their money back.

Sometimes, fraud may not be obvious until you conduct your due diligence or think critically about an opportunity. Many investors fell victim to FTX, a popular cryptocurrency exchange founded by Sam Bankman-Fried, also known as SBF. SBF was found guilty of wire fraud, conspiracy to commit wire fraud, conspiracy to commit securities fraud, conspiracy to commit money laundering, and conspiracy to commit commodities fraud. He and his staff at FTX used billions of customer funds to live a lavish lifestyle and defraud investors.4

New Crypto-Based Opportunities: ICOs and NFTs

Crypto-based investments, such as initial coin offerings (ICOs) and non-fungible tokens (NFTs), provide even more avenues for scammers to access your money. Remember that although crypto-based investments or business opportunities may sound lucrative, they don’t always reflect reality.

For example, some scammers create fake websites for ICOs and instruct users to deposit cryptocurrency into a compromised digital wallet. In other instances, the ICO itself may be at fault. Founders could distribute unregulated tokens or mislead investors about their products through false advertising.

Rug Pulls

A so-called rug pull occurs when project members raise capital or crypto to fund a project and then suddenly remove all the liquidity—and they themselves disappear and become unreachable. Scammers abandon the project, and investors lose all they have contributed.

Cloud Mining

Platforms market to retail buyers and investors to get them to contribute upfront capital to secure an ongoing stream of mining power and rewards. These platforms don't own the hash rate they claim to and don't deliver the rewards after receiving your down payment. While cloud mining isn't always a scam, to keep your money, you must conduct rigorous due diligence on the platform before investing.