Top 10 Bitcoin Scams and How to Avoid Them?

Top 10 Bitcoin Scams and How to Avoid Them?
TabTrader Team
TabTrader Team
Reading time is 8 min
Reading time is Aug 22, 2022

The cryptocurrency industry offers a whole world full of opportunities. But it is also full of people ready to separate us from our money. How do we protect ourselves from theft and fraud? Read this article on the top 10 Bitcoin and cryptocurrency scams and how to spot them to find out.

What are Bitcoin and Crypto Scams?

A cryptocurrency scam refers to criminal activity aimed at illegally obtaining crypto assets. While it is not always easy to distinguish legitimate crypto projects from fraudulent ones, we hope that this article will give you some useful tips.

How to Spot Crypto Scams

What should one look for in an investment? A good project is:

  • Well-made. No grammatical errors, spelling mistakes, lagging site pages or links that lead nowhere. It is better not to trust a project that is not willing to make an effort to create a good-looking, user-friendly website or well-written whitepaper.
  • Reasonable in terms of promised returns. It's advisable to stay clear from projects that promise unrealistic returns on investments.
  • Socially connected. While an anonymous team is usually not an immediate red flag in the crypto community, an investor should keep in mind that it can be harder to take legal action against a project whose founders have chosen to hide their identity.
  • Covered by the media. It is generally a good idea to google the project name and see what comes up. The projects with extensive media coverage are known to inspire more trust among users than the little-known ones.
  • Has good reviews. A reliable project must have good reviews on well-known consumer review sites. For instance, the TabTrader platform has 4.6 stars on Trustpilot based on hundreds of reviews. Reputation is vital.

How to Protect Yourself Against Crypto Scams

These tips may help when it comes to avoiding crypto scams:

  • Ignore cold calls. If someone reaches out seemingly from nowhere with a crypto investment opportunity, it is most likely not worth your time;
  • Do not put too much trust into social media ads; this is where scammers can easily find their victims;
  • Only download apps from official platforms such as Google Play Store or Apple App Store. It is highly unlikely that scam apps will stay there for long;
  • Double-check the sites used to download software;
  • Keep crypto wallets safe. Don’t tell anyone the private keys;
  • Be cautious while using crypto wallets. If it’s the first time transferring funds to a company, it is better to send a small amount and see what happens next.

Most Famous Crypto Scams

There are currently countless variations of scams in the crypto industry, with new ones emerging every day. Here we will tell you about the biggest Bitcoin and cryptocurrency scams that have been uncovered in the relatively short history of cryptocurrency.

Name-dropping

Criminals are known to exploit the names of well-known brands or individuals to make their scams appear legitimate. They send emails, SMS or call posing as legitimate companies to cheat investors out of their money or steal their personal data.

Bitcoin mining scams

Numerous companies and projects sell shares in their mining farms. It looks safe and profitable: a user doesn’t need to buy expensive mining tools; just invest and enjoy the profit. However, most cloud mining projects are inefficient at best, so an investor is unlikely to make a profit or even break even.

Ponzi or pyramid schemes

A ponzi scheme is an investment scam that generates returns for earlier investors by taking money from more recent ones. 

Crypto phishing scams

Crypto phishing scammers send out emails, SMS or social media posts to lure users to fake sites that look very much like legitimate crypto exchanges or wallets. On these sites, investors are invited to enter their crypto wallet keys and passwords, which are then stolen by the criminals.

Fraudulent ICOs

An initial coin offering, or ICO, is the perfect chance for genuinely promising projects to raise funds. However, it is also a nice opportunity for scammers to steal investors’ money. These fraudsters create a fake ‘new’ project and can go as far as to make a website, release a whitepaper and fill fake social media pages with lucrative and tempting offers. However, as soon as the ICO is concluded, the scammers shut down the project, making off with investor funds.

Pump and dump

This type of scam is similar to the previous one, but not quite the same. Pump and dump involves scammers artificially boosting the price of an unpopular cryptocurrency in their possession through fake positive statements in order to sell it at a higher price.

Giveaway scams

Giveaway scams attempt to trick investors into believing that a major cryptocurrency exchange or a famous individual is hosting a giveaway. However, to receive free coins, users are usually asked to provide their wallet information or send a certain amount of cryptocurrency to a giveaway address.

One example of such a scam is fake livestreams featuring celebrities such as Elon Musk that promote bogus cryptocurrency giveaways. Criminals hijack YouTube accounts and upload deepfake videos to streaming platforms to make their spurious investment offerings appear legitimate.

Fake exchanges and wallets

Scammers are known to create apps or website pages that impersonate well-known brands. Fake project names are usually spelled with a slight typo compared to the original. Fake exchanges and wallets are aimed at collecting users’ personal information.

Bitcoin blackmail scams

This type of scam is as old as time, but unfortunately has become even more common with the growing popularity of cryptocurrency. Blackmailers send out emails in which they claim to have some incriminating information about a user (webcam recordings, recorded visits to adult sites) and ask them to pay a ransom in Bitcoin to keep the data private.

Malware

Internet users can sometimes accidentally download malicious software or visit a site that will automatically install a virus on their device. Then, whenever that person tries to send crypto to someone they know, the malware will automatically replace the recipient's wallet address with that of the attacker. Once the transaction is confirmed by the network, the user will unfortunately not be able to get their money back. Please use antivirus software and double check the recipient's address to avoid being scammed.

It's important to note that cybercriminals constantly come up with new techniques to steal their victims’ money. We strongly advise refraining from risk-taking unless absolutely sure the project is legit.

Where to Report Bitcoin and Crypto Scams

There are a number of organizations that deal with cybercrime:

In addition, a fraudulent page or profile on social media can be reported to that network’s support team.

But what about the money?

If funds have been sent to a scammer directly from a crypto wallet, it is highly unlikely they can be returned after the transaction is approved by the network.

However, if a debit or a credit card was used, there is still a chance that the funds may be recovered. Users should contact the card issuer as soon as possible to either stop the transaction or at least prevent the scammers from stealing more money from their account.

Bitcoin and Crypto Scam FAQ

Is cryptocurrency a scam?

No, it is not. On the contrary, blockchain technology is able to provide safer and faster transactions compared to the traditional financial system. However, the fact that cryptocurrencies are poorly regulated in most countries at the present time creates fertile ground for various kinds of cybercrime.

What is a Bitcoin scam?

A Bitcoin or crypto scam is a deliberate act of deception involving transactions in BTC or other crypto assets.

How do crypto scams work?

Crypto scams usually work by offering fake investments to crypto traders. 

Where to report crypto scams?

While crypto transactions are currently not generally regulated by law, there are several ways to report cyber fraud to the authorities. Some agencies that work with crypto fraud are: the Financial Conduct Authority in the United Kingdom, the Federal Trade Commission in the United States, the eConsumer Agency (for international fraud) and the FBI’s Internet Crime Complaint Center (for fake websites or email extortion attempts). Also, if you notice an obvious social media scam, feel free to report it to the support team.

Looking to get started in crypto trading?

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