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How to Spot Cryptocurrency Scams


  • With the rise of cryptocurrency, scams associated with it are also at their peak
  • There are various crypto scams today, for example, phishing, exit, Ponzi schemes, ICO scams, etc. 
  • This article aims to explain how to spot and avoid cryptocurrency scams

Despite negative sentiment in the cryptocurrency market, cryptocurrencies are still in the focus of interest of more and more investors. Along with the crypto industry’s growth, there has been a significant increase in the number of scams reported across the crypto industry. While institutional investors have the resources to assess crypto projects and market participants, retail investors are still at the mercy of the scant information available to them. In effect, retail investors have no other recourse but to remain diligent while making investment decisions.  

As a relatively new territory in the financial and economic sphere, blockchain and cryptocurrencies still have some unchartered territories. Therefore, it’s natural that some of its elements are still in the gray area, and the industry needs time and effort to mature as a branch of the economy. The key part of this process is how cryptocurrencies are perceived by regulators. Regulation in the crypto industry is currently being discussed and debated by governments around the world. Though regulation can deter most scams by establishing a security framework to protect investors, the nature of crypto-business makes it vulnerable to potential fraud and dishonest behaviors.   

The history of crypto-related scams is very dynamic and reflects the growth of the crypto sphere. The first scams were focused on stealing bitcoins from exchanges and compromising private keys. However, as technology progressed and smart contracts were introduced, the scams became more sophisticated. This article aims to explain the most common cryptocurrency scams and how to identify and avoid them. 

Most common cryptocurrency scams

Fundraising Scams

With the invention of smart contracts, the concept of decentralized fundraising was introduced, thereby opening many opportunities for the industry to grow. However, along with opportunities, it also opened doors for scams and fund degradation. Listed below are examples of fundraising scams:

Initial Coin Offerings (ICOS): ICOs are occasionally held by businesses developing new cryptocurrencies to aid in funding development. Companies pre-sell a portion of their new cryptocurrency to raise this cash. Blockchain technology received a lot of excitement in 2017 and 2018, and as a result, several businesses began conducting ICOs. Through their ICOs, hundreds of businesses raised millions, if not billions, of dollars. However, there were many scams.

The biggest example of an ICO scam is Bitconnect, which was proclaimed to be an open-source cryptocurrency that guarantees investors 40 per cent returns. Unfortunately, Bitconnect was a Ponzi scheme that cost its investors an incredible $3.45 billion.

Initial DEX Offerings (IDO): The ICO paradigm was replaced with the IDO model as decentralized exchanges expanded. ‍An IDO offering is when a cryptocurrency is first listed on a decentralized exchange. A blockchain project uses an IDO to launch a currency on a DEX for the first time in order to attract investment from retail investors. In IDOs, liquidity pools (LP) are crucial since they generate liquidity after the sale.

During the token creation event, a typical IDO allows users to lock in cash in exchange for fresh tokens. A portion of the money received is then combined with the new token and added to an LP before being eventually returned to the project. Scammers follow investors everywhere they go. Phoney tokens and fake cryptocurrency are a couple of the most well-known IDO frauds.

Rug Pull: Rug pulls is a new type of scam, wherein the name comes from the expression “pulling the rug out.” In this instance, a developer lures investors to a new cryptocurrency project before abandoning it and leaving the investors with useless funds. Rug pulls are more frequent in new projects that haven’t been subjected to the same level of scrutiny as more established cryptocurrencies. Newer projects might include flaws allowing their developers to steal value from investors.

Rug pulls accounted for 37% of the over $7.7 billion in total illicit revenue from crypto scams in 2021, compared to 2020 where they accounted for just 1% of the under $5 billion in total illicit revenue.Turkish cryptocurrency exchange Thodex was responsible for most of the lost funds on the list after its founders vanished in April 2021 with more than $2 billion in customer assets. AnubisDAO, a cryptocurrency inspired by Dogecoin, came in second with $58 million, followed by Uranium Finance, a Binance Smart Chain-based exchange, with $50 million.

Apart from fundraising scams, there are many other ways of scams in the industry. Listed below are some of the most common forms of scams in the crypto business. 


Phishing scams happen when thieves look for—or fish for—sensitive data and deceive their victims into providing it. These increasingly sophisticated assaults, which typically take the shape of a pop-up or malicious email, aim to steal critical financial information from an unsuspecting individual.

Exit Scams

The exit scam is the most common fraud in the crypto industry. An exit scam happens when clients transfer money to a project that initially looks legitimate but subsequently quits operating or vanishes with the money. Exit scams have historically been common in which bitcoin exchanges cease operations and refuse to refund consumers’ money.

Ponzi Schemes

These traditional con games usually go like this: “Buy our coins, refer three individuals, and profit is assured!” Anytime a risk-free reward is promised, you may be sure it’s a Ponzi scheme (or some other type of scam). Because they use the money paid by recruits to benefit the founders and early adopters rather than genuinely making money for their consumers, Ponzi schemes are frauds. The final participants in these scams will lose money in the end.

Investment Scams

Investment fraud refers to business opportunity fraud in which one party promises substantial profits in exchange for simply contributing cryptocurrency. Scammers promise victims immediate, wildly improbable riches in exchange for an insignificant investment.

While investing in cryptocurrencies may result in significant rewards for investors, it’s important to distinguish between genuine and fraudulent investment possibilities. Seasoned cryptocurrency traders may know when a deal looks too good to be accurate, but less knowledgeable traders may be more susceptible to this trickery

An example of one of the most notorious cryptocurrency investment frauds to date is BTC Global, which stole over $80 million from 27,000 investors. Victims made deposits into an investment pool over several months that they said were overseen by a master trader.

A bitcoin investor would eventually discover that they could not withdraw funds from their investment account because the so-called master trader had been assaulted and could no longer supply services.

Giveaway scams

Free money may be fantastic to win. Unfortunately, losing everything as a result of a scam giveaway is not. Giveaway ruses may make any promise, from free Bitcoin to a mansion. One victim lost £400,000 after falling for a false giveaway offered by a fraudster posing as Elon Musk.

The attackers updated their Twitter profile pictures to resemble Elon Musk’s current avatar. Then they responded to one of Elon’s Twitter threads by saying they would give away twice as much Bitcoin as the participants had put up while pretending to be Elon.

Malware software

Malicious software that poses as cryptocurrency wallets and miners is known as cryptocurrency malware, and if you install it, it may steal your passwords and private keys. When installing any software, exercise extreme caution. Some cryptocurrencies are exclusively used to spread malware that can steal private keys.

Best practices for avoiding crypto scams

  • The Golden Mountains’ Potential: Always be vigilant when the project or investment seems unrealistically profitable. Scammers often make promises of inflated profits on your investment.
  • False/misleading information: Always pay attention to the information provided. Scammers present false information with purposefully cryptic terminology to trick gullible investors. An illustration might be, “Our artificial intelligence system guarantees you will always win!”
  • No communication or information: Often, con artists lack a customer service or communications division. You will always find these scammers giving poor or nonexistent answers to questions, which should immediately raise a red flag. Genuine projects always have a legitimate customer support system. 
  • False/fake teammates: Another thing to look out for is the team members. Always run a background check on the members of the team and question whether they’re real a d genuine individuals. With scams, when scrutinized further, the team behind your coins is revealed to be made up of fictitious individuals using stock images for accounts. 
  • Do your own research: It is always advisable to do your own research on a project you are interested in than just believing random people on the internet. Genuine projects have all sorts of information available – the whitepaper, social media posts, blogs, official discussions on Telegram or Discord. 

Final words

As a result of the nature of blockchain technology, scams involving the transfer of cryptocurrencies are irreversible. Sadly, you won’t be able to get your money back, and it will be challenging to identify who exactly is the rightful owner of the con artist’s wallet.

However, by alerting authorities about cryptocurrency scams, you may help safeguard others by making it more difficult for fraudsters to commit similar crimes in the future. You can stay one step ahead of scammers and protect your cryptocurrencies if you stay vigilant and adhere to the tips mentioned in this article.

To secure your funds, never share your private key or personal information with anybody and only transmit acquired cryptocurrencies to wallets that you or trusted third party control.

The FLUID team is on the frontline of promoting best security practices and contributing to making the cryptocurrency sphere a more secure and professional sector of the economy, as we understand that only in that way can the whole industry grow.