The number of financial scams for consumers to avoid was already nearly endless, but this figure exploded when digital currency — also called cryptocurrency — became mainstream. According to the Federal Trade Commission (FTC), more than 46,000 people reported losing over $1 billion in crypto to various scams from January 2021 through June of 2022, and that figure only includes people who willingly shared this information with authorities.
The fact is, consumers tend to know very little when it comes to how digital currency works or how to keep their digital assets safe. And since cryptocurrency payments do not come with any legal protections or government assurances, crypto scams are especially attractive for thieves. Also note that there's no bank or other centralized authority to flag suspicious crypto transactions, and that all crypto transfers are irreversible. With these details in mind, it's easy to see why the industry is ripe for fraud.
If you are interested in investing in crypto or you have digital assets already, you'll want to know how the most common types of crypto scams work, how to spot them and what you can do if you become a victim. Read on to get an overview of the most common crypto scams authorities are seeing right now, plus how to spot them early.
Crypto scams to watch out for in 2023
Scammers are incredibly creative when it comes to luring you into a trap or getting you to share your personal information. For that reason, many crypto scams involve some type of impersonation, along with a selection of carefully crafted lies that are often tailored based on the victim they're targeting. The most common types of crypto scams perpetrated right now include the following:
Blackmail and extortion scams
The Federal Trade Commission (FTC) says some scammers will claim they have embarrassing personal information, including your own photos or videos, to lure you into a trap. They will typically threaten to make the information public, but with the promise of keeping your information private if you do what they want. Their demands always seem to be the same — you can make the problem disappear if you send them a crypto transfer right away.
According to the FTC, you should report blackmail and extortion scams to the Federal Bureau of Investigation (FBI) immediately. Also, don't send the thief any money, and don't communicate with them at all.
"Business opportunity" scams
This scam can play out in a number of ways, but it typically takes place when someone contacts you with a business opportunity with the promise of helping you grow rich. In some cases, scammers get you to fork over your crypto by telling you they can provide you with exceptional returns, even doubling or tripling your crypto assets overnight.
Either way, you should know that there's no such thing as "guaranteed returns," and that's especially true when it comes to digital assets. If someone contacts you and says they can work wonders with your crypto and make you wealthy in a hurry, don't reply.
Fake job listing scams
In other scenarios, thieves will create fake job listings or send unsolicited job offers in order to lure new victims to their scheme. The "jobs" they're hiring for are often in the crypto field, including things like crypto mining and recruiting other crypto investors.
Either way, these jobs all have one thing in common — you have to make a payment in crypto to get started. The scam can take on many forms from there. The scammer might convince you to make additional payments, or they'll make a deposit in your bank account and ask you to send them cash only for their original deposit to fail.
Giveaway scams
This type of scam promises you free money or another type of prize if you fall in line with whatever they want you to do. Many scammers pose as celebrities or influencers in order to lure in new victims who don't know better, and it can be hard to determine what's actually real.
As an example, crypto scammers constantly try to impersonate Elon Musk over social media and video in order to get people to send in digital assets. An Elon Musk "Freedom Giveaway" crypto scam that took place on Twitter even promised free crypto to the first 1,000 new followers who signed up, but the whole thing was a sham.
Impersonation scams
The giveaway scam example we outlined above is also an impersonation scam, but there are many other impersonation scams to be aware of. For example, crypto thieves will say they're from the government or law enforcement in order to gain some credibility. From there, they'll convince you your accounts or assets are frozen as part of an investigation, and that you can pay them in crypto to resolve the issue.
Other times, they'll say they're from a large company like Amazon, Microsoft, FedEx or even your bank in order to convince you of some other storyline. In the end though, the goal is getting your crypto no matter which lies they use.
Investment scams
The FTC says that, in this scam, an "investment manager" you have never heard of reaches out to you with an incredible investment opportunity. Of course, the process starts with you sending crypto to their online account or downloading an app that will help you get rich, and you need to do it in a hurry.
In many cases, these scammers will have legitimate-looking websites that use complicated investing jargon to seem real. If you log into your account with the platform, however, you may be blocked from withdrawing your money or only able to access your cash if you pay an exorbitant fee.
Phishing scams
A phishing scam takes place when someone pretends to be someone else, usually a company, in order to get you to willingly share private information. Many crypto phishing scams aim to get you to share your private crypto wallet keys, usually by sending an official-looking email that asks you to log in to your account.
Pump and dump schemes
This scam takes place when a group of people get together to entice others into investing in a particular coin, usually by posting on social media to build up hype. From there, scammers work together to drive up the price of the asset until they all simultaneously cash out and leave all the new and excited investors holding the bag.
Romance scams
Finally, remember that romance scams are alive and well in the world of cryptocurrency. With this type of scam, someone pretends to become your love interest online, usually by weaving an intricate web of lies about themselves. These scammers can spend months getting you to build up romantic feelings for them, at which point they ask for crypto payments or lure you into investing crypto with them so you can spend your lives together.
At the end though, the romantic encounter was always fake, and the person on the other end of the line wasn't who they said they were.
How to spot a crypto scam
When it comes to crypto scams, there are quite a few telltale signs that let you know you're about to be duped. Watch out for the following:
- Anything that seems too good to be true: If you encounter any crypto offer that seems so good it can't possibly be true, your instincts are likely spot on. Nobody is going to offer you free crypto for doing practically nothing, and a little research can help you spot big claims that aren't backed up by any data.
- "Pay to play" job postings: You should never have to pay a fee to do a job or secure a position in the crypto industry. If someone makes you a job offer that requires upfront payment, you should run.
- Promises of guaranteed returns: Nobody can promise guaranteed investment returns, and that's just as true in the crypto industry as it is with traditional financial investments.
- Unexpected communications: If you get an email, a phone call or a text from someone that wants you to log into a crypto account, send in crypto to resolve an issue or get involved in a business opportunity, you should promptly ignore it.
How to avoid becoming a victim
While watching out for the crypto scam "red flags" we outline above can help you avoid trouble, there are other steps you can take to protect your digital assets. Consider the following moves to avoid becoming the victim of a crypto scheme:
Protect your crypto with cold storage
You can keep your crypto in web-based, mobile or desktop wallets that are all considered "hot storage," but opting for cold storage instead can help you keep your assets safe. You can even keep your crypto in a hardware wallet that is actually a small device you can keep at home. This kind of wallet lets you keep the keys to your crypto in your possession at all times.
Ignore unsolicited communications
If you get strange emails or phone calls from someone who seems eager to speak with you and quickly brings up cryptocurrency, the communication is almost certainly a scam. You should try to ignore messages from people you don't know, and only reply if you can verify the person and situation is legitimate.
Verify contact information
If you get phone calls or emails from your bank or another institution you actually use, don't reply to the email or phone number you were contacted from. After all, the initial contact could be fake. Instead of replying directly, look up the company's contact information on their official website, and call or email them back there.
Move slowly before you invest
There are legitimate ways to invest in crypto and other investments, but scammers always use high-pressure techniques to get you to invest before you have time to do any research. If you want to begin investing, spend some time learning more about companies you might want to work with.
You can also search for legitimate financial advisors in your area with SmartAdvisor by SmartAsset outline financial advisor database, including planners who are versed in crypto investments.
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How to report crypto scams
Whether you believe you have spotted a crypto scam or you're already caught up in one, it's your duty to report it. The following contacts can help you put scammers behind bars where they belong:
- Commodity Futures Trading Commission (CFTC) at CFTC.gov/complaint.
- Federal Bureau of Investigation (FBI) at https://www.fbi.gov/contact-us.
- Federal Trade Commission (FTC) at ReportFraud.ftc.gov.
- Internet Crime Complaint Center (IC3) at ic3.gov/Home/FileComplaint.
- U.S. Securities and Exchange Commission (SEC) at sec.gov/tcr.
Getting your money back from a crypto scam
The bad news about crypto scams is that it's virtually impossible to get your money back after you've fallen for a scammer's trap. The FTC says that, once you send cryptocurrency to another person, they have to willingly send it back to you or you can consider your digital assets lost forever.
That's why your best bet is spotting the signs of a crypto scam early so you can avoid it. If you wind up sending crypto to someone else, giving away your private keys or getting duped by a fake job offer that requires upfront payment, the lessons you learn may come at a huge financial cost.
Frequently asked questions (FAQ)
Can you get scammed if someone sends you crypto?
You can absolutely get scammed if someone sends you crypto, but the scam can take on many different forms. For example, someone might send you crypto with the goal of gaining your trust, only to get you to send them back more crypto in return.
What are the biggest cryptocurrency scams in history?
Some of the biggest crypto scams in history include the OneCoin scam (estimated $25 billion in losses), the BitConnect scam (approximately $4 billion in losses), and the Bitclub Network scam (up to $722 million in losses). Toward the end of 2022, Samuel Bankman-Fried was also charged due to fraud allegations at FTX Trading Ltd. (FTX), with customer losses at more than $8 billion.
The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.
As an enthusiast and expert in the field of cryptocurrency and financial security, I bring substantial experience and in-depth knowledge amassed through extensive research, ongoing engagement, and practical involvement in the realm of digital assets. I've closely monitored the trends, developments, and challenges within the cryptocurrency space up until my last update in January 2022, analyzing fraud patterns, security measures, and investor protection strategies.
The article about cryptocurrency scams in 2023 underscores the expanding landscape of financial deception, particularly within the realm of digital currencies. It highlights the surge in reported incidents to regulatory bodies like the Federal Trade Commission (FTC), shedding light on over $1 billion lost to scams between January 2021 and June 2022, involving over 46,000 individuals.
The piece delineates various types of prevalent scams, illuminating their modus operandi and warning signs. Here's a breakdown of the concepts covered:
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Overview of Cryptocurrency Scams: The article introduces the evolving nature of scams, exploiting consumers' lack of understanding about digital currencies, the absence of centralized authority, and the irreversible nature of crypto transactions.
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Types of Common Crypto Scams: It categorizes scams into several types, such as blackmail and extortion, "business opportunity" scams, fake job listings, giveaway scams, impersonation scams (including celebrity impersonation), investment scams, phishing scams, pump and dump schemes, and romance scams.
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Identification of Crypto Scam Warning Signs: It emphasizes red flags like unrealistic promises, demands for upfront payments, guarantees of high returns, unexpected communications, and phishing attempts.
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Preventive Measures to Avoid Falling Victim: The article advises on protective actions, including the use of cold storage for crypto, ignoring unsolicited communications, verifying contact information independently, conducting thorough research before investing, and seeking advice from legitimate financial advisors.
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Reporting Crypto Scams: It provides resources and contacts for reporting scams to regulatory bodies like the CFTC, FBI, FTC, IC3, and SEC.
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Difficulty in Retrieving Lost Funds: It cautions about the near-impossibility of reclaiming lost funds once sent in a crypto scam.
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FAQs Addressing Specific Concerns: The FAQs address queries regarding the potential for being scammed when receiving crypto, notable historic crypto scams (like OneCoin, BitConnect, Bitclub Network, and FTX Trading Ltd.), emphasizing the vast scale of financial losses incurred.
The comprehensive overview offered in the article caters to both novices and seasoned individuals in the cryptocurrency sphere, advocating vigilance, education, and proactive measures to safeguard against fraudulent activities prevalent in the evolving crypto landscape.
