10 Common Types of Crypto Scams: How to Protect Yourself in the Wild Wild West of Cryptocurrency

“Not your keys, NOT your crypto.” This isn’t just an old saying tossed around by crypto veterans—it’s a hard truth that many learn the painful way. Forget insider trading and pump-and-dumps; the real threat lies in the scams lurking around every corner of the crypto space. I’ve personally witnessed neighbors lose over $250,000 during the collapses of Celsius and FTX, and even I wasn’t immune—earlier this year, I lost .35 BNB in a scam while trying to invest in an ICO. It was a simple mistake: I didn’t double-check the link. Don’t let this happen to you.

The reality is, almost everyone in crypto has been scammed at least once, no matter how seasoned they are. The booming popularity of cryptocurrency has attracted not only legitimate investors but also cunning scammers who thrive on the eagerness and inexperience of others. These scams can be sophisticated and nearly impossible to detect—unless you know what to look for.

In this guide, we’ll break down the 10 most common cryptocurrency scams, showing you how they operate and sharing real-world examples so you can protect yourself and your investments. Don’t wait to learn these lessons the hard way—stay informed and stay safe.

The growing popularity of cryptocurrencies has brought in not just legitimate investors but also scammers looking to take advantage of people eager to make money. These scams can be incredibly sophisticated and difficult to identify for inexperienced users. Understanding how these scams work is crucial for protecting your digital assets. Below, we dive deeper into the 10 most common cryptocurrency scams, detailing how they operate and providing real-world examples.

1. Phishing Scams

Phishing scams are one of the most common and effective types of scams in the cryptocurrency space. Scammers impersonate legitimate crypto services, companies, or exchanges, often by sending fake emails, social media messages, or by creating clone websites that closely resemble trusted platforms. The goal is to trick victims into revealing sensitive information like private keys, seed phrases, or account login credentials. Once scammers gain access to this information, they can drain the victim's wallet, leaving them with nothing.

• Example: Imagine you receive an email that looks like it’s from Binance, a popular crypto exchange, claiming there is an issue with your account. The email directs you to click on a link to "resolve" the problem. However, the link takes you to a fake website that looks exactly like Binance. Once you enter your login details, the scammers use your credentials to access your actual Binance account and steal your funds.

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2. Ponzi or Pyramid Schemes

Ponzi schemes in the crypto world work similarly to traditional ones, where early investors are paid with money from new investors instead of legitimate profits. These schemes often promise extremely high returns in a short amount of time, encouraging users to recruit others. As long as there are enough new investors, the scheme survives. However, once new investments slow down, the scam collapses, leaving most participants with nothing.

• Example: The Bitconnect scam is widely known as one of the most notorious crypto Ponzi schemes. It offered unrealistic returns on Bitcoin investments and featured a lending system that allowed users to receive daily interest on their deposits. Bitconnect ran for almost two years before being closed down, resulting in investors losing more than $1 billion. In the latest cycle, we witnessed similar projects like Celsius and FTX, which belong to the same category.

  
  

3. Fake Initial Coin Offerings (ICOs)

An Initial Coin Offering (ICO) is a fundraising method where new cryptocurrency projects sell their tokens to raise capital. Unfortunately, scammers exploit the popularity of ICOs by creating fake projects. They often develop professional-looking websites, whitepapers, and social media channels to lure investors. These fake projects promise groundbreaking technology or substantial future gains, but once they’ve raised enough money, the scammers disappear with the funds, and the project never materializes.

• Example: PlexCoin raised over $15 million during its ICO, promising investors a 1,354% return on their investment. The project generated massive hype, and many people invested. However, shortly after raising the funds, the project’s founder was charged with fraud, and investors lost all their money.

  
  

4. Rug Pull Scams

A rug pull is a particularly malicious scam where developers create a new cryptocurrency or decentralized finance (DeFi) project, often hyping it up on social media or through influencers. Investors pour money into the project by buying tokens or staking their assets. Once the developers have amassed enough liquidity, they withdraw all the funds from the liquidity pool and disappear. This causes the price of the token to crash, leaving investors with worthless coins.

• Example: The Squid Game Token scam took place in 2021. The project was launched and gained rapid popularity, partly due to its name association with the popular Netflix series (though it had no official connection). The developers suddenly withdrew all liquidity after investors poured millions into the project, disappearing with over $3 million and leaving investors with tokens that had no value.

  
  

5. AI Crypto impersonation scam

An AI crypto impersonation scam is a sophisticated fraud where scammers use AI technologies like deepfakes, voice cloning, and chatbots to impersonate prominent figures or companies in the cryptocurrency space. These scams create convincing fake videos, voice recordings, or social media posts to deceive victims into trusting bogus investment opportunities, giveaways, or phishing schemes. For example, scammers created a deepfake video of MicroStrategy CEO Michael Saylor, promoting a fake Bitcoin giveaway where viewers were urged to send Bitcoin with the promise of receiving double in return. Many unsuspecting users fell victim to the scam, leading to significant financial losses. To protect yourself, it's crucial to verify the legitimacy of sources, be cautious of too-good-to-be-true offers, and enable enhanced security measures like multi-factor authentication and hardware wallets..

• Example: Only a couple of weeks back, a person passionate about cryptocurrency fell victim to an AI impersonation scheme, resulting in the loss of the majority of his life savings. The scam involved the use of AI to mimic a friend's voice, with the victim being enticed with the offer of bitcoin rigs as part of the fraudulent scheme.

  
  

6. Fake Exchanges

Fake exchanges are websites or platforms that mimic legitimate cryptocurrency exchanges but are designed solely to steal your money. These fake exchanges may offer attractive deals, such as low trading fees or exclusive tokens, to lure victims into depositing their cryptocurrency. Once the users deposit their funds, they find they can’t withdraw them, or the site shuts down entirely, taking all the deposited funds with it.

• Example: Bitsane, a fake crypto exchange, operated for several years and looked like a trustworthy platform for trading. In 2019, the exchange suddenly shut down, and users were unable to withdraw their funds. Over $5 million was stolen in this exit scam.

  
  

7. Impersonation Scams

In impersonation scams, scammers pose as famous individuals, cryptocurrency influencers, or reputable companies to promote fake giveaways, investment schemes, or phishing attempts. They often use social media accounts that look official to trick people into sending cryptocurrency, promising rewards or doubled returns in exchange. Once the money is sent, it’s gone for good.

• Example: In 2020, scammers hacked high-profile Twitter accounts, including those of Elon Musk, Bill Gates, and Jeff Bezos, to promote a fake Bitcoin giveaway. The scam message claimed that if users sent Bitcoin to a specific wallet, they would receive double the amount in return. Within hours, the scammers netted over $120,000 from unsuspecting victims.

  
  

8. Malware and Ransomware

Malware refers to malicious software designed to infect a victim’s computer or device to steal sensitive information like private keys or to gain access to cryptocurrency wallets. In ransomware attacks, the victim’s files are encrypted or their device is locked, and the attacker demands a ransom—often in cryptocurrency—to restore access.

• Example: The WannaCry ransomware attack in 2017 was a widespread malware attack that affected hundreds of thousands of computers globally. The hackers demanded payment in Bitcoin to unlock the victims' data. Though this attack wasn’t specifically aimed at stealing cryptocurrency, it’s a prime example of how ransomware attacks often demand payment in crypto, taking advantage of its anonymous nature.

  
  

9. Fake Wallet Apps

Fake wallet apps are apps that appear to be legitimate cryptocurrency wallets but are designed to steal users' private keys and funds. These apps may even be listed on official app stores like Google Play, giving them an air of legitimacy. Once users download the app and input their private keys or seed phrases, the scammers steal the information and empty the victim’s wallet.

• Example: In 2020, a fake version of the Trezor wallet app was made available on the Google Play Store. Users who downloaded it and entered their private keys unknowingly provided this sensitive information to scammers, who then accessed and drained their wallets.

  
  

10. Cloud Mining Scams

In a cloud mining scam, scammers offer users the chance to rent cryptocurrency mining equipment and participate in mining without having to buy expensive hardware. They promise regular payouts based on the mining profits. In reality, no mining occurs. The scammers simply take the users’ money and disappear, leaving them with no returns on their investment.

• Example: The MiningMax cloud mining scam raised over $250 million from investors, promising them high returns on their investments. However, it was revealed that MiningMax was running a Ponzi scheme, and the majority of the funds were spent on luxury goods. The operators were eventually charged with fraud, and investors were left with significant losses.

How to Protect Yourself from Cryptocurrency Scammers:

In the wild world of cryptocurrency, the phrase "Not your keys, NOT your crypto" has become a mantra for experienced investors and crypto veterans alike. It's more than just a catchy saying—it’s a warning. If you don’t control the private keys to your crypto wallet, you don’t truly own your assets. This simple truth has saved many from falling victim to the growing number of scams in the crypto space.

Unfortunately, scams are everywhere. Whether it’s insider trading, pump-and-dump schemes, or exit scams, losing your hard-earned money is easier than you think if you're not careful. In my own community, I’ve seen people lose hundreds of thousands of dollars during the high-profile collapses of companies like Celsius and FTX. And I, too, have been scammed. Earlier this year, I sent .35 BNB to a scammer, thinking I was making an ICO purchase. I didn’t take enough time to verify the legitimacy of the link—and that’s all it took.

Why "Not Your Keys, NOT Your Crypto" Matters

Cryptocurrency is built on the idea of decentralization—no banks, no intermediaries. This gives investors unprecedented control over their assets, but it also comes with a major responsibility. If you don’t own the private keys to your wallet, you don’t truly own your crypto. Most people store their crypto on centralized exchanges, which are convenient but come with risks. If the exchange is hacked or collapses (like FTX), your funds could vanish. Scams can happen to anyone, even the most seasoned crypto enthusiast. But the good news? You can protect yourself, and it all starts with one core principle: control your own keys.

Centralized exchanges hold custody of your private keys, meaning they have control over your assets. If something goes wrong on their end, you’re at their mercy. When you store your crypto in a private wallet where you control the keys, you eliminate this risk. This is where the importance of hardware wallets comes into play.

The Power of a Hardware Wallet

To keep your cryptocurrency secure, it is recommended to utilize a hardware wallet. These physical devices store private keys offline, making them impervious to hacking, malware, and phishing attempts. Even if your computer is compromised, your assets remain safe as the wallet never connects to the internet. Ensuring the security of your crypto is best achieved through the use of a hardware wallet such as Tangem. Featuring Tangem's bank-grade security and user-friendly interface, you can protect your investments and have peace of mind. Tangem guarantees that your private keys are stored offline, beyond the reach of cyber threats, catering to users of all levels, from novices to experienced traders.

Incorporating secure practices like being cautious of phishing scams, verifying addresses, and avoiding get-rich-quick schemes alongside using a Tangem wallet can significantly reduce the risk of falling prey to fraud. Remember, in the realm of decentralized finance, your security lies solely in your hands. Arm yourself with appropriate tools like the Tangem wallet and maintain vigilance to safeguard your digital assets. The future of finance lies in crypto—be prepared to safeguard it.

My personal recommendation for a hardware wallet is the Tangem Wallet. Why Tangem? It stands out for two main reasons: security and ease of use.

👉Recommend: TANGEM-BEST HARDWARE -WALLET 10% OFF

Why I Recommend the Tangem Wallet:

1. Top-Tier Security: Tangem wallets are built with bank-grade security chips, ensuring that your private keys are stored securely on the device. Since it's offline, it’s protected from online hacks and phishing scams that target software wallets and exchanges.

2. User-Friendly: Unlike some hardware wallets, which can be intimidating for beginners, the Tangem Wallet is incredibly easy to use. It integrates seamlessly with your smartphone, allowing you to manage your assets without needing to connect to a computer or deal with complex interfaces. This makes it ideal for both crypto newbies and seasoned investors alike.

3. No Backup Hassles: Tangem offers a unique advantage—no need to write down or store seed phrases. Instead, the wallet provides a backup card, making it incredibly simple to secure your crypto without the hassle of managing sensitive recovery information.

If you are not using the Tangem wallet, we suggest considering Ledger as an alternative. It is crucial for everyone to understand the significance of mastering self-custody, as this principle is fundamental in the cryptocurrency realm and can be overshadowed by the frenzy of a Bull Run.

Other Key Steps to Protect Yourself from Scams -ACTIONABLE STEPS

Beyond securing your private keys in a hardware wallet like Tangem, there are several other key practices to keep in mind to avoid falling victim to cryptocurrency scammers.

1. Be Wary of Phishing Scams

Phishing is one of the most common ways scammers steal crypto. These scammers create fake websites or send emails pretending to be from legitimate platforms like Binance or Coinbase. They’ll direct you to click on a link, where you unknowingly enter your login credentials, handing over access to your funds.

• How to Protect Yourself: Always double-check URLs and never click on links from unsolicited emails. Bookmark the official sites of exchanges or wallets you use, and only access them through those bookmarks. Never share your private keys or recovery phrases with anyone.

2. Avoid Centralized Platforms When Possible

While centralized exchanges offer convenience, they also put your assets at risk if the platform collapses or is hacked. Even reputable exchanges can experience security breaches, and some have been known to shut down unexpectedly.

• How to Protect Yourself: Only keep the amount of crypto on exchanges that you actively trade with. Move your long-term holdings into a hardware wallet where you control the keys.

3. Watch Out for Fake ICOs and Airdrops

Scammers often create fake initial coin offerings (ICOs) or promote free airdrops to trick investors into sending their crypto. They create professional-looking websites and social media profiles to lure you in, but once you send your money, the project vanishes.

• How to Protect Yourself: Always do thorough research before participating in any ICO or airdrop. Check the project’s team, read reviews, and ensure it’s listed on legitimate crypto websites. If something sounds too good to be true, it probably is.

4. Don’t Fall for “Pump and Dump” Schemes

Pump-and-dump schemes manipulate the price of smaller cryptocurrencies by artificially inflating the price, usually through coordinated buying in private groups. Once the price spikes, the organizers sell their holdings, leaving others with heavy losses as the price crashes.

• How to Protect Yourself: Be cautious of coins that seem to spike in value without any legitimate reason. Avoid chasing after quick profits based on hype. Stick to well-researched, long-term investments.

5. Double-Check Everything Before Sending Crypto

One of the easiest mistakes you can make is sending your crypto to the wrong wallet or an illegitimate address. Scammers often set up fake ICOs, exchanges, or investment opportunities with addresses that look official but are designed to steal your funds.

• How to Protect Yourself: Always double-check the address before sending crypto. When possible, send a small test amount first to ensure the transaction is going to the right place. If you're unsure, don’t rush into sending your funds.

Conclusion: Take Charge of Your Crypto Security

The cryptocurrency landscape is full of potential, but it’s also filled with risks—scammers, fraudsters, and hackers are constantly looking for ways to exploit unsuspecting investors. Protecting yourself starts with understanding one fundamental truth: “Not your keys, NOT your crypto.” If you don’t control your private keys, you don’t control your assets. Protect what you have worked hard to obtain.