What are crypto scams?
Crypto scams are cyber crimes designed to trick people into losing their money or personal information, usually by pretending to be legitimate cryptocurrency opportunities. With crypto gaining popularity, scammers are getting more creative - using everything from fake investments to fraudulent giveaways to steal from their victims.
Here are some common red flags you should look out for when considering new crypto investments:
Promises of quick and easy profits with little to no risk
Pressure to act quickly, often with urgent or time-sensitive offers
Vague or missing details about the project, team or technology behind it
False claims of endorsements or fake testimonials to make it seem more trustworthy
Let's take a look at the most common crypto scams and how you can avoid them.
What are airdrop scams?
Airdrops are promotional events where crypto projects distribute free tokens to attract users. While legitimate airdrops serve as a marketing tool, scammers often exploit the concept to steal funds or personal information.
To execute an airdrop scam, scammers often create fake websites or social media campaigns that promise free tokens in exchange for a small fee or personal information, such as private wallet keys. By clicking on malicious links, users may be redirected to fake platforms where their sensitive details are captured or malware is installed. This allows scammers to steal funds or compromise your security.
Red flags to watch out for:
Unrealistic promises of large token giveaways or guaranteed returns
Requests to send funds or share private keys in exchange for "free" tokens
Suspicious websites or social media campaigns with unverified information
How to protect yourself:
Verify the project’s website and official social media accounts
Never share your seed phrase, private keys or passwords for an airdrop
Stick to well-established crypto platforms for claiming legitimate airdrops
What is a rug pull?
A rug pull occurs when crypto developers abandon a project and run off with the investors’ money. These scams are particularly common in decentralised finance (DeFi), where new projects and tokens are often unregulated.
Usually, developers create a token or DeFi project and aggressively promote it to attract investments. As more people buy in, the token’s value increases. Once enough funds have accumulated, the developers withdraw all liquidity, causing the token’s value to crash. Explore how you can spot and avoid rug pulls in this article.
What are Ponzi schemes?
Ponzi schemes operate by taking money from new investors and using it to pay returns to earlier participants, rather than generating real profits through legitimate investments. This creates the illusion of a profitable and successful project, drawing in more investors. As more people invest, the scheme continues to function temporarily by cycling funds from new participants to existing ones.
These schemes often disguise themselves as exclusive investment opportunities, luring investors with promises of guaranteed returns or “too good to be true” profits.
Red flags to watch out for:
Promises of consistent, high returns with little risk
Pressure to recruit others to join
Lack of transparency about how profits are generated
How to protect yourself:
What are ICO scams?
ICO (Initial Coin Offering) scams are fraudulent fundraising schemes where scammers promise high returns on new cryptocurrency projects in exchange for investments. In an ICO scam, individuals are lured into purchasing tokens of a non-existent or poorly planned project. They are often marketed as exclusive opportunities with high potential, but they can be misleading or entirely fake.
Dig deep into how you can spot and avoid ICO scams in this guide.
