Common Cryptocurrency Scams: A Guide to Avoiding Fraud

Cryptocurrencies have been gaining popularity in recent years, with many people investing in them as a way to make money. However, this has also led to a rise in cryptocurrency scams, with fraudsters taking advantage of the lack of regulation in this market.

More than 46,000 consumers have reported losing over $1 billion in cryptocurrency to scams since the beginning of 2021; this is around one out of every four dollars reported lost and is more than any other payment method.

This article aims to educate you on the most common cryptocurrency scams and how to avoid them.

1. Phishing Scams

Phishing scams are a common tactic used by fraudsters to trick individuals into giving away their personal and financial information. This is usually done through an email or message that looks like it is from a reputable source, such as a cryptocurrency exchange, asking you to click on a link and enter your login credentials. The link takes you to a fake website that looks identical to the real one, and the scammer uses the information you enter to steal your money. To avoid phishing scams, it’s crucial to be cautious of emails or messages asking for personal information and to always double-check the URL before entering your information.

2. Ponzi Schemes

A Ponzi scheme is a type of scam that promises high returns with little to no risk. The scammer collects investments from new investors and uses the money to pay returns to earlier investors. This creates the illusion of profitability, and the scammer continues to collect money until they have collected enough to run away with the funds. To avoid Ponzi schemes, be wary of investments that promise high returns with little risk, and always do your research on the investment and the company before investing your money.

3. Pump and Dump Scams

Pump and dump scams involve artificially inflating the price of a cryptocurrency through false or misleading information. The scammer then sells their holdings at a higher price, leaving other investors with worthless coins.

The pump and dump schemes are mostly found in social media groups and channels (Facebook, WhatsApp, telegram, etc.) where the admin or the trusted person tells other people to follow their investment plan (misleading information).

To avoid pump and dump scams, don’t invest in cryptocurrencies based solely on hearsay or hype, and always do your research on the cryptocurrency and the company behind it before investing.

4. Rug Pull Scams

In rug pull scams, fraudsters “pump up” a new business, nonfungible token (NFT), or coin to attract investors. The con artists simply vanish with the money after obtaining it. These investments’ software forbids anyone from selling bitcoin after buying it, leaving them with a worthless investment.

The Squid coin scam, which took its name from the well-liked Netflix comedy Squid Game, is a common variation of this scam. To earn cryptocurrency, investors had to play: People would purchase tokens for online games and later earn more to trade for other cryptocurrencies. The Squid token’s value increased from one cent to almost $90 per token.

Trading eventually ceased, and the funds vanished. As users tried to sell their tokens but were unsuccessful, the token value eventually fell to zero. Over $3 million was obtained from these investors by the con artists.

Rug pull scams are also prevalent for NFTs, unique digital assets.

5. Fake Wallets and Exchanges

Fake wallets and exchanges are another common cryptocurrency scam, where fraudsters create fake versions of reputable wallets or exchanges and trick individuals into downloading and using them. The fake wallet or exchange will then steal any funds deposited into it. To avoid fake wallets and exchanges, only download wallets and exchanges from reputable sources, such as the official website of the wallet or exchange, and always double-check the URL before downloading.

6. Multisig (multi-signature) wallet scams

A new type of multi-signature wallet scam is being practiced which involves multi-sig wallets (like Trustwallet). The victim is somehow persuaded by the attacker and the money is transferred to a multi-sig wallet that the victim has access to but does not own. The feature of the wallet lets the attacker move the funds without the victim’s consent.

Be wary if someone provides you with their Trust Wallet private key and requests that you assist them in transferring funds. There will be USDT in the wallet, but not enough TRX to cover the transaction cost. You are defrauded of TRX as you top up the wallet because TRX is transferred to another wallet.

7. Malware

Malware, or malicious software, can also be used in cryptocurrency scams to steal personal and financial information. This is usually done through a fake software update or an infected website. To avoid malware, only download software updates from reputable sources, such as the official website of the software, and always be cautious of websites that ask you to download an update or software.

8. ICO Scams

ICO (initial coin offering) scams are a type of cryptocurrency scam that involves a fake or fraudulent ICO. In these scams, the scammer will create a fake ICO and then promote it as a legitimate investment opportunity. The scammer will then take the investment funds and disappear, leaving investors with no returns.

To avoid falling victim to an ICO scam, it is important to do your research and to only invest in legitimate, well-established ICOs. You should also be wary of any ICOs that promise high returns with little or no risk, as these are often signs of a scam.

Ways to avoid cryptocurrency scams

In summary, the following are the ways to avoid common cryptocurrency scams:

  • Be cautious of emails or messages asking for personal information
  • Double-check the URL before entering the information
  • Be wary of investments that promise high returns with little risk
  • Do research on investment and company before investing


Cryptocurrency scams are a real threat, and it’s essential to be vigilant and educated to avoid falling victim to them. Always do your research on investments, wallets, and exchanges, and never give away personal or financial information without verifying the source. By following these simple tips, you can protect yourself from cryptocurrency scams and make the most of your investment.


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