Types of scam and fraud involving crypto currencies

Types of scam and fraud involving crypto currencies

Cryptocurrency fraud is evolving and growing as fast, as the crypto market. Criminals and crypto thieves are occupying niches where there are many naive and inexperienced people providing them an opportunity to still an immense amount of assets. Consumers need to be on the lookout for fraudulent activities and be aware of the ever-changing technological traps the fraudsters coming up with daily.

As more and more people from different countries and walks of life become involved in new digital finance, digital theft technologies are also actively evolving. This is further increases the risk of an already risky investment.

We are not talking about market volatility. Scammers are everywhere on the Internet - on social networks, on message boards, and instant messengers. Cryptocurrencies are caring a huge risk, regarding con artists. Therefore, when considering investing in various startups, it is important to assess the risks associated with the fraudulent activity

Please,  pay attention to the following factors:

  • When analyzing cryptocurrency companies, experts recommend verifying that they are using the blockchain. Since this means the ledger of transactions is openly published and ensures some level of transparency regarding the use of investor money.
  • Startups must have strategic and detailed business plans that solve common existing problems for the end-user.
  • Companies must clearly demonstrate the demand for their cryptocurrency, as well as describe the rules for fundraising.
  • Behind the project should be real people with their own competencies, experience, expertise, and other professional qualities.

If the company lacks some of these characteristics, it is worth reconsidering your decision to invest

For everyone who wants to get involved in the exciting future of cryptocurrencies, it is important to research and educate yourself for spotting common scams.

Crypto Fraudsters in 2021

Recent incident reports show that cryptocurrency scams are gaining ground in 2021, as the new industry is gradually attracting the attention of both the media and crypto scammers. This year, crypto scams have reached an all-time high.

According to Cipher Trace report:

  • Crypto criminals have laundered in volume $ 732 million by the end of April;
  • about 56% of the total amount of money laundering was done in DeFi.

These numbers exceeded the entire 2020, in which the total amount of losses was $ 1.9 billion. However, in 2019, the number of losses reached $ 4.5 billion.

A recent popular case in the context of fraud was the moment when scammers posing as Elon Musk committed a $ 2 million theft in cryptocurrency. The imposter staged a fake giveaway. Scammers posing as celebrities promised to match investments in cryptocurrency, but instead, they stole substantial sums of crypto assets.

Another major incident of the crypto scam involved a British woman who lost all of her £ 90,000 savings of cryptocurrency investments.

But the most daring case happened on August 10, when an unknown hacker penetrated the Poly Network project and stole $ 611 million in cryptocurrencies. A few days later, he returned all the stolen funds, explaining his action as an attack just for fun.

Thus, we can conclude that each participant in the cryptocurrency market can encounter fraudsters in one shape or form or another and lose their crypto assets. To take adequate security measures, it is important to understand the methods that are mainly used by criminals and hackers.

Publication Analytics Insight has created a list of popular crypto scam technologies in 2021.

Fake (Phishing) Websites

Many users are convinced that they can quickly distinguish an imposter from an honest company. But scammers have already launched many fake websites that are designed to resemble the original designs.

If there is no small lock icon next to the URL to indicate security, and there is no "HTTPS" in the URL, you should avoid the use of such a website

Sometimes, the hackers take control of the original site and redirect the user to a third-party payment platform. To avoid this inconsistency, you must carefully enter and check the exact spelling of the URL in your browser, and then save it to bookmarks to visit the correct web address in the future.

Better to spend a little time and check yourself for the authenticity of the site than to lose money due to a lack of patience.

Fake mobile apps

Another common trap is fake mobile apps. Experienced users can quickly find and remove them from Google Play or the App Store. However, beginners often fall for this scam by attempting to use fake services and lose their money as a result.

According to Bitcoin News, thousands of people download fake cryptocurrency apps every month. Therefore, every investor should pay attention to their financial security in advance.

Some obvious parameters can be used to distinguish a fake:

  • Incorrect name spelling of an app;
  • Branding inconsistencies: looks inauthentic with strange coloring or incorrect logo;
  • the picture is blurry;
  • visual elements are displayed poorly;
  • the text overlaps with other elements

These are some "red flags" when you spot them just don't download the app.

But more advanced fraudsters can create apps that look almost identical to the original. To avoid downloading the fake app, use the links posted on the official website of the developer.

Fake influencers

Advertising banners periodically pop up on social networks, which captivate with their content. These are often advertising with lucrative income opportunities or insider tips from celebrities. But very often, they also lead to pseudo investments and fake projects.

An advertisement often includes a promise from a celebrity (often associated with the crypto industry) to double the amount whoever invests in the advertised cryptocurrency.

Scammers use real influencers, public figures, athletes, and politicians on their posters, confidently claiming that they have invested almost their entire savings in a crypto project or a newly-created coin.

But in fact, they just steal photos of unsuspecting famous people to fake the legitimacy and extract the crypto assets from the naive novices. The same applies to cryptocurrencies, where malicious bots run rampant.

Do not trust the suggestions that come from Twitter or Facebook, especially if in the picture someone is bragging about an unrealistic return.

DeFi and NFT

Decentralized finance is an attempt to transform traditional financing. This technology allows cryptocurrency holders to increase the number of coins and provide a maximum rate of return in a really high percentage. Reliable DeFi platforms in reality provide the most opportunity out of lending cryptocurrency.

But there are many fraudsters in this niche. Scammers lure investors with promises of large profits, but in the end, they pocket the money. Such scams are carried out with a high degree of complexity, and investors have almost no way to recover the lost amount

NFTs are also very popular nowadays. But scammers are making non-fungible tokens completely replaceable for themselves. They create copies of expensive NFTs that do not contain the original hashtag codes. And whoever buys them essentially gets a useless character set that is totally worthless.

Fraudulent schemes in communication

Sometimes scammers are trying to communicate with the victims using

  • messenger;
  • social media;
  • email;
  • sometimes even phone

They are offering a unique opportunity to invest in cryptocurrency by different means such as:

  • Mining;
  • Assets under management;
  • Startups

The scheme is always the same - the user is offered to register on some website and make a deposit on the account. This can be done in both cryptocurrency and fiat money. But after receiving payment, the fraudsters are simply stopped communicating.

In other scams, criminals ask investors to share their wallet private keys. Every experienced user knows that this is the recipe to lose all the money assets that are stored in the wallet. But many newbies don't know about it. As a result, they lose their money

Viruses and malware

Direct communication with the victims can be time-consuming and at times exhausting. The fraudsters are forced to find a common language and new deception schemes.

To get around this, hackers use various malware and viruses to gain access to user data, including their crypto wallets. And in this case, neither two-factor authentication, nor a complex password, nor anything else will help. It is also important to remember that cryptocurrency payments have no legal protection.

Therefore, the only protection against this type of fraud is personal awareness and caution on the part of the wallet owner.

Cloud mining scam

Many cryptocurrencies are generated as a result of the mining process, which involves complex calculations using powerful computers. It requires expensive equipment and uses a lot of electric power.

As a result, a separate business of cloud mining platforms appeared, which allows users to mine cryptocurrency without having to buy expensive equipment.

This trend has not been spared from fraudsters and scammers who have found an ability to create fraudulent platforms and applications for cloud mining. But instead of the mining of coins, such software only steals users' funds, without giving anything in return.

A lot of financial pyramids appeared in this segment, which is disguised as cloud mining services. Such projects, instead of actually investing in mining, simply collect investors' money, under the promise of large returns..


If you look at all these types of cryptocurrency fraud, you wi understand that they are very similar to the other methods that are used in other online scams. The exception, of course, is mining and Defi projects. But in any case, the idea remains the same - to force an uninformed user to transfer money to a fraudulent account or to steal his data to access the wallet.

The best defense against any kind of fraud is exercising vigilance and stay aware of the new types of fraudulent schemes. In addition, it is important to do due diligence for any project before making an investment decision.

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