All You Need To Know About Crypto Scams

March 5, 2022March 5, 2022

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It’s no secret that crypto is full of scams. Scammers stole $14 Billion in crypto in 2021. The mad rush into cryptocurrency over the past several years has caught the attention of all kinds of investors, but it has also caught the attention of scammers.

Half the battle in crypto is avoiding scammers. Crypto scams most often aim to gain private information such as security codes or trick an unsuspecting person into sending cryptocurrency to a compromised digital wallet. I’ve seen some really smart people fall prey to them. It’s always disheartening to witness.

This blog post is intended to educate the readers on crypto scams, how to recognize them and preventive measures. Let’s dive in.

Most Common Crypto Scams

There are two types of most popular crypto scams

Social Engineering Scams

For social engineering scams, scammers use psychological manipulation and deceit to gain control of vital information relating to user accounts. These types of scams condition people to think that they are dealing with a trusted entity such as a government agency, well-known business, tech support, community member, work colleague, or friend. Scammers will often work from any angle or take however much time they need to gain the trust of a potential victim so that they reveal key information or send money to the scammer’s digital wallet. When one of these trusted connections demands cryptocurrency for any reason, it can often be a sign of a scam.

Investment or Business Opportunity Scams

The adage “if something sounds too good to be true, then it probably is” is one to keep top of mind for anyone venturing into investing in general, but it is especially true for cryptocurrencies. Countless profit-seeking speculators turn to misleading websites offering guaranteed returns or other setups for which investors must invest large sums of money for even larger guaranteed returns. While funds flow freely inward, these bogus guarantees often lead to financial disaster when individuals try to get their money out and find that they can’t.

Here is the list of crypto scams for your reference.

Scam Category	Sub-Catogery	Description
A) Social Engineering Scams	Romance Scams	Scammers often utilize dating websites to make unsuspecting targets believe that they are in a real long-term relationship. When trust has been granted, conversations often turn to lucrative cryptocurrency opportunities and the eventual transfer of either coins or account authentication credentials. ~20% of the money reported lost in romance scams was in cryptocurrency
	Imposter and Giveaway Scams	Moving down the sphere of influence, scammers also try to pose as famous celebrities, businesspeople, or cryptocurrency influencers. For example, in the six months prior to March 31, 2021, there had been reports of more than $2 million in cryptocurrency transferred to Elon Musk impersonators.
	Phishing Scams	Within the context of the cryptocurrency industry, phishing scams target information pertaining to online wallets. Specifically, scammers are interested in crypto wallet private keys, which are the keys required to access funds within the wallet.
	Blackmail and Extortion Scams	Send blackmail emails. For such emails, scam artists claim to have a record of adult websites or other illicit web pages visited by the user and threaten to expose them unless they share private keys or send cryptocurrency to the scammer.
B) Investment or Business Opportunity Scams	New Crypto-Based Opportunities: ICOs and NFTs	Scammers create fake websites for ICOs/IEOs/IDOs and instruct users to deposit cryptocurrency into a compromised wallet. In other instances, the ICO/IEO/IDO itself may be at fault. Founders could distribute tokens that are unregulated by U.S. securities laws or mislead investors about their products through false advertising.
	DeFi Rug Pulls	DeFi rug pulls are the latest type of scam to hit the cryptocurrency markets. Decentralized finance, or DeFi, aims to decentralize finance by removing gatekeepers for financial transactions. In recent times, it has become a magnet for innovation in the crypto ecosystem.
	Cloud Mining Scams	Platforms will market to retail buyers and investors to put upfront capital down to secure an ongoing stream of mining power and reward. These platforms do not actually own the hash rate they say they do, and will not deliver the rewards following your downpayment.

Let’s Take a Close Look at a Crypto Scam Scenario: Creating a Fake Crypto

We’re going to run through – step by step – how scammers create scam coins and trick people into buying them.

Not so you can actually create one (don’t do that), but so you can understand how scams work, how scammers think and operate…

And how to protect yourself and others from them.

Let’s begin.

a) Make crypto coin seem stupid cheap

What’s heavier? A pound of feathers or a pound of lead?

It’s a classic trick question. They’re both a pound. They weigh the same.

One way scammers take advantage of newbies is by making them think that a pound of lead is heavier than a pound of feathers.

Take, for example, Shiba Inu.

Shiba Inu’s market cap is more than three times bigger than Uniswap, the most popular decentralized exchange in the world.

That’s insane.

But compare the prices.

Shiba Inu (SHIB) seems way cheaper. This is by design.

Coin price is meaningless out of context. Two things matter more: the market cap and the circulating supply.

If this is obvious to you, good. You’re ahead of a lot of people.

It’s incredible how many people dive into crypto without understanding this simple concept. They look at Shiba Inu and think “cheap.”

And then the scammers say:

“Think about it. If you buy $25,000 worth of SHIB (1 billion tokens) and SHIB goes to JUST 1 penny… your SHIB will be worth $10 million.”

It all sounds so exciting and simple. Could SHIB hit 1 penny? Why not? 1 penny is nothing!

What the scammers don’t say is that SHIB would need to hit a market cap of $5.5 trillion to reach a penny.

That’s 7 times bigger than Bitcoin.

Never going to happen.

b) Come up with a coin name.

The best name for a scamcoin is one that:

A.] implies fast money
B.] implies security/safety
C.] is meme worthy

SafeMoon is a good example.

Or maybe SafeMoonDoge. Or RocketDoge. Or DiamondDoge.

Having trouble coming up with a name? Someone made a sh**coin name generator.

With the help of the name generator, we’re going to name our coin MoneyRocket.But we also want to make it sound safe. So we’re going to name it SafeCryptoRocket.Ticker: CRYPTOROCKET

c) Create token in less than 5 minutes.

Most people don’t understand how simple it is to create a new cryptocurrency.

Anyone can do it.

First, go to cointool and connect your wallet.

Then, scroll down to the box that says “Create Token” and click the network you want to create your token on.

(Since most scammers want to avoid Ethereum gas fees, they’ll likely build their scam coins on the Binance Smartchain (BSC). BSC has much lower fees, making it a popular choice for scammers.)

With this tool, I can create my SafeMoneyRocket (CRYPTOROCKET) token — with 21 trillion tokens in total supply — in less than five minutes.

I can also make it possible to mint more whenever I want, pause the smart contract, and blacklist any user I want.

When I click “Create Token” at the bottom, it takes about 10 seconds for the token to be created.

Cost to create… about $400.

d) Create fake volume.

Once fake coin is created, scammer create a smart contract address.

It will look like this:
0x099f551eA3cb85707cAc6ac507cBc36C96eC64FfUsing this address, you can create massive amounts of fake volume for your coin, tricking people into believing it’s gaining traction.

Here’s how:If fake coin is on Binance Smartchain, they can add it to a decentralized exchange like PancakeSwap using that address.

(It’s as easy as going to “Manage Tokens” and pasting the smart contract address.)

Once they do that, scammers can trade this coin between two different wallets and create massive amounts of fake volume.

e) Get listed on exchanges.

Most small exchanges don’t vet their tokens. All they want to see is trading volume.

Trading volume = money.

You can get listed on a number of smaller exchanges simply by paying them or faking the volume. Often both.

(This won’t work on Binance, Gemini, Coinbase, and other big exchanges.)

f) Design website.

To add a veneer of legitimacy…scammers pay a website designer to create a crypto website. Just copy any other crypto website and create a white paper with a lot of buzzwords. (Nobody reads them.)

Hopefully it looks a little better than SAFECOIN’s website. But it doesn’t really matter.

g) Pay influencers.

Most scam coins pay influencers for comments on Twitter and Reddit.

Even with millions of subscribers, TikTok and Youtube influencers don’t make that much money from the platforms. The real money comes from sponsors and paid ads. Most of the time, they don’t disclose they were paid.

You can offer them a bunch of tokens… or about $2,000 in cash.

Furthermore, on Reddit and Twitter, there are services that will post and comment about your coin.

For example, on this website…

You can buy top posts on popular Reddit crypto forums, comments, and even downvotes on any comments that question your legitimacy.

h) Profit.

In all, scammers probably pay less than $10,000.

If the coin takes off, they could pull in a lot more. As people buy in, scammers are constantly pulling out.

That’s how scam coins work.

Use this knowledge to protect yourself and others.

Measures to Prevent Crypto Scams

According to AARP.org, here are some preventive measures for avoiding crypto scams:

Don’t put money in a virtual currency or cryptocurrency if you don’t really understand how it work, and don’t speculate in cryptocurrencies with money that you can’t afford to lose.
Don’t invest in or trade cryptocurrencies based on advice from someone you’ve only dealt with online.
Don’t believe social media posts promoting cryptocurrency giveaways.
Don’t share your “private keys”, which enable you to access your virtual currency, with anyone; keep them in a secure place (preferably offline, where they cannot be hacked).

To Sum It Up…

For many people, the mad rush into cryptocurrencies has evoked feelings of the Wild West. As the crypto ecosystem continues to gain scale and complexity, it will undoubtedly remain a top focus of scammers. As mentioned above, crypto scams generally fall into two main categories: socially engineered initiatives aimed at obtaining account or security information and having a target send cryptocurrency to a comprised digital wallet. By understanding the common ways that scammers try to steal your information (and ultimately your money), you will hopefully be able to spot a crypto-related scam early and prevent it from happening to you.

Disclaimer: The information provided on this page does not constitute investment advice, financial advice, trading advice, or any other sort of advice and it should not be treated as such. This content is the opinion of a third party and this site does not recommend that any specific cryptocurrency should be bought, sold, or held, or that any crypto investment should be made. The Crypto market is high risk, with high-risk and unproven projects. Readers should do their own research and consult a professional financial advisor before making any investment decisions.