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ryptocurrency has exploded in popularity due to its revolutionary blockchain technology and the potential for high investment returns. However, where big money flows, scammers will flock. 

This guide will outline the most prevalent crypto scams, how to identify them, and key tips to avoid becoming another victim. Read on to uncover the creative ways scammers try to infiltrate the crypto community and the top ways to thwart them.

Hacker trying to hack into someone's laptop
Do your research before investing in any coin

Crypto Investment Scams

One of the most frequent cryptocurrency scams begins with a supposed “investment manager” contacting you to offer their services. They present themselves as a seasoned crypto investor who has achieved outstanding returns and now wants to share their winning strategies with regular investors. 

Of course, they emphatically claim they can deliver spectacular profits for you too. All you need to do is hand over your cryptocurrency to them, and they’ll invest and manage it using their proprietary, ultra-successful methods to earn major gains. However, once you transfer your coins or tokens, the so-called manager becomes impossible to reach and you never see your crypto again.

These crypto investment scams typically exhibit certain red flags to watch out for:

  • Promise of unusually high returns with little to no risk.
  • Pressure to act quickly or risk missing out.
  • Unregistered advisor with no verifiable track record.
  • Demand to pay in cryptocurrency only.

Fake Cryptocurrency Exchanges

Another common tactic is to create elaborate fake cryptocurrency exchanges designed to trap unwary traders. These sham exchanges often have very convincing websites that look totally legitimate. You can open accounts, make deposits, check balances, and even conduct trades. 

However, you'll eventually discover you cannot make withdrawals. The site will manufacture an error or ask for an unusual fee before releasing your funds. At that point, the ugly reality sets in that the exchange has no intention of letting you withdraw your cryptocurrency. You've deposited funds into their wallets, but your digital assets won't be returned. This flavor of scam has bilked crypto investors out of untold millions.

Some signs you may be dealing with a fraudulent exchange include:

  • Website looks unprofessional or sloppy.
  • No customer service or very slow response.
  • Little online reputation or community feedback.
  • Requires unusual personal information.

Phishing Cryptocurrency Sites and Emails

Phishing scams involve creating fake websites and emails designed to impersonate legitimate companies. The fakes look convincing on the surface to trick users into entering login credentials or sensitive information. Scammers then have what they need to drain accounts and steal identities. 

For cryptocurrency owners, phishing sites and emails posing as major exchanges like Coinbase or wallet providers like MetaMask are particularly dangerous. Users can inadvertently give full access to their crypto by entering private keys or passwords into the fakes. Millions in crypto assets have been lost to phishing cons.

Common phishing techniques include:

  • Phony Emails - Requests to verify account details or reset passwords via embedded links that harvest credentials on fake sites. 
  • Text Messages - Phishing texts with urgent-sounding links designed to panic recipients into clicking without thinking critically.  
  • Fake Sites - Highly convincing impersonations of popular exchanges, wallets, and DeFi platforms that fool users into entering sensitive info on malicious domains.  
  • Malicious Apps - Fake cryptocurrency apps manipulate app store ratings/reviews to install malware on victims' mobile devices.
A man using laptop with hacker's image inside it, blue tone image
Phishing Emails try to steal your digital wallet

Pump and Dump Schemes  

"Pump and dump" ploys have plagued the stock market for decades but are now increasingly worming their way into cryptocurrency markets. This scam occurs when an organized group accumulates positions in a low-value coin or token while keeping it quiet. 

They then instigate a coordinated effort to spread positive hype, phony news, and misleading information to generate excitement and lure in other investors to pump up demand and prices for the coin. Once prices spike sharply higher, the original scammers sell (dump) their holdings to cash out huge profits. This causes the price to crash suddenly, leaving regular investors stuck holding nearly worthless coins.

Warning signs a cryptocurrency may be the target of pump and dump shenanigans include:

  • Obscure Coins - Sudden surges in coins with very low market values should raise suspicions. Recognizable coins with stronger track records rarely see pumps of 5x or 10x in days.
  • Fake Hype - Scammers in online forums, social media, and messaging apps breathlessly promote coins and urge buying while divulging little substantive information.

How to Protect Yourself from Crypto Scams

While scammers are constantly evolving new ways to carry out cryptocurrency fraud, you can avoid becoming a victim by taking the following precautions:

  • Always verify sources - Scams often start with unsolicited emails, texts, social media messages, or phone calls. Verify the source directly through an official website or helpline before responding.
  • Research before investing - Take time to thoroughly evaluate any investment opportunity no matter how appealing it sounds. Search for reviews, complaints, and red flags associated with the company or offering.
  • Avoid obscure cryptocurrencies - Stick with well-known coins like Bitcoin and Ethereum that are less susceptible to manipulation and pumps.
  • Don't believe unbelievable gains - If returns sound too good to be true, they always are in crypto. Any promise of guaranteed high returns is a scam.
  • Use trusted exchanges - Only use exchanges other traders report positive experiences with. Check registration, reviews, security features, and practices carefully.
  • Enable 2FA - Two-factor authentication adds critical account protection on exchanges, email, wallets, and crypto apps.
  • Beware requests for private keys - Never share private wallet keys except when transacting on the actual associated service. Asking for keys is a huge red flag.
  • Don't panic - Scammers use various pressure tactics to cloud judgment. Stay calm, think critically, and double check everything if something seems off.
  • Report fraud attempts - Alert relevant agencies if you spot a scam so authorities can potentially identify the criminals and protect others from being defrauded.

Just like the early days of the internet, hype attracts greed, and greed fuels fraudulent schemes - from phishing ploys to fake exchanges and investment scams. However, by learning to recognize common tactics and exercising common sense precautions, cryptocurrency can still offer outstanding potential while avoiding costly mistakes. Stay skeptical, do your homework, and proceed cautiously.

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