How to never get scammed in crypto (Part 2)

This is the second part of the “How to never get scammed in crypto” guide, read the first part here. This article will show you examples of the most common scams, how to spot them and habits to protect yourself.

Types of scams

1. Phishing or imposter scams
2. Fraudulent trading services or platforms
3. Pump and dump / Rug pull scams
4. Cloud mining / Liquidity mining scams
5. Malware, software hacks & other exploits
6. Social Engineering

Phishing or Imposter Scams

Attack vectors: Victim’s ignorance, Stealing information

Scammers pretend to be legitimate platforms (like an exchange, wallet or lender), they create a front that looks just like the real thing so you trust them, that way they can ask for sensitive information like passwords, private keys or recovery phrases.

Safety tips

• Verify phone numbers, email and website URLs before interacting
• Bookmark legitimate websites so that you always go to the correct site

Red flags

• Website name has a misspelling or is different from what you know
• The website or app interface looks different from what you remember
• The scammer tells you that there’s a problem with your account that you need to fix urgently
• The email address provided is a Gmail or some other free email service
• The email address provided has a misspelt or unusual pattern to what you’re used to

Examples

• Email phishing
• Tech. support phishing
• Identity theft phishing
• Fake website phishing
• Free airdrops/other rewards

Fraudulent Trading Platform

Attack vectors: Victim’s greed, Victim’s ignorance

Scammers make great efforts to build a legitimate looking investment opportunity. Many times, the domain looks legitimate, well designed, with social media and even business registration. These platforms appeal to the greed of victims (promising very juicy returns with no risk) and ignorance about how crypto works.

Safety tips

• Don’t be greedy
• Bookmark legitimate websites so that you always go to the correct site
• Run, If the investment opportunity seems too good to be true
• Only use platforms & tools that are recommended by people you trust
• Never respond to people who solicit via social media email or calls
• Do your own research (DYOR)

Red flags 

• You befriend the promoter online
• They talk to you about making huge returns on your initial investment
• Dodgy or non-existent tokenomics
• Overbearing celebrity/influencer endorsements

Examples

• Fake private wallet
• Fake crypto exchange
• Fake yield farm
• Free airdrops/other rewards
• Crypto doublers/giveaways

Pump & Dump / Rug Pull Scams

Attack vectors: Victim’s greed

These scams were popular in the bull market of 2019 to 2022. Scammers create ICOs (initial coin offerings) that promise outlandish returns for early investors. This is a thin veil for a ponzi scheme where the scammers’ pull the rug from under investors by taking their valuable assets and leaving them with a worthless token. Scammers favour token/coin, NFT projects, they piggyback on the success of high profile projects to make people invest.

Safety tips

• Don’t be greedy
• Do your own research (DYOR)
• Run, If the investment opportunity seems too good to be true

Red flags 

• Heavy marketing and no substance
• Founders or development team are not public
• No whitepaper that describes mechanics of token
• Emphasis on inviting other people to join buy the token
• Founders silence or ban people who point out flaws

Examples

• Fraudulent ICO (initial coin offering)
• Fraudulent NFT projects
• Fake celebrity endorsements
• Deepfake celebrity endorsements

Cloud Mining / Liquidity Mining Scams

Attack vectors: Victim’s ignorance

Scammers promise victims that they can earn returns from mining crypto. They require you to transfer crypto to them, after which they show fake returns. When a victim tries to withdraw funds, there’s an error, sometimes, they are required to send more funds to “unlock” their earnings and this can go on and on as long as the victim doesn’t wise up and realize that it’s a scam. This scam preys on the ignorance of people and the amount of technical details involved. 

Safety tips

• Do your own research (DYOR)
• Run, if the investment opportunity seems too good to be true

Red flags 

• Promises extremely high returns on investment
• Mining company is new and not talked about by trusted sources
• If a decentralised protocol you can’t examine their smart contracts
• If a decentralised protocol the deployed code is different from GitHub source code
• Founders or development team are hidden

Malware, Hacks & Other Exploits

Attack vectors: Victim’s ignorance, Stealing Information

These are more sophisticated scams, where scammers broadcast legitimate looking apps, plugins etc which contain malware and allows the scammer to either steal tokens, access secret phrases or private keys.

Safety tips

• Do not install apps from untrusted sources
• Do not store recovery phrases or private keys in plain text
• Keep significant funds in a hardware wallet

Red flags 

• Job ad that requires you to install software on your machine
• Sketchy looking apps on the Appstore or Playstore

Examples

• Malware embedded in mobile apps mobile games or browser plugins
• Malicious job postings that require the user to use software that contains malware

Social Engineering

Attack vectors: Victim’s ignorance, Victim’s empathy/naivety

Scammers build a relationship with their victims, sometimes platonic, but many times romantic. After gaining their trust, they propose crypto as a way to make money. Victims many times borrow money or send their life savings to the scammer, who then either strings them along further to get more money or disappears altogether.

Safety tips

• Be careful of strangers you meet on social media email or who cold call you
• Do your own research (DYOR)
• Never send money to people you meet on the internet

Red flags 

• You befriend the promoter online
• They talk to you about making huge returns on your initial investment
• Dodgy or non-existent tokenomics
• There’s a lot of appeal to emotions and manipulation

Examples

• Romantic scam
• Blackmail scam

Conclusion

Scammers scam because that’s what they do, there’ll always be new schemes, but as an individual, you can keep yourself, funds & data safe by keeping these points in mind.