While there are opportunities in the world of cryptocurrencies, users should learn to identify and avoid common types of crypto scams used by bad actors.
Please note that this article is for information purposes only and not designed to provide a comprehensive or complete overview of scams present in the crypto space.
3 common crypto scams to watch for
Even though online fraudsters tend to switch up their tactics and find novel ways to reach unsuspecting victims, the structure of the scams themselves typically falls within a handful of “go-to” schemes meant to prey on an unsuspecting user's naivety and emotions.
It's helpful to adopt a cautious mindset when it comes to giveaways, tech support impersonations, and investment scams that plague the community.
Giveaway scams are prominent on the internet as fraudsters dupe unsuspecting individuals with the promise of free money. These scams typically invite victims to make cryptocurrency payments with the promise of returning double or triple the original amount. Unfortunately, the speed and irreversible nature of many crypto transfers creates opportunities for bad actors to take the funds and disappear.
While there are many ways to carry out a giveaway scam, scammers often find success by impersonating trusted individuals and celebrities to increase their reach and influence. Some scammers will even go the extra mile to secure or hack a verified Twitter account to feign legitimacy. Others will carefully craft profiles that are nearly identical to the original account. YouTube scammers will even repurpose footage of celebrities as a livestream and promote their giveaway scam in the description.
You forfeit all rights to your cryptocurrency the moment it leaves your wallet, so avoid sending funds to any strangers, especially if they are promising you future value in return. If you happen to spot a giveaway scam, do the right thing, and take a moment to report the fake account in-app to prevent others from being deceived.
Technical support scams
Fraudsters also work to masquerade as a given platform's customer support team. One popular tactic is to claim that the victim’s computer or account has been compromised. After inciting fear, scammers will then offer to fix the non-existent problem after the victim verifies their account information with their username and password. These types of scams are particularly dangerous because the victim’s entire account balance becomes vulnerable.
Technical support schemes are often conducted as part of a phishing campaign, so malicious actors will seek to actively replicate the services that our platform normally provides.
Protecting yourself against this fraud requires a proper cybersecurity mindset:
- Verify every digital correspondence to ensure the sender isn’t fraudulent
- Never give remote access of your PC to any individual
- Always use 2FA (2-Factor Authentication) when setting up your account, and never share these codes with any individual
- Never give out personal account details in any digital correspondence
If you ever receive an email claiming there is an issue with your account, check your service’s social media and/or reach out to the official customer support channel listed on the platform's website to confirm whether the cause for concern is legitimate.
Similar to giveaway scams, get-rich-quick schemes steal from honest bystanders by preying on hope and greed. Between pyramid schemes, Ponzi schemes, and investment fraud, there are numerous approaches to this method that have been tested and refined in traditional finance — long pre-dating the crypto space.
Ponzi schemes and pyramid schemes in crypto operate no differently than they do in traditional markets. Scammers promise immense returns on investment, then use the next round of investments at a higher valuation to pay off the previous set of investors.
Unfortunately, crypto investors are eager to pile into a space where investment scenarios with sky-high returns happen legitimately from time to time. If anyone claims to offer such returns, you should perform your own research, or reach out to your financial advisor or attorney for advice.
Investment scams through Initial Coin Offerings (ICOs) are difficult to identify since the market is built on providing early-stage capital to blockchain projects. Every promise of 10, 20, or 100x gains should be met with immediate skepticism. Nobody legitimately knows what an asset will be valued in 24 hours, much less the next week.
Anyone looking to participate early in a coin offering should research the founders, company history, and feasibility of the project before putting any money in. Even if the price of a project increases in a short period of time, be wary of pump-and-dump schemes (where the cryptocurrency in question is artificially inflated and then sold off en-masse while retail buyers are still engaged in the chase upward movement).
When it comes to online scams, it’s important to remember one thing: if it’s too good to be true, it probably is. Oftentimes the best defense against bad actors is to arm oneself with knowledge. For more information on how to stay safe online, learn more about Binance.US' Safety and Security Tips.
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Legal disclaimer: This material has been prepared for general informational purposes only and should NOT be: (1) considered an individualized recommendation or advice; and (2) relied upon for any investment activities. All information is provided on an as-is basis and is subject to change without notice, we make no representation or warranty of any kind, express or implied, regarding the accuracy, validity, reliability, availability or completeness of any such information. Binance.US does NOT provide investment, legal, or tax advice in any manner or form. The ownership of any investment decision(s) exclusively vests with you after analyzing all possible risk factors and by exercising your own independent discretion. Binance.US shall not be liable for any consequences thereof.