Top Crypto Scams Based on DFPI’s Crypto Scam Tracker
Crypto scams have become a significant threat to investors in recent years. Not just that, with new fraudulent schemes emerging regularly, it’s not getting any better. Per the Federal Trade Commission (FTC), cryptocurrency fraud resulted in losses totaling $679 million during the first half of 2024.
Because of this, the California Department of Financial Protection and Innovation (DFPI) maintains an up-to-date tracker that aids consumers in identifying these scams.
In this guide, we will break down 16 different scams recorded from the DFPI Crypto Scam Tracker to understand the nuances of each one—and how to prevent falling victim to each one.
1. Fake Investment Platforms
In the first half of 2024, investment scams were the most prevalent type of crypto-related fraud, representing 46% of all reported cases.
Scammers create some scam crypto platforms that look real and offer high returns with very low risk. After investors deposit their money, they are frequently locked out of their accounts or unable to make withdrawals. Scammers can also make convincing websites with false testimonials, graphics that look professional, and regulatory seals that are phony but would look legitimate.
You need to check various factors, such as user reviews, and regulatory compliance, before depositing money in any investment platform.
2. Pump-and-Dump Schemes
In a pump-and-dump scheme, the scammers use social media, influencers, or fake news to create hype around an initial coin offering (ICO) and artificially pump up the price of a cryptocurrency. After the price has soared, the criminals offload their assets and crash the price, and investors are left holding worthless tokens.
Scams like these are most common in full-blown low-cap crypto. This adds to a potential mixed bag of information hidden behind a veil of pseudonymous wallets and meaningless hype, making it all the more important to assess the token’s market fundamentals before investing, and avoid projects that lack transparency and any real utility.
3. Romance Scams with Crypto
Romance scammers establish emotional connections with victims through social media or dating apps and then persuade them to sink money into phony cryptocurrency scams. They may offer a nonexistent investment opportunity, frequently promising extremely high returns. After the victim is led to believe that the scammer is trustworthy, and as soon as funds are sent, they fade away.
A Tennessee woman was a victim of a romance scam. She lost approximately $400,000 to a crypto scammer she met on the dating app Hinge. The fraudster reached out to her about investing and convinced her to put money into a digital wallet. She had no idea that the digital wallet belonged to her dating scammer. In the end, she lost her life savings and that of her father.
Professional warning: If your online relationship turns into requests for financial assistance, take it with a grain of salt: consult trusted individuals before transferring money.
4. Rug Pulls
A rug pull occurs when a project’s developers withdraw all of the funds provided by investors for a liquidity pool, leaving those investors with worthless tokens.
Scam 101 — This sort of thing goes on in decentralized finance (DeFi) projects all the time, where developers can create as many tokens as they want.
Rug Pull by Squid Token Developers is a real life example of such scam.
Squid Token was marketed as a cryptocurrency tied to the popular series Squid Game. Investors rushed to purchase tokens, only for the developers to abandon the project, draining millions in funds. The token’s value plummeted to near-zero overnight.
To prevent this from happening, make sure that the team behind a project is known and reputable, and look for whether the code has been audited by third parties.
5. Phishing Attacks
Phishing is when they send you a fraudulent message that tries to fool you into revealing private keys or login credentials. These scams may come in the form of fake e-mails, direct messages, and fake websites posing as a decent exchanging organization or wallet. Always check the URL of a site before providing sensitive data, and never answer unsolicited requests for personal or financial information.
6. Fake Airdrops
Scammers publicize free tokens via airdrops, requesting users to send an insignificant sum of funds, or enter private credentials to receive free tokens. Never pay for an airdrop with legitimate ones. Stay safe by ignoring any “too good to be true” offers, and ensure that you check out the source of the airdrop before giving out any personal information.
7. Tech Support Scams
Per reports, a tech support scam is where the fraudsters act as customer service representatives of wallet services or exchanges and request access to users’ devices or private keys. Once they have access, the scammers remove the funds.
Always go through official channels when looking for tech support from any reputable company offering blockchain development services. Don’t give anyone who claims to be from support remote access or private keys unless you are absolutely sure they are real.
8. Social Media Giveaway Scams
Scammers impersonate celebrities, brands, or popular crypto projects to announce “giveaways” on social media. They also offer to double any crypto that you send to their wallet. However, once victims send money, they get nothing back.
Giveaway Scam by Fake Elon Musk Twitter Account is one popular real life case study.
A scammer posing as Elon Musk on Twitter claimed to be giving away Bitcoin to followers who sent small amounts of cryptocurrency for verification. Several victims sent funds and lost everything. A German, in particular, lost £407,000 to the scam.
The fraudulent account was later suspended by Twitter.
Always confirm the legitimacy of any giveaway with the official sources and be wary of any offer that requests cryptocurrency in order to receive more in exchange.
9. Ponzi Schemes
Ponzi schemes promise high returns that are paid out from the investments of new participants rather than profits. Eventually, these schemes collapse when new investors stop joining, leaving the majority of participants with significant losses.
A real life example of a Ponzi scheme involves Bitconnect.
Bitconnect was a crypto platform that falsely promised high returns on investments. The scheme, which operated between 2016-2018, collapsed after accumulating $2 billion in investments. Investors were lured with promises of up to 40% monthly returns, but the platform was exposed as a Ponzi scheme. U.S. authorities are still pursuing legal action against Bitconnect’s founders.
Be cautious of investments offering guaranteed returns or profits with little risk. Always conduct thorough due diligence before committing any funds.
10. Cloned Exchanges
Scammers set up what appears to be an authentic cryptocurrency exchange, which is almost identical to the legit exchange and convinces the user to deposit money or trade. Once the money is transferred to the scam address, it is gone, and the phony exchange goes out of business.
Only trade through exchanges that have a great reputation and check their URLs and security characteristics before trading, no matter what.
11. Malware Distribution
All types of malicious software (malware) are distributed through email attachments, misleading downloads, or phishing sites. Once malware is installed, it can snatch your private keys or personal data.
Never download software from untrusted sources, and always have updated antivirus to protect your computer or devices from malware attacks.
12. Impersonation of Celebrities
Crypto scammers frequently impersonate celebrities and prominent figures to promote fake investment schemes or scam token sales. They leverage the trust people have in these figures to entice victims into sending funds. Always verify promotions, and be cautious of offers that seem too closely tied to a celebrity or public figure.
13. Mining Investment Scams
It is a type of scam in which the customer is promised a return as they harvest the money with cloud mining servers. Victims need to make an advance payment in either mining equipment or mining shares but never see any returns.
Cloud mining fraud by mining max is a real life example of such scam in action.
Mining Max lured investors with promises of high returns through cloud mining. Victims lost over $250 million after it was revealed the platform operated as a Ponzi scheme. South Korean authorities arrested several key figures in the scam.
Do thorough due diligence on mining companies, and demand proof of operations, before making investment decisions.
14. DeFi Rug Pulls
In decentralized finance (DeFi) rug pulls, scammers create a project that appears legitimate, attracting investors to contribute liquidity. Then, the perpetrators “pull the rug” by draining the liquidity pool, leaving investors with worthless tokens. Stick to reputable, audited DeFi platforms to avoid these high-risk scams.
15. Fake Wallet Apps
Scammers create fake wallet apps that resemble well-known services, leading users to download them and steal their funds. Only download apps from trusted app stores or official websites, and always ensure they have positive reviews and a history of reliable updates.
16. Token Swap Scams
A token swap scam involves tricking your investors, to exchange their coins for worthless or malicious tokens. The exchange project may appear good, offering a better rate or reward, but once the swap is initiated; the tokens are nearly worthless. To avoid falling victim to this type of fraud, use trustworthy and reliable token exchanges.
Conclusion
A crypto scam can occur in many ways, from phishing attacks to smart Ponzi schemes–the list is endless. Staying updated, learning due diligence, and using only trusted sites are the only ways to save yourself from becoming a scam victim.
Always do your due diligence before making an investment, and always keep in mind that no legitimate opportunity will ask you for private keys, unexpected payments, or personal information! Remain alert and reference resources like the DFPI Crypto Scam Tracker to keep up with newer threats.
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