Common Crypto Scams

The crypto space is often referred to as the wild west. Being a relatively new innovation, many governing bodies have little clear-cut regulations or even knowledge of the ins-and-outs of decentralized finance, which can open the space up to many types of scams.

Phishing

Phishing scams involve links sent to a victim that, when clicked, give the scammer access to the victim's wallet keys, allowing the scammer to drain the wallet. The best protection against phishing scams is to never click a link that is not from an official source.

Pump and Dump

In a pump and dump scam, a creator of a token buys a large amount or majority of the token just to sell when the price is high, dumping the price on actual buyers. These can usually be spotted by searching a blockscanner of the chain that the token is on and comparing the number of holders with the amount of tokens each holder has. If the largest wallet was the first to buy and holds the majority of the tokens, it is likely a pump and dump.

Rug Pulls

A rug pull is a scam where a token's liquidity can be drained by the token creator. The creator launches the token with a liquidity pool and, when the value of the pool reaches the creator's desire, they pull the plug and take the liquidity. These are harder to spot, but the mechanism for this scam can be found in the token's code, allowing the token to be made unsellable or allowing the token's contract to be altered. A popular countermeasure is to invest in assets with locked liquidity or contracts that have been renounced, meaning the contract cannot be altered.

Employment Scams and Investment Ads

Employment scams and investment ads promise high returns in exchange for an initial investment. Scammers will take the money and leave. Never trust anyone promising to help you make money by sending them money first, or clicking on a URL sent by them.

Influencer Scams

An influencer hypes a project to get their followers to buy, then dumps their holdings once a desirable value is reached, leaving their followers with losses.

Airdrops and Fake Giveaways

Scammers advertise fake airdrops or giveaways that require a fee a fake exchange or website and connect their wallet. Once connected, the scammer gains access to the wallet and drains them from an official source.

Honeypots

A honeypot is a fake cryptocurrency or smart contract that seems too good to be true. Victims buy into a digital asset and then find they are unable to sell it, losing their investment. If something looks too good to be true, it likely is.

Fake Celebrity Endorsement

Scammers use images or AI-generated content of celebrities endorsing their project. If a celebrity is truly backing a project, there should be multiple sources of the information and extended interviews with that celebrity.

Protecting Yourself from Scams

Wallet Security

   
• Never give your seed phrase or wallet keys to anyone, and never store them digitally.
   
• Write your seed phrase down on paper or another non-digital apparatus and keep it in a secure location.
   
• Never connect a wallet with assets to any website or application you are unsure of.
   
• Use an empty hot wallet to check sites before using your real one.
   
• Invest in a cold wallet such as Trezor or Ledger, and only buy from official websites.

Account Security

   
• Do not click on links that are not from official sources.
   
• Do not accept friend requests from strangers or engage with anyone trying to sell you something online.
   
• Use two-factor authentication for your accounts to add an extra layer of security.

By following these best practices, you can better protect yourself from the various scams prevalent in the crypto space.