5 Common Cryptocurrency Scams and How to Avoid Them


In today's world, your cryptocurrency is an incredibly valuable asset to criminals. Since it is liquid, highly portable and, once a transaction has been made, it's almost impossible to revert it. As a result, a wave of scams (both decades-old classics and cryptocurrency-specific swindles) has flooded the digital realm. In this post, we will identify some of the most common cryptocurrency scams

  1. Social Media Giveaway Scams
  2. It's amazing, nowadays, how everyone seems so generous on the likes of Twitter and Facebook. Check the replies to a tweet with high engagement, and you will certainly not doubt that your favourite investor, or social media influencer is doing a giveaway. It usually goes this way, if you send them just 1 BNB/BTC/ETH, they promise to send you back 10x that amount! Certainly, it seems too good to be true, doesn't it? Unfortunately, that is because it is. That is a pretty good rule of thumb to apply to many of these scams. It is incredibly unlikely that someone is hosting a legitimate giveaway that requires you to first send your own money. On social media, you should be wary of these kinds of messages. They might come from accounts that might look identical to the ones you know and love, but this is part of the trick. As for the dozens of replies thanking said account for their generosity – they're just fake accounts or bots deployed as part of the giveaway scam. Suffice it to say, you should just ignore these.
  3. Pyramid and Ponzi schemes
  4. Pyramid schemes and Ponzi schemes are slightly different, but we are placing them into the same category because of their similarities. In both cases, the scam relies on a participant bringing new members with the promise of incredible returns. Ponzi schemes In a Ponzi scheme, you might hear about an investment opportunity with guaranteed ridiculous profits in a short period, this should be your first red flag! Commonly, you will see this scheme disguised as a portfolio management service. In reality, there is no magical formula at work here – the “returns” received are just other investors' money going in and coming out. This is how it works; the organizer will take an investor's money, and add it to a pool. The only inflow of cash into the pool comes from new entrants. Older investors are paid off with newer investors' money, a cycle that can only continue as more newcomers join. The scam unravels when there isn't any more cash coming in – unable to sustain pay-outs to older investors, the scheme collapses. The cycle continues until the inevitable implosion of the scheme. Pyramid schemes In a pyramid scheme, there's a bit more work required by those involved. At the top of the pyramid is the organizer. They will recruit a certain number of people to work on the level beneath them, and each of those people will recruit their own number of people. I know you would relate with these kinds of scams. As a result, you end up with a massive structure that grows exponentially. and ramifies as new levels are created (hence the term Pyramid). So far, we have only described what could be a chart for a very large (legitimate) business. But a pyramid scheme is distinct in the way it promises revenue for recruiting new members. Take an example where the organizer gives Alice and Bob the right to enlist new members for $100 each, and takes a 50% cut on their subsequent revenue. Alice and Bob can offer the same deal to those they recruit (they will need at least two recruits to recover their initial investment). As the pyramid scheme grows, the older members earn an increasing stream of revenue as the distribution costs are passed from the lower to the upper levels. But because of the exponential growth, the model is not sustainable for long. Sometimes, participants are paying for the rights to sell a product or service. You might have heard of certain multi-level marketing (MLM) companies accused of running pyramid schemes in this manner. In the context of blockchain and cryptocurrencies, controversial projects like OneCoin, Bitconnect, Ethereum Million, Ethereum Forsage, Fortron, and PlusToken have come under fire, with users taking legal action against them for allegedly operating pyramid schemes.
  5. Fake Mobile Apps
  6. It's easy to overlook the warning signs on fake apps if you are not careful. Typically, these scams will direct users to download malicious applications – some of which mimic popular ones. Once the user installs a malicious app, everything might seem to work as intended. However, these apps are specifically designed to steal your cryptocurrencies. In the cryptocurrency space, there were many cases where users downloaded malicious apps whose developers masqueraded as a major cryptocurrency company. In such a scenario, when the user is presented with an address to fund it wallet or to receive payments, they are actually sending funds to an address owned by the fraudster. Of course, once the funds are transferred, there is no undo button. Another thing that makes these scams particularly effective is their ranking position. Despite being malicious apps, some can rank highly in the Apple Store or Google Play Store, giving them an air of legitimacy. To avoid falling for them, you should only download from the official website or from a link given by a trusted source. You might also want to check the publisher's credentials when using Apple Store or Google Play Store.
  7. Phishing
  8. Even newcomers to the crypto space will undoubtedly be familiar with the practice of phishing. It typically involves the scammer impersonating a person or company to extract personal data from victims. It can take place across many mediums – telephone, email, fake websites, or messaging apps. Messaging apps scams are particularly common in the cryptocurrency environment. There is no single playbook that scammers adhere to when trying to get a hold of personal information. You may get emails notifying you of something wrong with your exchange account, which requires you to follow a link to fix the problem. That link will redirect to a fake website, similar to the original one – that will prompt you to log in. This way, the attacker will steal your credentials, and possibly your cryptocurrencies. A common Telegram scam sees the scammer lurking in official groups for cryptocurrency wallets or exchanges. When a user reports a problem in this group, the scammer will reach out to the user privately, impersonating customer support or team members. From there, they'll urge the user to share their personal information and private keys.


Always remember that malicious actors have no shortage of techniques for siphoning funds from unsuspecting cryptocurrency users. To steer clear of the most common scams, you need to remain constantly vigilant, and aware of the schemes used by these parties. Always check that you are using the official websites/ mobile applications of the company, and remember: if an investment sounds too good to be true, it probably is. Finally, if you have ever been a victim of cryptocurrency fraud, and you want to recover your cryptocurrency, connect with us today Phoenix souls.
To learn more about us, click on the link above.
The video below is specifically created for you. Do well to watch and remember to hit the subscribe button.