When you start trading crypto you come across the craziest things. Little by little you learn and stop doing certain things because you know they are dangerous. At worst, you learn through experience.
There are so many pitfalls in the world of crypto that you almost have to be an expert to avoid them all.
Fortunately, I’m going to write something for you today, so you don’t have to experience them firsthand, but are one step ahead of the scammers because you are now aware of how they work.
Table of Contents
- Too good to be true scams
- Fake ICO
- Investment fraud
- Pump and dump
- Rug pull
- Chat scams
- Popular personalities
- Cloud mining
- SIM card swapping
- Fake airdrops
- Fake exchanges
- Theft and hacking
- Trojan horse, malware, crypto jacking
- Fake help and support
- Fake coins
- Dust attack
- Honey pot
- Fake wallets
- Preventing crypto scams
When it comes to a lot of money, there are deadbeat conventions on how to knock the money out of people’s pockets, you know how it goes. A whole world will open up for you, even if it is the world of cesspools.
It’s impossible to write down all the scams because you’ll just see that when I have the whole list, yet another crook comes up with some shit to scam people. Still, you’re going to see a whole mountain of ways scammers operate.
And now, without further ado: the list!
Too good to be true scams
1. Bitconnect. This is the most famous scam in cryptocurrency history. The red flags were not forthcoming, but the pledges of the organizers knew very well how to exploit a trait of almost all humans: the greed virus. This is a virus that includes classic symptoms such as cognitive dissonance and red cheeks. This reminds me of the X-Files: "I want to believe."
The Bitconnect Project started in 2016 and they raised just under $400,000 in their "ICO." All members of the team were anonymous. Red flag: check. A white paper was too much work for them, too. Red flag. The purpose of the project? Nowhere to be found.
Since the beginning, it looked like a Ponzi scheme to the neutral observer.
After some time, they revealed that this was a platform for loans. The ROI (return on investment) was estimated at 480% per year, but at least 90%. Well, if that’s not a Ponzi scheme then suddenly I’ve become bad at math or something. According to Bitconnect, they had a very good trading bot that generated a huge ROI (so why did they need other people’s money?). Sure ya.
They also had a superrrrr referral program. A small setback was that you had to invest at least $10,010 to participate, but then you also got 7 levels of referrals! From your direct referrals you got 7%, about 700 bucks. If you know a bit of math, 7 levels are pretty hefty. Bitconneeeeeect! A lot of people came together to push each other to join.
If you were smart enough to do the math, you would have raised around $90 million within 10 years if you reinvested it all. Too bad they disbanded, otherwise I’d get in right now!
One small problem was that they didn’t mention anywhere how you could cash out. Virtually it was chock-full of millionaires who got in early, but they remained virtual.
Their website was choked with language errors. This is a red flag, because as a business you cannot afford it. So, if you come across it anywhere, avoid these sites and their crypto.
At some point, the monkey came out of the tree: Bitconnect was throwing a party with other people’s money. When that became clear, the whole mess collapsed in 2018, and virtually all the money was lost.
Why do so many people fall for this obvious crypto scam? As soon as someone sees they can make a lot of money the virus strikes, and reasonable arguments go to waste.
A maxim for Ponzi schemes is: is it clear how one gets the money to pay you high ROI? If not, it will probably be some kind of Ponzi scheme, where the previous layer has to be paid by the next layer. When the layers run out the whole thing collapses.
2. OneCoin. 2017 started this scheme. OneCoin would be listed on an exchange. This exchange was part of an umbrella organization, OneLife. So, nothing for cats. The exchange would be called XCoinX.
You could buy a basic package for "only" $110, as well as an all-in-one package for the sloppy price of $55,555, for which you also got OneCoins. Must have been into numerology or something. This principle is also well known from the Church of Scientology, where you can buy all kinds of "programs" with extremely expensive prices. As soon as you have paid enough there, you can start knocking money out of people’s pockets yourself, because you have become a "teacher."
At a kind of Tupperware parties, you got together to share the blessings of OneCoin. You got 10% of your referrals, so if those deposited $55,555 you can understand that this was no kitten on a tree. So, there was often a lot of pressure at such a "party."
OneCoin became worth 60x as much in the meantime, but the exchange, where it was to be sold, had not yet opened. Small unfortunate detail. Virtually choked with OneCoin millionaires.
When the authorities in many countries swung into action, the case was rolled up. A battery of arrests followed, the only one to escape was the elusive Bulgarian Dr. Ruja Ignatova. Her brother is serving a 99-year sentence. Probably from a judge who also practices numerology.
3. More Token. In the year 2018 of the Lord, it was that a "high yield investment return" plan was set up. With the Plus Token, you could get a very high ROI. At least, if it wasn’t a scam. When there were 3 million wallets containing 70,000 Bitcoin and 800,000 Ethereum, the organizers thought the bucks were big enough and disappeared. Only 6 people were arrested, the rest are probably in the Cayman Islands enjoying the sun and the beach.
4. Pincoin and iFan. Exitscam after an ICO. Big promises, little wool.
5. Bitcoin Saving and Trust. In 2011 this obvious scam started, if you’ve been reading for a while already. Participants received 7% interest per week (!) on their deposited Bitcoin. Trendon Shaver, the founder, made a good living out of it for about 3 years before he had to go to jail.
6. Mirror Trading International. In 2019, this South African gang promised you 0.5 - 1.5% return per day! They had such a good trading bot that this was no problem. Within a year there was $600 million in deposits, and they were off with the loot.
7. Time Wonderland. Fork from Olympus DAO. 2% interest per day, making 1377 tokens out of 1 Time token over a year. Since everyone knows that only banks can create money out of thin air, you must wonder where they get these returns from. The answer is obvious: from new entrants. Just another Ponzi scheme. This coin went to over 8000 euros within a few months and then dropped like a stone and disappeared from view. Not that strange.
I believe you can see the line now. If it is too good to be true, this expression is true in almost 100% of cases. It must be absolutely clear where the growth of your money is coming from, otherwise it is a scam. Period.
There was a time when the ICO (initial coin offering) was hugely popular. One ICO followed another, and the promises increased even more.
Around 80% of all ICOs are scams, designed to get away with the dough after it ends. So, it is more like an LCO, a last coin offering.
If you want to be prepared and start researching an ICO, you need to pay attention to several things. Do they have a white paper, a roadmap, and a decent website? Then there’s a start.
If there has already been a seed round (initial investment in a project by venture capitalists and angel investors) and big names have participated in it (i.e., they have researched the project) you are almost certain that the project is kosher and has a good chance. ICOs are really for very experienced veterans or for pinpoint researchers.
These guys even advertise on TV from time to time! They promise you golden mountains and show you the way to the rainbow, because that’s where the pot of gold is.
So, you invest in such a club and get a neat statement with how much you have by now. At some point, of course, you want to go on vacation or buy that expensive washing machine. Then you ask for some or all of it and it turns out that the computer where everything is stored has been standing in the rain, the accountant is on vacation and the cat is in heat.
Needless to say, you can whistle for your money, because as you know, money doesn’t respond to that.
This kind of thing should never be settled on the phone and if you do want to deal with them check with Trustpilot or something if it is a bona fide company.
How can you possibly get scammed at a website where you get free coins for reading emails or watching advertisements? Well, once you have a decent amount together, they don’t pay out. Have you been wasting your time for months! Faucet websites pay too little to spend your time there anyway.
Hey, pssst. I have a unique NFT here for sale of a painting. It’s called the Mona Lisa. Bargain for 5,000 euros. Deal?
This communication (somewhat less obvious) is sent to an army of people and they all neatly receive a "unique" copy.
An NFT (non-fungible token) should actually be unique, but since there is no regulation yet, you don’t have a leg to stand on if you purchase the Mona Lisa as a digital artwork for €5000.
Pump and dump
This is a bit of a sneaky form of scam, though, because it seems so logical.
You get an invitation to a pump and dump group. The agreement is to start investing in coin x together on date x and time x. Coin x is low capped and has little liquidity, so a hefty number of purchases drives the price up considerably.
What you don’t know is that the organizers have made regular purchases weeks in advance in such numbers that the price barely moves. When date x and time x arrive, the organizers shout NOW! You will see that the price rises tremendously in a short time. The moment the organizers can cash in big time (usually after a minute or so) they throw in all their coins at market price and within a minute the price drops to well below YOUR purchase price.
The result? The organizers won big money and the participants lost big money. Just don’t participate in it.
Another one of these things! A new coin enters the market and there is still little liquidity in it (purchased coins). Little by little the coin rises a bit, and more people invest. Once the liquidity has risen enough and the creator of the coin thinks he can cash in enough, he throws all his coins on the market at market price and the coin goes to 0. Everyone else loses their money because no one is going to throw another penny into that coin.
This happens especially with very new coins and with meme coins. Note that if the creator of the coin only keeps a small portion of the coins themselves, they cannot do this.
This is a bit like playing poker together, collusion. You are in a chat room or on social media and people start talking about how good investor X is and how much money they are making because of his incredible qualities.
These chat scripts are sometimes even played by chatbots, and the idea is that you will believe their stories. Occasionally a link is dropped, and you too can join in and benefit from investor X’s mega skills. The only downside is that you won’t see a penny back from investor X, because he doesn’t exist at all.
This has been popular for a while in advertisements and on social media. Elon Musk is also deep into this coin. Jack Nicholson made millions on this exchange. The Easter Bunny buys his eggs here!
One sneaky scam though was the hacked Twitter accounts of rich people. For example, Bill Gates promised that it was time to give something back to the community. He promised to double return all money sent to a particular Bitcoin account. Classic trick of course, capitalizing on greed, what came back double was silence.
Almost always a scam. They do use your hardware, but you yourself don’t see a dime.
SIM card swapping
Through devious methods, crooks manage to replace your SIM card and can then impersonate you. With the swapped SIM card, they then try to log into exchanges via SMS and steal your cryptocurrency.
One remedy for this is to use 2FA on all exchanges. If your SIM card suddenly stops working, then you know what could be going on. Inform the exchanges where your money is and make sure that no trades or moves are allowed until you regain control.
You look in your MetaMask wallet and see that you suddenly have some coins that are worth a lot of money. How nice of, um, someone. So free money does exist after all!
They are trying to give this coin a name that appeals and sounds a bit official, such as MNEB or VERA.
You naturally want to go sell them but that just doesn’t work no matter what you do. Often you must pay high gas fees on a DEX, but that transaction just sticks. So, it costs you money.
Sometimes you must take an additional action, such as creating an account and depositing crypto into it or creating a wallet. The goal is to steal your coins that you put on it or send a virus along with it so they can get to your crypto money.
See a weird coin that’s worth a lot of money? Ignore it. Free money does not exist unless you are a bank.
You know this one. You get a notice that your computer is down unless you transfer x amount of money in cryptocurrency to address x.
This usually only happens to corporations or wealthy people, who have very sensitive information on their computers.
Make sure your computer is secure and don’t open weird links.
Tricky, mind you. A DEX like UniSwap or PancakeSwap is copied exactly, and you can do anything you can do on such a DEX as well. The only difference is the website address. And that you lose everything you deposit on it.
Add the official exchange to your favorites if you trade a lot there. This way you will always go to the right address. When you first go there pay very close attention to the address. If the address is Pamcakeswap or something, then it is a fake exchange.
Another form of fake exchanges are newly set up exchanges. With all that open-source software, you soon have one online. Some of these allow you to deposit, for example, but not withdraw.
Sometimes you wake up and the exchange has disbanded. Very occasionally this is with a very big one, like FTX, but almost all the others are smaller exchanges from countries like Bulgaria or so. If you have any doubts, check out their reviews.
With a new DEX you must be even more careful. Often the native coin goes like a rocket in the beginning, like WaultSwap or BakerySwap for example, and suddenly the coin can be found back in the rear. That can cost you a lot of money.
One of the most famous scams in these spoofing (fooling) regions is Typosquatting. Here they created websites like Amozon, Gougle and GltHub to scam people.
Theft and hacking
Theft of your coins is only possible if one knows your password for a wallet like MetaMask or if one knows your seed phrase.
Your password for all your crypto adventures should be at least 11 characters, that has been calculated. Brute force (trying one at a time) will then take too long to figure out. Don’t put your password on your computer, but in a notebook with all your passwords, so you don’t search yourself silly.
If you can turn on 2FA, do so. There is only one phone in the world that displays the correct code, and fortunately, it is in your possession. There is no better protection.
Mt. Gox is the best-known example of hacking. Between 2013 and 2014, 70% of all Bitcoins were traded here. In 2014, Mt. Gox disappeared overnight. An unpleasant morning coffee for many people. 1 million Bitcoins had been stolen in a hack and they were bankrupt.
The security of exchanges has been much better since then. Hacks are now rare, and the better exchanges insure themselves for this. The largest sites also have the money for this.
Trojan horse, malware, crypto jacking
All kinds of sites can install software on your computer, after which your computer goes to work making money for others, such as by mining for others.
Advertising networks may also start using substantial amounts of RAM for their own purposes. Therefore, an adblocker is not a luxury these days.
If you suddenly see that your computer is using a lot of RAM for programs you don’t know about then it’s time for a virus scan. Worst case scenario is a new installation of your operating system if you can’t get rid of it. This is also known as crypto jacking.
Fake help and support
If you trade on a DEX and you don’t know what to do they have an FAQ, but no help and support. On sites like Telegram or Discord, people can pretend to be help and support staff. Don’t fall for it, because they are going to ask you for your login details or your seed phrase, to clear your wallet.
If out of the blue anyone anywhere starts asking for sensitive information: get out!
A coin usually has a contract by which it is sold. If you go to CoinGecko, many coins have a contract that allows you to buy the coin through your MetaMask or Trust Wallet. This is at the top right in CoinGecko.
Really clever ones, they recreate such a contract. It looks the same, everything is correct except the address. If you want to avoid purchasing the fake coin, make sure you copy the contract preferably from the official website belonging to the coin. The alternative is copying from CoinGecko or something.
If you go swapping at random on a DEX, then you may well be buying fake coins unless you check the contract.
If you suddenly see all kinds of coins in your wallet worth less than a penny, you may be a victim of a dust attack. They are trying to get you to send this "dust" to another address, so they know which addresses you are using.
They often send another message in the description, such as "claim your 0.5 ETH at site X now." If you click on that, then software is installed on your computer that they use to try to empty your wallets.
This is an exceptionally clever set-up, though, I must admit.
Someone drops a comment like it’s nothing that he has been stupid. He just randomly pasted a private key from a wallet into the wrong chat and says he hopes that none of the 25,000 people in the Telegram chat will abuse it.
Of course not, kid! We’re all as honest as they come here!
One after another went to the DEX and tried to cash in that big sum of money with this private key. What they didn’t know is that this Spongebob Smartypants had a clever contract arranged that all the gas fees you had to spend to make the transaction go through were skimmed off and sent to another address, so nothing changed at all in that account. Of course, the transaction itself didn’t go through; it got stuck in confirmation.
Never send your money to an obscure wallet. Only use very well-known wallets, because before you know it, you put funds on a wallet, and they are lost forever. For example, with the GitHub XRP Ledger wallet theft, large numbers of coins were stolen.
This uses successful methods that work often enough. Strategies such as scare tactics, promises and intimidation are frequently used.
If your bank calls you for your information because the IRS is at their door, then you know it’s scaremongering.
If your daughter calls on WhatsApp to ask for a lot of money for whatever, tell her you’ll call her back so you can also be sure it’s her.
If a company sends you a bill saying that if you don’t pay within a certain (short) period of time, a bailiff will follow, then you should ask yourself if this is true. If you don’t know the company, then it is probably scaremongering and you should find out as soon as possible what kind of company this is and if necessary call the police.
These days, faking a phone number so it looks like that person is really calling you is fairly easy for professionals to do. The same goes for social media accounts and websites. Be alert!
Preventing crypto scams
Before reading this paper, you may have thought, "What could possibly happen to me?"
After reading this blog, you may be thinking, "What else can happen to me?"
At some point you are going to see the line. Whatever happens, watch your money very carefully.
As soon as an outsider starts is asking you for sensitive information you slam shut.
Once you get free money you don’t believe any of it.
As soon as you are promised golden mountains you don’t go for it.
As soon as official agencies start asking for essential information or to pay for all sorts of things you go on asking around and don’t let yourself be taken for a ride.
You don’t allow yourself to be emotionally blackmailed.
Beware of obscure countries or providers.
Turn on 2FA.
If necessary, observe reviews on Trustpilot or another review site.
Investing in cryptocurrency is a very fun adventure. Make plans and stick to them. Then you also won’t get tricked by people who are after your money and coins.
Seize the day and don’t let the day seize you!
This article received a 10 on Trustpilot.
Okay, that last one was a scam.
This is not buying advice. Always do your own research before investing in a cryptocurrency. Keep your portfolio diverse and only invest money you don’t need.