7 Crypto Scams You Need to Know & How to Avoid Them
By: Richard Knight
Tags: Cryptocurrency Investment, Blockchain, Cryptocurrency, Scam, Bitcoin

1. Advertising Scams:

Just because you see an advertisement on Google Search, Facebook or LinkedIn for a specific product or service doesn’t mean the advertisement is linking you to the correct website.

Google Ad pointing to a Phishing (fake) website

How to Avoid this Scam:

To protect against this type of scam, don’t click on advertisements if you are not sure it is linking to the correct authoritative website. Even if you think you are being redirected to the correct website, always double check the URL to confirm its correct once you arrive.

The Google Chrome extension Cryptonite can help with identifying fraudulent sites.

2. Cloned Websites & Fake URLs:

A cloned website looks exactly like the authority website however it is hosted on a different domain.

Can you spot the fake URL here?

Answer: The letters “n” are not correct.

How to Avoid this Scam:

It’s good practice to always double check the URL of the website you are visiting to ensure it’s the correct one. Some of these cloned websites use URL’s very close to the actual URL where they may substitute an “O” for a Zero or “i” for “L” and so forth.

There are few options available to detect fraudulent websites, however the Google Chrome extension Cryptonite does claim to help with identifying phishing sites.

3. Fake ICOs:

On the heels of cloned websites are completely fake websites. These are websites claiming to offer a nonexistent product or service and the most popular type of fake websites in the last two years are Initial Coin Offerings.

According to a Bloomberg Research Paper, about 80% of ICOs launched in 2017 were scams.

One such ICO scam that received a lot of new attention in 2017 was Centra which was able to raise over $32 million and included Floyd Mayweather and DJ Khaled as celebrities endorsing the project.

One of the largest ICO scams in 2017 was a Vietnamese company Modern Tech that was able to raise over $660 million from approximately 32,000 people. Shortly after the ICO, the team disappeared and according to reports the team of seven Vietnamese nationals left the country with the funds.

How to Avoid this Scam:

If you’re one to invest into ICOs, scrutinize the ICOs carefully. Always do your own research and verify as much as you can. ICOs are one of the highest risk investments simply because in many cases it’s just an idea — there is no product. If you’re unsure, don’t invest.

4. Cloud Mining Scams:

During 2017 when cryptocurrency mining was profitable and a lot of people were looking to get into mining but didn’t want to have to purchase their own equipment, many fraudulent cloud mining websites began to appear.

A popular cloud mining scam was MiningMax and estimated to have scammed investors out of as much as $250 million dollars.

How to Avoid this Scam:

If it sounds too good to be true, it likely is. Again, here is where you need to do your due diligence and research. If you have doubts, then don’t invest, no matter how tempting the offer may seem.

5. Email (Phishing) Scams:

An email (phishing) scam is where an authentic looking email is sent to an unsuspecting user in an attempt to either steal their personal information or gain access to one of their online accounts.

The popular cryptocurrency exchange Coinbase has been a popular victim of this type of scam with many variations going around like this:

How to Avoid this Scam:

A good way to prevent these types of scams is to always look at the from address. If the from address is not from the URL of the source organization, it’s likely a scam.

6. Pump & Dump:

A pump and dump is when a group of people manipulates the price and volume of a coin in an attempt to sell their holdings when the price is at it’s peak while leaving the other investors (holding bags) when the true value of cryptocurrency returns to normal levels.

Telegram is the most popular breeding ground for Pump and Dump groups:

How to Avoid this Scam:

Stay away from Pump and Dumps. Period.

7. Phone Hacks:

A phone hack is where a scammer takes control of your cell phone and uses it to authentic an online transaction. By using social engineering to convince the cell phone company to transfer your number to their cell phone, they are able to authenticate your online transactions using your cell phone number.

If they have access to your email and take control over your phone, they have the ability to authentic many types of transactions including banking and the ability to gain access to your cryptocurrency exchange.

Cory Brown gives an excellent blow-by-blow account of how this happened to him in his medium post:

How to Avoid this Scam:

Don’t advertise you own Bitcoin. Make sure to use the strongest and available authentication methods available, even if it’s not that convenient and change your passwords often.

Big Shout Out:

Big shout out to Cody Brown, fellow medium writer for sharing his story how he lost $8,000 worth of Bitcoin in only 15 minutes due to scammers. It’s tough to accept you’ve been scammed. Even tougher to make it public.

It’s only when people like Cody openly share their stories with the world that the rest of us have an opportunity to learn from these painful lessons.

Thanks for being authentic and openly sharing your story with us.

Trade Safe,

Richard