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Scam Alert Crypto – 3 Major Crypto Scams Explained

Crypto scams are relatively new versions of Ponzi schemes but are more sophisticated scams because of the technology involved in blockchain. Blockchain technology was supposed to fix the issues in the existing financial system and bring more transparency in money transactions by means of decentralization.

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What we are instead witnessing is an 80% rise in cyber crimes related to cryptocurrencies and almost $14 billion in fraud and illegal scams. (Source: chainalysis)

scam alert crypto
Scam Alert Crypto

In this blog I will be discussing:

  • How do crypto scams work?
  • Can you recover from a crypto scam?
  • Where Can You Report?

Let us start by first looking closely at how cryptocurrency scams work.

How Do Cryptocurrency Scams Work ?

Cryptocurrency scammers are finding new ways to dupe investors and traders. Here are the top ways crypto scams work in 2022:

  • Honey Trap
  • pump and dump.
  • Rug Pull
  • Phishing
pump and dump
honey trap

Scam Alert Crypto :The Honey Trap

This type of scam usually begins with an invitation from a social media profile (usually of a gorgeous girl in her twenties). They entice you and tell you that this currency or exchange is the “Next Big Thing” by using false accounts and screenshots of payouts. Additionally, they will invite you to sign up for one of the platforms very soon, either through the web or an app, and they may even give you free money to trade with at first.

You will start making money when you start trading with fake money (they will say it’s real money, but try asking them if you want to withdraw and you’ll find out). When you are completely confident in your ability to earn money with cryptocurrencies, you will fund your account as fully as you can, only to discover the following day that it has been blocked for unknown reasons. Also, your dear friend from social media has blocked you to go hunting for the next victim.

Scam Alert Crypto : Pump and Dump

The pump and dump scheme is not new to the financial world. However, use of this scheme in the crypto world is getting popular. Some of the scammers who also happen to be founders of a digital token or currency usually start a campaign on social media, with paid promotions and in discord communities for the home-made crypto currency.

They promote fake news or stories about evolution and some sort of technical idea ( mostly not easy to understand).

Prices shoot up because of fake news and false branding. Promoters then dump the token to get maximum benefit.

Scam Alert Crypto : Rug Pull

Rug pull has recently been very much in the news after the Squid Token scam. In the rug pull scam, promoters of a crypto project entice investors to fund the project and limit the sale of the token. This increases the liquidity of a currency before it even comes fully into existence.

Before you know it, the promoters of the token pull the rug out and disappear.


Phishing is the most common type of scam and is not only used in crypto currency but also on many other platforms.

When a user clicks on one of the links, hackers try to reveal secret private keys from the user. Your secret wallet private keys are meant to be secured. Once hackers or scammers get access to your private keys, they transfer all digital tokens to their wallet.

Can You Recover from a Cryptocurrency Scam?

According to Top 10 VPN, financial losses from digital tokens are already 667% higher in 2022 than in all of 2021. The single largest theft that has been reported till now is of $500 million USD (Coincheck Inc.).

As far as the question of recovering cryptocurrency scams is concerned, there is no good news. However, a lot of people are being mistreated worse in the name of recovering stolen cryptocurrency wallets.

There is a whole other level of scams happening in the name of recovery. There are two main kinds of scammers in this space-

First types will usually get you assurance of complete recovery in terms of fiat currency and they will ask for all of your bank details during the investigation of a scam. Once they have this sensitive information, they will further rob you of whatever is remaining in your bank account and disappear.

Second types are more humble ones ( only in terms of damage). This type will give you some sort of digital currency ( certainly with zero value) and then ask you for fees.

It is better to raise awareness and register complaints to the relevant authorities than to further become re-victimized.

[ READ : Trading For Beginners]

Where To Report Cryptocurrency Scams?

Cryptocurrency scammers profit from people’s ignorance. The FTC (Federal Trade Commission) has given several recommendations regarding cryptocurrency fraud and scams. Any fraud related to financial instruments usually comes under the SEC ( Securities Exchange Commission) in the United States and under SEBI ( Securities and Exchange Board of India ). However, in the case of crypto currencies, you can report them directly to your local cybercrime cell.

For reporting crypto scams in the United States-

For Reporting in India-

Key Takeaways

  • Crypto scammers find new ways of enticing investors.
  • Cyberthreat and cybercrime related to digital tokens have recently breakout from all time high.
  • Anyone promising very high return through digital currency can be a potential scam
  • Try to identify Red flags around crypto scams and spread awareness.
  • Scam alert for cryptos should be reported to concerning local authorities.

Finally I would like to conclude this article with a word of caution – I have personally seen people getting victims of these scams and volume of such scams are increasing exponentially, Digital currency initiatives and decentralization is a great concept but since all of this is in very nascent stage and there are lot of issues regarding regulation and policies I would like to request everyone to stay cautious and don’t fall for “Get Rich Quick” schemes.

Scam alert crypto and other scam alerts shall raise some awareness regarding the issue and help victims to become aware.




    Rupin Joshi Senior Technical Analyst, Finance Writer, and Trading ExpertRupin Joshi is a seasoned Trading Expert with over a decade of experience. As a prolific Finance Writer, he has authored numerous research papers in Technical Analysis and Price Action. Rupin's insights and strategies have earned him global recognition, including awards in Trading Competitions. Currently serving as the Director at Bulls Arena Trading, he continues to empower traders and investors with his expertise and innovative approaches.

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