If you believe the US Federal Trade Commission, an agency tasked with protecting American consumers, the number of reported cryptocurrency scams is skyrocketing. In a May 2021 post, the FTC reports that cryptocurrency scams have exploded since October 2020 resulting in losses over that period of around $80 million USD. The average loss per reported scam? $1900 USD.
Common cryptocurrency scams
According to the FTC, some of the most commonly perpetrated crypto scams are:
- giveaway scams where members of particular online crypto communities get free coins if you send your coins to a posted wallet address
- bogus websites with scam investment opportunities offering block buster returns using fake testimonials
- Elon Musk impersonators that have duped unsuspecting coin holders out of $2 million collectively
- Online dating apps used to lure people into cryptocurrency investments (yes, you really did read that!)
So who is getting duped out of their dough?
Apparently, people aged 20 to 49 were 5 times more likely to get caught up in a cryptocurrency scam. But this probably a reflection of the crypto demographic more than anything. Older crypto investors are losing in smaller numbers but their losses are bigger at an average of over $3000.
How to spot cryptocurrency scams
You’ll notice that most the scams above involve some kind of impersonation – of an individual, a Project, a crypto community group. The first thing you need to do is verify who you are dealing with and that they are legit. Before you invest, check them out. Google the name of the company, entity or cryptocurrency, plus words like “review,” “scam,” or “complaint.” See what others are saying.
Another commonality between all of these scams are the claims of big payouts, guaranteed money, and free returns. Scammers prey on greed and ignorance. While crypto markets are know for their incredible market growth rates, these are generally found buying small cap coins and tokens from legitimate exchanges. If you come across an ‘investment opportunity’ that seems too good to be true then it just is.
The third characteristic of scams is the double down investment offer. A request out of the blue that you double your initial investment in order to get the promised returns.
Another common feature of these types of scams is that they are unsolicited. Someone reaches out to you to join a crypto community or promote a killer crypto investment opportunity. If this happens over social media, via email, in Youtube comments or in any message group forums its a scam.
Finally, all of these scams ask you to send your crypto to a public wallet address that they have posted themselves. Don’t do it if you ever want to see your coins again! Instead, leave your crypto in your hardware wallet and only send it to addresses you have verified or have been generated within a secure website or app. NEVER send your crypto to wallet addresses sent to you in unsolicited emails, social media, group chat apps like Telegram and WhatsApp.
And if you do get suckered in by evil scammer and live in the US, you can report the crypto scam here.