Top 15 Popular Crypto & NFT Scams

Emmanuel O.
24.12.2022
to read

Updated: 10.01.2023

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The unregulated nature of the Crypto market and its over $3 trillion market value (all-time high) are perfect indicators to show that the market isn't going away anytime soon.

However, the market has its challenges, and one of such challenges is the different forms of crypto scams. These scams are becoming so sophisticated that it's now possible for anyone to fall victim.

The 2022 Federal Trade Commission (FTC) report shows that about 46,000 people lost more than $1 billion in crypto to scams between January 1st, 2021 to March 31st, 2022; that's a staggering record that should elicit concern.

Aaron Cohn, a legal practitioner with a profound history of handling different crypto hack recovery cases, revealed that he had gotten more requests for such assistance in the last year. He advised that all retail investors interested in crypto investment must understand the elevated risk and use the proper security measures.

Seeing crypto scams for what they are and understanding the different types available is the first step to effective risk management because when it comes to crypto, you're responsible for your safety and well-being in the market.

This article is a conscious attempt to reveal 15 top crypto scams and how to avoid them, considering the vast prospects of digital assets and decentralized systems.

15 Types of Crypto and NFT Scams

1. Wallet Hacks

There are many levels of security in well-known bitcoin wallets which means they are only hackable by skilled programmers. Access to someone else's cryptocurrency wallets is only possible by acquiring specialized knowledge and tools.

However, it is important to know that every hack is a product of inattention from the user's side. It could occur through the negligence of phishing emails, engagements with malicious data stealing programs (keyloggers), two-factor authentication bypass, clone services, and so much more.

The CoinDash ICO Hack, the Parity Wallet Breach, and the freeze and Tether Token Hack are examples of wallet hacks with devastating outcomes.

2. NFT Price Markups

A non-fungible token (NFT) is a special blockchain code. It is kept in a decentralized ledger with other transactions involving the same asset. You can convert any image into an NFT with the software. Famous painters' works of art are stolen by con artists, who subsequently offer them for sale as NFTs. Since NFT rights should not be confused with intellectual property rights in this situation, a phony NFT is bought.

Because the number of purchases and resale often determines NFT prices, selling and reselling NFTs by owners or through friends is another scam in the crypto space.

In 2017, porn actress Lana Roades launched an NFT collection called CryptoSis and eventually eloped with $1.8 million of investor funds.

3. Rug Pull Scams

This kind of scam is common with NFTs. The investment fraudsters “pump up" a new business, non-fungible token (NFT), or coin to attract money. The con artists take the money and vanish after receiving it. Investors are left with a worthless investment since the coding for these ventures prohibits users from selling bitcoin after purchase.

The Squid coin scam, which took its name from the well-liked Netflix comedy Squid Game, is a popular example of this scam. Investors were compelled to play the game before they could earn cryptocurrency. A quick token purchase on the online game could make you 25x your investment which you can later decide to trade for other cryptocurrencies. In other words, a squid token purchased at $20 could go up to $90 within a very short time.

Trading eventually ceased, and the money vanished. As investors tried to sell their tokens but were unsuccessful, the value of the tokens eventually fell to zero, causing investors to lose over $3 million to these con artists.

The recent FTX debacle can be likened to a rug-pull scam because no one saw it coming at first.

Last month, the FTX virtual exchange, which had a market value of $32 billion, was destroyed when FTX and its sister trading house Alameda Research filed for bankruptcy. Authorities claim that Bankman-Fried defrauded investors and improperly used money that belonged to clients of FTX and Alameda Research.

4. Scam Pre-Sales and ICOs

One of the easy ways to invest and get good returns on your investments is through engaging in project pre-sales or initial coin offerings (ICOs).

Exchanges and other crypto projects carry out pre-sales and initial coin offerings to allow investors to purchase its coin or NFT before an official launching or listing on an exchange.

The desire to get rich has generated investors’ strong interest in ICO projects because tokens or NFTs in this phase are usually cheap.

Over time, fraudsters have also created elaborate projects and used promises of mouth-watering profits to deceive investors into investing in their scam ICOs or presales.

Most scam ICOs and presales have banality in ideas, high marketing campaigns, inexperienced teams, unclear project descriptions, opposing opinions from the crypto community, and very meager development costs.

A major example of this ICO scam is the Baby Musk Coin which scammed investors of over $ 2 million. In the early stages of the project, the scammers had deliberately decided to add the "Musk" name to the coin due to his previous support for Bitcoin and Dogecoin.

5. Phishing Websites

A major indication of fraud is the offer of free cryptocurrency. Email broadcasts are a popular phishing technique. From various services or blockchain platform creators, users receive messages.

According to the message, the owner's bitcoin wallet was recently the target of an unwanted entry attempt. To check the availability of funds, it is therefore advised to click on a link. Similar to how one enters a digital wallet, the link interface is utilized for that purpose. In this manner, hackers gain access to the username and password data. Subsequently, they take your money and transfer it to their accounts.

A ZachXBT tweet on October 25th revealed that a phishing website scammer known as Monkey Drainer, within 24 hours, stole 700 ether (ETH) worth roughly $1 million in crypto and non-fungible tokens worth thousands of dollars.

6. Clone Services

They operate similarly to phishing websites, which involve luring unsuspecting owners into engaging with their interface. For every cloned service, there is an original somewhere.

Using a cloned website or application makes the user susceptible to wallet hacks and data theft.

On June 26, 2019, Europol and police agencies busted a major clone exchange operation that stole over $27 million from its victims.

7. Romance Cryptocurrency Scams

Romance scams are popular with people in the crypto space, and these scams come with online relationships built over time with trust. Scammers exploit victims' heartstrings by deploying different social engineering tactics to convince their "lover" to send them crypto funds.

These scammers prefer crypto because transactions cannot be reversed with the belief that the receiver cannot be tracked.

Sarrah Rose, a relationship coach, recently revealed that a man she met on one of the dating sites tried to dupe her with $50,000 worth of cryptocurrency.

8. Employment Cryptocurrency Scams

This often comes as unsolicited job offers accompanied by alluring benefits that would trigger its victims into using its website to divulge vital information.

Victims are often made to use cryptocurrencies for onboarding training.

There are also a lot of crypto scams with remote jobs. Scammers use rich resumes to project themselves as freelancers, target cryptocurrency exchanges and use the job opportunity to hack into the company or crypto exchange database.

9. Address Change

Mostly popular with peer-to-peer (P2P) transactions on crypto exchanges, merchants with scamming intent create fluctuating prices that change the moment a victim goes into trade with them.

When a p2p merchant's service credentials are hacked, services are falsified, and unsuspecting victims send crypto funds to the fraudster's address instead of the exchange.

Scammers carry out similar tactics on social media accounts.

10. Giveaway cryptocurrency scams

Every day Social media sites are flooded with fake posts that advertise different crypto giveaways to entice consumers. Some scammers also use phony celebrity accounts to promote these scams and attract their victims.

These giveaway hyperlinks are mostly linked to fraudulent sites requesting an "access fee" in bitcoin. The victims lose the "access fee" or expose their system to data theft.

In the first half of 2022, the number of domains used for cryptocurrency giveaway scams involving fake YouTube streams increased by a factor of five, according to Group-IB, one of the world's top cybersecurity companies with headquarters in Singapore. Scammers started using the name of Nayib Bukele, the president of Salvador, in addition to Vitalik Buterin, Elon Musk, and other crypto celebrities.

11. Pyramid Crypto Projects

In the last three years, there has been a steady increase in the number of crypto-based pyramid schemes, probably because they usually offer high returns of 20% to 35 %.

A typical crypto pyramid scheme needs more transparency in financial reporting, management teams, and regulatory requirements.

The forsage Smart Contract is an excellent example of such a crypto pyramid scheme, and its organizers are currently being investigated for a $300 million scam.

12. Blockchain Vulnerabilities

The crypto bull run has elicited much interest in cryptocurrency investments. Scammers explore vulnerabilities like registry entry and exit points to infiltrate user data for selfish gains.

Blockchain endpoints like crypto wallets and exchanges are highly vulnerable despite being described as an immutable secured ledger.

13. Fake Cryptocurrency Exchanges

Fake crypto exchanges often use bogus crypto token arbitrage opportunities to lure victims into investing funds.

A fake crypto exchange can offer to sell a Litecoin for $40, while the actual price on other legit exchanges like Binance is $50, which means an investor can make $10 on every Litecoin they purchase from the scam exchange.

After two to three transactions, the investor's fund is held down in the scam exchange, and he eventually loses his funds.

Examples of such exchanges are Bitkrk and Arbitez.

14. Man-in-the-Middle Attack

Users that log into their crypto accounts or wallets using public networks like Wi-Fi risk exposing their passwords, cryptocurrency wallet keys, and account information to interceptors called “man-in-the-middle.”

15. Bitcoin Investment Schemes

This type of scammer is mostly popular with social media platforms like Twitter, Facebook, and telegram. These scammers always pose as seasoned investment managers.

The so-called investment managers convince their victims that their investments will be profitable and claim to have gained millions of dollars in cryptocurrencies.

Victims are often made to pay an upfront fee, and they eventually elope with it. These scammers even go as far as requesting KYC documents that will give them access to the victim's details.

How Do You Avoid These Crypto Scams?

Now that you know the major types of crypto scams available, the tips below could save you from losing your hard-earned money to them.

Be Wary Of Projects Requesting Payments In Cryptocurrency

A major warning sign of a cryptocurrency scam is a demand for payment in cryptocurrencies. You should never be required to pay using cryptocurrencies because it has yet to be a widely accepted form of payment and is not fully regulated by the government. It's a significant red flag that you might be the victim of fraud if someone, even a reliable online connection, insists you must.

Use a Good Private Virtual Network (VPN)

To prevent "the man in the middle" from intercepting your data for scamming intents. They do this by helping you establish a secure connection when using public networks.

Ensure You Carry Out Proper Research Before Investing

It's imperative to always research cryptocurrency exchanges before investing your time and money in them because new coin varieties are constantly emerging. This entails asking questions about exchanges you've never heard of before and even checking to see if they've ever been linked to complaints or scams.

Examine the degree to which exchanges are open about their liquidity and ICO policies; this is a sign of a trustworthy business. It may entail contacting the exchange personally and inquiring. It's also important to confirm whether an exchange uses blockchain technology, which enhances transaction security.

You can stick to major crypto exchanges like Binance, Coinbase, Bybit, and Gate.io.

Report Suspicious Activity Immediately

Engaging in online financial transactions, especially with cryptocurrencies, is already deemed high-risk, so you can play safe by immediately reporting suspected scams to regulatory authorities.

Never Oblige to Any Unsolicited Requests

An unsolicited request could come from urgent payment in cryptocurrency or job offers in the crypto space.

It's better to designate these requests as spam or remove them as soon as you receive them in your inbox. This is because your loved ones or government authority will go through such shady means if you genuinely require a quick payment.

Regular Software Updates Help Too

Regular updates of crypto wallets, crypto exchange applications, and systems operating systems can help fix security patch issues, bugs and upgrade the system firewall against data theft.

Emmanuel O.

Content Writer & Business Analyst & Crypto Enthusiast

Visits: 359

I am passionate about blockchain technology, and the potential it holds for our world. I have been researching and writing about cryptocurrencies since 2016, so in this blog post I'll be sharing the most recent news from within the crypto industry.

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