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Give Up Your Coins! How to Spot a Cryptocurrency Scam

Written by Sydney Butler
Last updated May 16, 2024

What is it that scammers look for when developing new scams?  I think there are two factors that are most important. First of all, the scam should be based on something that has a lot of hype. So that the average person will recognize all the buzzwords. The second most important thing is that the subject should be complicated. So complicated that the average person doesn’t really understand how it works. Which makes it easier to dupe them.

Cryptocurrencies and related technologies such as the blockchain fit these criteria perfectly. By now most people have heard of these things. They also heard that some people are getting incredibly rich off cryptocurrencies like Bitcoin. That’s a perfect storm of greed and gullibility, which you need to avoid.

What is Cryptocurrency?

BitCoin Physical

First, let me briefly explain what a cryptocurrency is. It’s actually quite simple in principle, although the technology behind it is very sophisticated.

Cryptocurrency is a digital representation of money or perhaps it’s more accurate to use something like gold or silver as an analogy. The coins are validated by using advanced cryptography. This means the currency and all transactions done with it are as reliable as the digital money in your bank account. The difference is that cryptocurrencies don’t require a central authority and no one controls it from one point. It’s the equivalent of anonymous, digital cash. That’s all you need to know about cryptocurrency for the purposes of this article.

The first cryptocurrency, Bitcoin, has become thousands of times more valuable over the years and people who bought them early were able to turn a few hundred dollars into millions of dollars. Predictably, when such fortunes are made, plenty of people want to try their hand at being the next crypto-millionaire.

Types of Scam

Anonymous Mask and Bitcoins

There are more than a few scams that revolve around cryptocurrencies these days. It’s rather shocking how quickly scammers see an opportunity to take your hard-earned money for themselves. While it’s a sad certainty that more scams will be invented in future, these are the most important ones to know about today.

ICO Fraud

An ICO or Initial Coin Offering is a new way for companies and startups to raise funds. It’s an alternative to listing on a stock exchange, direct investment or crowdfunding. When someone wants to bring their own cryptocurrency to market, they can publish a white paper detailing what makes their coin so great. Why it will be better than current coins and why they think people will start using it.

You pay them in Bitcoin, Ethereum or some other established coin. You get tokens redeemable for their coin in exchange. They then use your money to develop the coin and if it takes off the coins you are holding will increase in value. Maybe.

Even when it’s legit, an ICO is a pretty high-risk investment. The scams are however quite monstrous. Most commonly the scam ICO will take you money, issue tokens and then just disappear overnight. In April of 2018, it was reported that a Vietnamese ICO scam took investors for a staggering $660 million!

Phone Hijacking and Crypto Malware

Woman with Smartphone

Cryptocurrencies are stored in digital wallets, which are offline, or on exchanges, which are online. Either way, a common method of accessing cryptocurrencies is through a smartphone. Which is why scammers have turned to malware that infects smartphone to steal cryptocurrency. Apart from being crypto-specific, the infection itself is pretty typical. Visiting dodgy websites, side-loading unapproved apps and failing to have anti-malware software on your phone.

Fake Wallets

As I mentioned above, using cryptocurrency wallet apps is a popular way to manage your coins. Users just head to their app store of choice and then download the wallet they want to use. They can then send coins to that wallet, where the money is stored. Since they are downloading the app from the official store, it’s going to be safe, right?

Well, it turns out this is not quite the case. There are plenty of fake wallet apps that pose as legitimate, trusted wallets. These slip through the quality control processes of the app stores sometimes. They do get removed as soon as someone reports them, but by then plenty of money could have been stolen.

The only way to be really sure is to follow the app store link from that wallet’s official site. It might also be worth sending a small amount you are willing to lose, before dumping your entire fortune into a fake wallet.

Social Media Switcheroo

Why You Should Leave Social Media

You’re probably seeing plenty of adverts on social media related to cryptocurrency. People who want you to invest, buy their coins or somehow give you their money. What scammers have taken to doing is impersonate legitimate crypto companies on social media. They then post things like coin “giveaways”, which inevitably ropes victims in to be scammed. If a social media post from a known crypto company seems a little dodgy, head to their official site or make sure the post is from their official social media page.

Ebay Paper Wallets

Wallet with Ripple Coin

A “paper wallet” is basically a hard copy of the cryptographic keys you need to access your cryptocurrency. If you ever lose them, the money is gone forever. Generating a paper wallet for your cryptocurrency isn’t hard, but scammers have taken to selling paper wallets on sites like eBay. People who are new to cryptocurrencies might think paper wallets are hard to generate themselves, so they buy a premade one from someone else. However, since this person can easily make a copy of the wallet, they can also simply steal any currency you store in it at some point in the future. Never buy a paper wallet that someone else generated for you. It’s way too risky.

The Pump and Dump

How To Be a Scambaiter and Get Some Justice

The “pump and dump” is a well-established form of market manipulation that has found its way to cryptocurrencies. A group of people conspires to inflate the price of an unpopular and essentially worthless coin. They do this by putting marketing hype out, simply lying about the coin and also by buying massive amounts of the worthless coin with a very low market cap.

These actions make the price of the coin jump dramatically. Seeing this increase in price, other people who are not in on the scam start to buy the coin too. This makes the price go even higher. Then at an agreed time, the scammers all sell their coins to the excited investors coming in. This crashed the price, makes those new investors lose all their money and creates some very rich bad guys.

The only way to really avoid becoming a victim of the pump and dump is to control yourself when you see an unknown coin suddenly boom like never before. These sorts of changes don’t happen for no reason. Look up the history of the coin and try to find a legitimate reason for the price to go up so suddenly. If there’s no clear reason, it’s probably a pump and dump.

Dodgy Exchanges

Online cryptocurrency exchanges make it easy to send and receive coins while also keeping them relatively safe. That is unless you send your money to an exchange that’s not trustworthy. Before you decide on using a particular exchange, make sure that its reputation is as good as possible. Mt. Gox, one of the first and, for a while, most successful exchanges folded. Mainly because it had too many security issues. So there's never a guarantee.

Signs That an ICO Might be a Scam

Scams that involve ICO's are an especially dangerous issue right now. So I want to elaborate on the signs that a particular ICO isn’t on the level. With just a few simple checks, you can quickly find out if something is not quite right.  

Fake Team Members


Look for the list of team members behind the company and the ICO. If there are pictures, do a reverse image search. Google their names along with any other information offered on the site. Try to make sure that these are all real people, with confirmed connections to the company.

Impossible Returns

Case Full of Cash

If an ICO is offering “guaranteed” returns and telling you that you’ll make a certain percentage every month, run for the hills. Even the best ICOs are only going to give you relatively modest returns unless they become incredibly popular when they launch. The creators of the ICO have no way of knowing that this will happen. So how can they promise it? Bold claims must be backed up with detailed plans of how they will make their investor's so much money, which brings us to the next point.

No Company Documentation or Plan

An ICO must be accompanied by documentation meant to explain to investors how and why the coin is going to be a success. This usually takes the form of a white paper, which is a formal explanation of their plan and technology. If there isn’t one, or it doesn’t make sense, then it’s likely a scam.

No Public Code

If the ICO doesn’t have a public code repository on a site like GitHub, then there’s no proof that there will even be a coin to exchange for the token you are buying. Just walk away.

They Don’t Respond

When you send a question to their support contacts, they don’t answer your questions. Even worse, some ICO sites won’t even have contact details to send questions to. If the communication with the public is poor or nonexistent, you should take your money elsewhere.

Intentional Confusion

A real company who is looking for investment will want to be as clear as possible. They want the public to understand what they do and why they should invest. Scam sites are filled with jargon, marketing speaks that means nothing and non-answers. Give the content on the site a good reading and then decide if you actually understand what the company is offering. If they don’t explain terms or are deliberately making things complicated you should be very skeptical.

General Tips to Avoid Cryptocurrency Scams

While I’ve highlighted some specific things you can do to combat specific scams above, there are also a few general strategies that can help you avoid even new scams that we don’t know about yet. With a clear head and a tight hand on your wallet, you can safely navigate the crypto Wild West.

Take Your Time

Any attempts to rush you or pressure you to buy now and think later should be a red flag. Any investment worth putting money into or product worth having will give customers a chance to make a good decision.

Ask as Many Questions as You Need

List all your concerns and try to find the answer to them. Hit up the FAQs first and send any remaining questions to the company or person for a response. If all your questions aren’t answered to your satisfaction, move one.

Do Your Homework

It’s amazing what even a few minutes spent on Google can do to open your eyes to a scam. Usually, someone else has already fallen for it or they too have doubts about something. Sites like Reddit and well-known cryptocurrency forums are a good place to check if your suspicions are well-founded or not.

Final Thoughts

Cryptocurrencies represent an amazing development on many different fronts; finance, privacy, economics and technology in general. It’s one of the hottest areas of development right now and everyone who is interested should have the freedom to explore it. At the same time, it’s of utmost importance to foster a healthy sense of skepticism. Being naive in the crypto world is a recipe for disaster. Just as the scope for fortune is broadened by the technology, so is the scope for major losses. So keep your eyes open, mind sharp and don’t trust anyone. Heck, that’s good advice for almost anything in life.

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