Protect Yourself from Cryptocurrency Scams

August 03, 2023

Cryptocurrency is growing in popularity for both investors and fraudsters.

According to the FBI, Cryptocurrency scams totaled $3.93 billion in 2023, an increase of 53% over 2022.

What Is a Cryptocurrency Investment Scam?

A cryptocurrency scam involves the payment or investment in Bitcoin, Ethereum or another digital currency to a fraudster based on false guarantees of high investment returns.

Three Cryptocurrency Investment Scam Scenarios

Fraudsters succeed when investors are unaware of their tactics. Here are the things to look out for:

  • Unsolicited job postings land in your email inbox, social media direct messaging system or arrive via text message recruiting cryptocurrency investors. The information you provide during the job application process is an attempt to steal your identity. You may even have to pay an application fee via Bitcoin.
  • Advertisements from fake investment managers guarantee high returns in a short timeframe. These bogus online ads and social media posts tempt readers by promising financial freedom with little effort. They claim all you need to do is give them your digital assets so they can help them grow. But when you log in to your investment account the scammer opened, you find you can't make a withdrawal without paying a hefty fee.
  • Pay-to-play Ponzi schemes require cryptocurrency payments before you're granted permission to recruit others into an investment program. Scammers claim you'll earn recruitment rewards in the form of cryptocurrency for referrals to the program.

Crooks may combine several aspects of each scheme to lure their victims.

How to Spot a Cryptocurrency Investment Scam

Understand the risks of cryptocurrency before you invest your hard-earned money. Beware of cryptocurrency investments that:

  • Claim a guaranteed rate of return. The unregulated cryptocurrency market is too volatile to make such claims.
  • Are endorsed by a celebrity. Scammers often use forged testimonials.
  • Promise large amounts of cryptocurrency free in exchange for a low-effort action, like referring other investors.
  • Provide little information or direct you to unrelated third parties to answer your crypto investment questions.

As with most scams, if it sounds too good to be true, it is.

Protect Yourself from Cryptocurrency Investment Scams

You can take proactive steps to protect your investment by remembering that crooks want you to act fast based on emotion. Keep these tips in mind.

  • Do your research before investing on a virtual currency platform. Legitimate exchanges exist, but scammers are creating fake ones every day.
  • Limit your potential losses by only investing money you are willing to lose. For example, if you keep your investment below 5% of your portfolio, you're unlikely to suffer significant losses.
  • Take online and social investment tips with a grain of salt. These may be phony posts to help boost activity for a particular asset.
  • Keep your personal information private, including the passcodes required to access your virtual currency.

Remember, cryptocurrency scams are attractive to thieves because it's difficult for you to get your money back or discover their identity.

If you suspect a cryptocurrency scam, report it to the Federal Trade Commission and the cryptocurrency exchange platform you used to send the money. It could help stop thieves before they target another victim.