How to Avoid Crypto Scams

Written by Steven Hatzakis
Edited by John Bringans
Fact-checked by Joey Shadeck

March 05, 2024

Thousands of crypto projects have launched in the last ten years, and new tokens hit the market nearly every day. As of June 2023, there are over 10,000 cryptocurrencies reporting price data on CoinMarketCap. Avoiding crypto scams in 2023 is much harder than it was ten years ago, partly due to the sheer number of cryptocurrencies, crypto projects, and crypto companies on the market.

Even the most sophisticated crypto investors can fall victim to crypto scams. Technology continues to evolve and scam techniques become more elaborate, making it harder to stay safe on the internet for traders of all experience levels.

I’ve been researching and writing about cryptocurrency for over ten years, and I’ve found that the first step you can take to protect yourself from crypto scams is to make sure you only use legitimate crypto exchanges and highly regulated crypto brokers. I've created this guide page to arm you with the knowledge you’ll need to avoid crypto scams, and to provide the resources you’ll need if you have been scammed.

What are crypto trading scams?

A crypto trading scam can be as simple as a social media imposter or as elaborate as a counterfeit crypto exchange, complete with a bogus website and phoney administrators. Regardless of the type of scam, the end goal is the same: to steal cryptocurrency or money from unsuspecting crypto investors. Early detection is the key to protecting your crypto assets. Once you’ve been scammed, it will likely be too late to prevent financial losses.

Cryptography is the backbone of blockchain technology and cryptocurrencies. The cryptography used to secure cryptocurrencies has – as of this writing – never been broken. That said, hackers will often be able to bypass that security because an investor didn’t properly secure their private keys.

Top 5 tips for protecting yourself from crypto scams

As a cryptocurrency holder, you must be inherently cautious and vigilant with your personal cybersecurity. Here are my Top 5 tips for staying safe as a crypto investor or trader:

1. Only use trusted crypto exchanges and wallet providers.

Make sure that all of your crypto service providers (exchanges, wallets, brokers, etc.) are properly licensed and regulated. Hackers can exploit faulty code and security vulnerabilities to steal client funds, even when exchanges and wallet providers are legitimate. This is all the more reason to opt for highly regulated exchanges and wallet providers.

2. Safeguard your crypto accounts and private keys.

You should never grant access to your private crypto keys to anyone, much less to a stranger on the internet. Whether you store your private key within a “hot wallet” from an online wallet provider, or you use a “cold wallet” (stored offline), keeping your private key (and your crypto recovery phrases) secure is one of the most important ways to protect yourself from crypto token scams.

3. Secure your online brokerage accounts.

Even if you hold your crypto with a trusted, regulated broker, you still need to secure your account with a strong password and two-factor authentication (2FA). Otherwise, an attacker can gain access to your brokerage account and withdraw your funds. I recommend using strong, cryptographically secure passwords to prevent unauthorized access.

4. Beware of cloned websites and imposters.

Imposters will go to great lengths to trick you so they can steal your crypto. Look at this example of a fake airdrop that purported to be from ApeCoin. The airdrop was announced on Twitter from what appeared to be a verified Twitter account with the handle @apecoinerc:

Upon closer inspection, you can see that the actual official Twitter account for this brand is @apecoin and their website is apecoin.com – both of which are different from what appeared on the scam Twitter account. In this case, they are trying to clone the website and branding of an established firm to trick people into giving up their personal information.

5. Don't send crypto payments in advance.

One thing that many crypto scams have in common is the sense of urgency they instill in their victims. They'll convince people that, in order to take advantage of an incredible opportunity, it's crucial to send their crypto funds right away. If you find yourself considering an investment opportunity, ask yourself – why do they need my money in advance? Reliable brokers and crypto exchanges will never use high-pressure tactics to get you to send them your money.

Top 10 signs you might be dealing with a crypto trading scam

Here are the Top 10 warning signs to look out for when identifying bad actors in the crypto market:

1. Lack of compliance and regulatory licenses.
2. Unbalanced claims, usually of lucrative returns or profit guarantees.
3. A high-pressure sense of urgency to send money for an investment opportunity.
4. Investment requests from users or accounts on WhatsApp, Twitter, Instagram, or other social media platforms.
5. Mismatched URLs (i.e., you’ve been contacted by someone on a social media that doesn’t match the the website for the project).
6. Airdrop offerings. (Not all airdrops are scams, but they should still make you suspicious).
7. Investment requests from users or accounts on WhatsApp, Twitter, Instagram, or other social media platforms.
8. A large number of press releases, announcements, or marketing materials that don’t include any substantive information about the product or service.
9. Overly positive client testimonials.
10. A stated intention to decentralize – without a viable plan for decentralization.

What can I do if I’ve been scammed?

If you’ve been the victim of a crypto scam, your first step will be to gather all relevant information and documentation. Should you decide to contact law enforcement or file a complaint with a regulator, you’ll need to be prepared with as much information as possible.

When pulling documentation for a potential investigation into a crypto scam, make sure to collect the following:

• Telephone logs and phone numbers.
• Chat transcripts.
• Wire transfer receipts.
• Blockchain wallet addresses.
• Logs of the network, and IP addresses of host systems.
• Malicious website addresses and copies of web pages.
• Credit card statements.
• Malicious software on your computer.
• Images of the hard drive used.

If you believe you have exhausted all options with the potential scam and are unable to get your money back, you may want to consider seeking legal counsel and contacting your local law enforcement. In addition, you can file a complaint with the Federal Trade Commission (FTC) and Federal Bureau of Investigation (FBI).

Here are the step-by-step instructions for filing a complaint with the FTC if you believe you’ve been the victim of a crypto scam:

1. Click “Report Now”.
2. Choose the option most relevant to your situation, i.e. “An impersonator” or “Investment, money-making opportunity” etc. correct option.
3. You’ll be prompted to answer a few questions about the nature of the scam.
4. Provide a detailed explanation of the scam – including how much money you’ve lost, the name of the company or individual, how you learned about the scam, etc.
5. Finalize the complaint form and submit it to the FTC.

Here are the step-by-step instructions for filing a complaint with the FBI’s IC3 division if you believe you’ve been the victim of an internet crime or a crypto scam:

1. Navigate to the IC3 website and click “File a Complaint”.
2. Accept IC3’s Terms and Conditions.
3. Provide your personal information, including any financial transactions involved in the scam.
4. Provide the scammer's contact information.
5. Provide an explanation as to how you were scammed.
6. Provide any emails or necessary information to aid the investigation.

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