Crypto scam types

Where there is money or another property there is always space for a scam. Unfortunately, nothing is still 100 percent secure on the web, especially when the human factor is involved. But is the situation inevitable and is every person is doomed to be scammed, in the crypto world, too? Not exactly. Nevertheless, one must keep on vigil. Some of the scamming schemes are old and familiar, but still functional and efficient, some of them are new and sophisticated, but the goal is always the same: to take away assets and property from someone careless enough to allow them to do so.

Types of scams

The first step to defeating an enemy is knowing the enemy. There are numerous schemes, so we’ve prepared a list of the most common and well-spread ones:

• Investment schemes. In this case scammers contact possible investors and offer them to be investment managers. They admit to have invested huge sums in crypto currency and won millions and billions. By promising good interest, they persuade innocent victims (usually those who are new to the crypto world) to invest money. They ask for ‘upfront fees’ but instead of paying rewards just disappear. Even worse is that scammers can trick out personal or sensitive information, identification data and get full access to the victim's wallet.
• Rug pull scams. In this case scammers pump up a new previously unknown project, NFT or coin. They collect money and then just vanish with it instead of running a startup. One of the most infamous schemes was called the ‘Squid coin scam’, when the investors played a game and were encouraged to buy in-game tokens (which were quite costly) to exchange them for the currency later. But the trade accidentally stopped and the scammers vanished with the money. The token value zeroed and the victims never managed to get their assets back. Actually, such schemes are quite frequently found around on-line gaming communities. 
• Romance scams (Pig Butchering). Dating often tops the notorious scam rating in real life, and the crypto world suffers from the same burden. The scheme remains the same for years. Some person contacts another on the internet (usually at a dating website ), hiding behind a fake identity, and initiates a distant romance. Once the necessary level of trust is achieved and the victim is ensnared, the villain begs for a sum (or several sums) in crypto. Quite often the scammer persuades the victim that they have gained a huge reward at the cryptocurrency market and encourages them to join in. For the first few times the rewards do come (usually quite moderate), but then the scammer asks for a big investment and disappears into the sunset as soon as the sum is transferred. 
• Phishing. The most common, notorious and long-living type of crypto scam. Scammers send emails with malicious links to fake sites or malware to gather personal details (identification data, wallet private key, sensitive data, etc.). The private key is given only once (one key per one wallet) and is impossible to change (unlike a password). Thus, if the key is stolen, the owner needs to create a new wallets and transfer coins and tokens there, which takes time and might be too late. 
• Man-in-the-middle attack. In this case, scammers try to steal sensitive information by means of interception at the logging stage, when owners connect to their personal crypto accounts from public places. They use a specific method called the ‘Man-in-the-Middle attack’ (or MitM), which means that an attacker interferes with the connection itself to steal the personal data (they can do it invisibly or put on a fake identity to disguise themselves). A villain uses a Wi-Fi connection or trusted network if there are any.
• Social media giveaway scheme. This scheme is similar to a common phishing scheme in a way. In this case victims are lured by fraudulent posts, often including fake celebrity account comments. As soon as a person clicks on a giveaway, they are led to a fake site which asks for verification to receive crypto. This verification is not free. If fortunate, the victim loses just the ‘entrance fee’.
• Pump and Dump. This type of scam is committed by a group of people, who use messengers and SMM to spread rumors that a celebrity or a billionaire has recently invested in this or that coin. Their aim is to force people to invest in it and push up its value. When the price of a coin goes sky-high, they withdraw the money and dump the price, leaving the investors with nothing.
• Ponzi / Pyramid scheme. Probably the oldest trick in the book, Ponzi schemes are built around involving new investors to make payments to the older participants. It is all about targeting new investors for money by encouraging them to buy coins. The scammers promise huge gains with zero risks, but where there is no risk there is either no guaranteed reward. The Pyramid scheme is a little more sophisticated and resembles a common finance pyramid. It is based on a recruitment scheme where the lower levels have to recruit new ones to get ‘promoted’ and receive rewards (at least they are promised to). The newcomers have to pay (which enables the upper levels to get profit), but also the middle levels may buy a right to sell services or tokens. One of the most well-known schemes is ‘OneCoin’ (originally presented as an alternative to Bitcoin, it was at the top in 2017). The users should have probably asked, why couldn’t they just mine the currency themselves instead, but too many were lured by quick and easy earnings and did not pay much attention to the strange fact.
• Fraudulent employers and employees. Scammers can pretend to be employers and employees. They claim cryptocurrency for providing an interesting job offer, disguising themselves as a recruiting agency. They never meet with the victim in person and hire only remote freelancers, whom they never pay. But the situation may be the opposite, when scammers get employed to get access to crypto systems and hack them easily.
• Fake exchanges. Creating a fake crypto exchange is another popular and easy way to withdraw money from innocent victims. They look just the same as real exchanges, but behind the curtains there is no exchange at all. A victim pays out a deposit and loses it right away.
• Fake mobile apps. Scammers encourage users to download malicious apps, which resemble real trustworthy and popular ones. This malware is aimed at stealing coins and tokens, pretending to work as usual. The user receives an offer to fund the wallet or receive a payment, but actually grants money to a fraudster. There is no undo button to stop the transfer. These applications are especially dangerous, as they may receive a reasonable high rank in the app-stores, which gives them an air of legitimacy.
• Vested interests. Scammers lure victims, involving people in projects they make on their own, and offer tokens and coins as a share. It might not be direct stealing, but the situation when the owners of the project try to push it. They may have no malicious intent outside of simply raising funds they do not have to make the project run. 
• Airdrops. A very common and attractive scheme, which innocent victims are always ready to believe, because not many things are more pleasant than a free gift. The scheme works as simple as that. A token drops into a user’s wallet as a ‘reward’, pretending to be a real reward from legitimate platforms. Nothing really happens as long as the token lies dead in the depth of the wallet. But. When the user tries to exchange it, they open a door for a hacker to take away all the assets stored there.
• Celebrity endorsement. Scammers set up fake accounts of real celebrities in social networks or even media to lure devoted fans. They may leave comments and posts, some go as far as running a fake live stream (by means of stealing a real video and editing in the necessary information), encouraging people to invest, or simply begging for currency in exchange for tickets to events (common or even admissions to the VIP zone), claiming donations for charity, involving into lotteries promising a big reward or even asking for personal information (for example, to register somewhere or order an admission card). The photos, videos, pieces of art and logos can be real but the endorsement is fake.
• Wash trading. It is a specific scheme when an asset or coin is repurchased several times in order to influence its price. This scheme may serve various purposes (such as spurring the buying activity or boosting the price, dumping the price or getting a tax rebate). Almost always the assets involved in the scheme are suspicious or their real value is several magnitudes different from what is being claimed.
• Blackmailing. Scammers also use blackmailing to get what they want. They send emails with threats of spreading sensitive or damning information and claim cryptocurrency or even a key to the wallet to keep the secret in return.
• Cloud mining scheme. In this situation scammers offer their hardware capacities for mining, luring people who are going to mine but can not afford expensive hardware. In the majority of cases the owners just rip the renters off or simply make their efforts worth nothing, because the cost exceeds the rewards.
• Fraudulent ICOs. ICOs ‘as is’ have nothing to do with criminal schemes, they are used by start-up companies to attract the initial pool of users. However, scammers use them to involve innocent victims in criminal schemes and disguise themselves as real companies.

How to recognize a scammer?

How can a scammer be distinguished from a common, ‘honest’ developer, start-upper or any other blockchain ‘inhabitant’? There are several markers, which should arouse suspicion and persuade a user to keep out. First, it is the amount of reward, doubling investments and or just ‘free money’ (usually without explaining and warning of possible risks). No real business, even highly reliable, guarantees returns, due to the unpredictable conditions of any market. Do not believe those who promise it.

Also, there should be sufficient information about the project (how the currency is working, how it was designed and other details necessary to make everything clear for the investor). The lack of a white paper or a clumsy and senseless one is a definite ‘red flag’).

Another one is the abundance of misspelling, grammatical errors and ‘rough’ text, usually with long, entangled sentences (scammers are not always highly educated specialists).

If one feels that someone is using manipulation tactics and techniques (extortion, blackmailing, etc.) and excessive marketing on them, chances are that the person is a fraudster.

Celebrity endorsement, which looks suspicious or strange, in most cases is fake and used by scammers to lure investors in their scheme. The same thing can be said about ‘knowing the people’. Information about the team of developers and designers must be clear and easy to find. When there is no information or a team or it seems weird, this is a good reason to keep out. If the promises are numerous but the details are small, this is another ‘red flag’ (as much as a suspiciously huge number of transactions per day).

How to defend

Nevertheless, it is not always easy to stay 100 percent safe. The scammers are always out there, waiting for a victim. However, there are some simple ways to get more secure in the crypto world and stay away from the danger:

•  Wallet protection. One should take care of their own private keys and never share them with anyone. Reliable people will not ask for them as an ID or fee for investment participation. All-in-all, better to always keep them close to the chest.
•  Keeping vigilance on applications. First advice is to download applications from official platforms only. However, fake ones can sneak even there, so there is practice of ‘checking up’ an application. It means that the first transfer should be quite small. It will help to check the legitimacy. If there is suspicious activity detected on the wallet (after transfer or during the updating) the application should be deleted at once.
• Keeping out from ‘the unknown’. If the white paper or a currency itself looks suspicious and the information is unclear or outright does not exist, it means that a thorough research is needed (or better just give up at once). The same thing concerns suspicious affectionate people, who try to manipulate people’s personal feelings (on charity or dating websites), encouraging them to invest in this or that crypto project. If such suspicious activity takes place, but there is no further real information, it is time to give up all the contacts.
• Taking care of luring adverts. Healthy skepticism and critical thinking are investors’ best friends. Skip and ignore adverts in social networks, if they look suspicious, clumsy or have no proof. Ignore cold calls, when the callers offer quick rewards and encourage investing, and never disclose any sensitive information or private keys and, certainly, never transfer anything to strangers.
• DYOR (Do your own research). This abbreviation is not repeated for nothing. No word must be taken for granted from a stranger or a newcomer. Before investing in a project a thorough research should be done. Read the white paper (who runs the project, how it works and how it was designed) and the reviews of other trustful specialists and users. The more trustworthy information is found, the better. Take time and do not make quick decisions. Deep calm thinking and a serious approach will help not only to avoid scammers (they may also give up waiting for ‘too slow and punctual victims') but also get more informed in general and find several safer alternatives.

Conclusion

The world of cryptocurrency is fast-growing and it attracts not only legitimate companies and trustworthy people but also the ones who wish to steal and hack. New schemes appear, however, the old ones are still working. So the user must keep on vigil not to get into a trap.