Beware: The Rising Tide of Cryptocurrency Scams

Cryptocurrency scams are on the rise, with criminals employing both familiar and innovative methods to steal funds. Recent fraudulent schemes include rug pulls, Ponzi schemes, and phishing attacks.

Whenever there is money involved, scams tend to follow, and this is particularly true for the cryptocurrency sector. In 2024, the value of cryptocurrencies, including bitcoin, reached unprecedented heights, likely spurring a rush to invest and attracting more scammers eager to exploit this trend. In 2023, reported scams surged significantly, with the FBI's Internet Crime Complaint Center estimating that losses exceeded $5.6 billion, which represented about half of all reported fraud losses. The total losses in 2023 saw a 45% increase compared to 2022, and as prices continue to climb in 2024, scammers are devising new tactics to deceive individuals seeking profit.

Digital currency refers to funds kept in a digital wallet, which can be converted into cash by transferring to a bank account. Cryptocurrencies, like bitcoin, differ from digital currency as they rely on blockchain technology for verification and lack a central authority, making recovery from theft more challenging.

Despite being a newer phenomenon, criminals are using traditional methods for their scams. Here are some prevalent cryptocurrency frauds to be aware of:

1. Bitcoin Investment Scams: According to the FBI, investment schemes are the most frequently reported frauds. Scammers pose as experienced "investment managers," claiming to have made substantial profits from cryptocurrency investments and promising victims they will earn money too. They often demand an upfront fee, which they steal instead of investing.

2. Rug Pull Schemes: In these scams, fraudsters create hype around a new project or token to attract funding, then vanish with the money. Often, the coding prevents investors from selling their bitcoin, rendering their investments worthless.

3. Romance Scams: Dating apps have become a hotspot for crypto scams, where one person gains the trust of another over time, eventually convincing them to send money in cryptocurrency. These scams, known as "pig butchering scams," cost victims $1.179 billion in 2023.

4. Phishing Scams: Scammers send emails containing malicious links to fake websites aiming to steal personal information, including cryptocurrency wallet keys. Users should never enter sensitive information through email links and should always visit websites directly.

5. Man-in-the-Middle Attacks: When users log into cryptocurrency accounts in public places, their sensitive data can be intercepted by scammers. Using a virtual private network (VPN) can help protect against these attacks.

6. Social Media Giveaway Scams: Numerous fake posts on social media promise bitcoin giveaways, often involving celebrity endorsements. Clicking on these links can lead victims to fraudulent sites asking for personal information or payment.

7. Ponzi Schemes: In these schemes, returns for older investors are paid from the investments of newer participants. Scammers often lure potential investors with promises of high returns with little risk.

8. Fake Cryptocurrency Exchanges: Scammers may promote fake exchanges that do not exist, leading investors to lose their deposits. It is advisable to stick to well-known exchanges and conduct thorough research before sharing personal information.

9. Employment Scams: Fraudsters impersonate recruiters to gain access to cryptocurrency accounts, often claiming they need cryptocurrency payments for training. This includes scams involving remote workers, particularly from North Korea.

10. Flash Loan Attacks: These attacks involve short-term loans used to manipulate prices on decentralized finance platforms, leading to significant financial losses for victims.

11. AI Scams: Attackers use AI technology to engage users with fake investment opportunities and endorsements, often creating deepfakes of celebrities to lend credibility to their schemes.

12. Bitcoin ATMs (BTMs): Scammers have begun exploiting bitcoin ATMs to steal funds. They may impersonate legitimate companies to convince victims to withdraw money from their bank accounts and deposit it into BTMs under false pretenses.

Protecting oneself from cryptocurrency scams requires vigilance. Common warning signs include unrealistic promises of high returns, requests for payment solely in cryptocurrency, and communication errors. It’s critical to maintain strong digital security practices and to report any scams to relevant authorities immediately.