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Crypto Scams 101: Common Types and Real-Life Examples

Shard Labs Aug 24

Disclaimer: This article is meant to provide general information and to help educate people. It is not financial advice of any sort, and it should not be taken in any way as such. Shard Labs would like to remind you that keeping it safe is ALWAYS vital. Never give your wallet keys or access codes to anyone.

Common Types of Crypto Scams and ReaL-Life Examples

If you’ve read the first part of our Crypto Scams 101 blog series, you already know how serious these are and that they’re becoming more frequent and complex, much harder to recognize.

So then, how can one tell if an offer is too good to be true? By getting familiar with the types of scams that are out there, of course! In this part, we will reveal the most common types of crypto scams and how they work, followed by some real-life examples!

But wait, who actually falls for these scams anyway?

If you’ve ever found yourself asking, “Who actually falls for these scams?!“,  when it comes to crypto scams you’ll be surprised to learn that victims come from various walks of life… You see, crypto scams have proven to be highly effective in targeting not just the elderly or technologically inexperienced individuals but also professionals, tech enthusiasts, and even seasoned investors, unfortunately.

Of course, elderly people are among the categories of the higher risk! There are several reasons why scammers target seniors:

  • Seniors tend to be more trusting of people and less knowledgeable about technology and digital assets
  • Seniors may be looking for ways to boost their retirement savings and may easily fall for investment schemes that promise high returns

Therefore, seniors need to be extra cautious and skeptical when dealing with crypto offers or requests. But if you think that only elderly or inexperienced people are easy targets for crypto scams, because of their digital (il)literacy and daily technology (non)usage, you will be surprised.

Even the developers of crypto projects can fall victim to these scams, losing millions of dollars and compromising their reputation… For example, in February 2023, a social engineering scam successfully drained $4 million worth of USD from a Trust Wallet belonging to Metaverse startup Webaverse. The scammers posed as potential investors and convinced the developers to meet them in person and show them their wallets. Then, they used a device to clone the wallet and transfer the funds to their own account.

This just shows that no one is immune to scams, and everyone should be careful and vigilant when dealing with crypto transactions. So next time before you think “There’s no way this can happen to me” stop, pause, and remember these examples.

Common Types of Crypto Scams

There are many types of crypto scams, and each type has its own methods and tactics, but they all have the same goal: to make you part with your crypto. In this section, we will explain each type in more detail and show you some real-life examples of how they work.

Phishing scams

In our previous article, we mentioned phishing scams and now it’s finally the time to explain what they are. Phishing is a scam where scammers send fake emails, texts, or calls that appear to be from reputable crypto platforms or services. They ask their victims to click on a link, enter their login details, or download an attachment. Then they use this information to access accounts and steal funds or personal information.

The most common platforms for phishing scams are Twitter and email, but they can also happen on other platforms.

Ponzi scheme

A Ponzi scheme is a scam where someone pretends to have a good investment opportunity, but they don’t. They can take many forms and use different platforms to scam people, such as email, fake websites, social media platforms like Twitter, Facebook, Instagram, and dating apps, but also face-to-face. Scammers use the money from new investors to pay the old investors, making it look like the investment is working (we’ve all seen The Tinder Swindler). But they keep most of the money for themselves. The scam falls apart when there are no more new investors or when too many old investors want their money back. One of the most notorious examples of a crypto Ponzi scheme is the infamous Sam Bankman-Fried and FTX fiasco, which was uncovered in November 2022. FTX caused a domino effect and the resulting shockwave still feels strong on the crypto market. You can read more about the shocking scandal that left the crypto community speechless here.

Pump and dump

This is one of the most popular types of scams – an investment scam, where scammers hype up publicly (through email & social media campaigns) a new project, coin, or NFT to get funding. After they get the money, they disappear with it, leaving investors with worthless tokens…  To put it simply it’s like buying a ticket for a concert that never happens, except you can’t get a refund or complain to anyone.

One example of a crypto scam involving pump and dump is the case of the Bored Ape Yacht Club NFT collection. According to some estimates, the hackers stole around $1.7 million worth of NFTs in this scam.

Rug pull

Rug pull is similar to pump and dump but in this case, the scammers prevent investors from selling their tokens after buying them. With rug pull scams, we can typically see the developer(s) of that certain project hyping it up and gaining legitimacy on social media platforms, like Twitter, before abandoning the project suddenly.

A popular example of this scam was the Squid coin scam, named after the popular Netflix series. The coin promised to give people a chance to play a real game and win money. However, the token was actually a rug pull, meaning that the developers ran away with the investors’ money after pumping up the price. The coin became worthless in minutes, and the people who bought it lost everything. This scam took over $3 million from people who trusted the coin. You can read more about it here.

image

source: beincrypto.com

 

Also, remember Terra Luna? Well some categorize it as a rug pull, others as a bad idea doomed to crash from the beginning.

Fake celebrity endorsements

It isn’t a surprise to see celebrities promoting cryptocurrency projects or platforms. For example, Snoop Dogg, Paris Hilton, and Lindsay Lohan have all endorsed various cryptocurrency or NFT projects. However, there are also cases when celebrities get used by scammers, who exploit their fame and influence to attract more customers or investors. For example, the famous American football player Tom Brady was one of the celebrities who promoted FTX; actor Seth Green got phished and had four NFTs stolen…

But when it comes to fake celebrity endorsement scams, one of the most recent was an Elon Musk deepfake scam we mentioned in our previous article. This type of scam is based on scammers who use fake videos, photos, or social media accounts of celebrities to promote a crypto investment scheme by claiming that “they” (the celebrities) have made millions from the investment and promise the same for their victims.

Romance scams

We all know about Tinder Swindler, right? We mentioned it a bit earlier in the article. This a great example of a Ponzi scheme meets romance scams, but have you heard of romance crypto scams?

They start the same – scammers pretend to be interested in a romantic relationship with their victims; they use social media, dating apps, or online games to lure them in. They then ask for money or crypto transfers, claiming they need it for an emergency, a travel ticket, or a gift. But in the end, they just evaporate, never meeting their victims in person… This method can also involve a friendship scam, where scammers pretend to be someone’s friend for a long time, sometimes even months, and then scam them when they have gained their trust.

Conclusion: Don’t trust everyone who slides into your DMs.

Fake websites and crypto exchanges

For this scam, they create fake websites or apps that look like legitimate crypto platforms or exchanges. They trick their victims into signing up, depositing money or crypto, or downloading malware. They then steal their funds or personal information or use malware to access their devices. One of the many examples of this type of scam is CreepCoin which stole money from investors who were lured by fake profits and testimonials. It was part of a larger network of fake websites and apps that have cost people more than $80 million since October 2020.

Additional resources you should check out:

Job scams

Here scammers offer fake jobs related to crypto, such as mining, trading, or developing. They reach out via LinkedIn or email, pose as a headhunter or a company, ask their victims to provide personal information, download software, or even send them a “business offer” as a PDF file containing a trojan. We recommend checking out one of the biggest scams regarding fake job offers, in which a company called Axie Infinity lost $540 million in cryptocurrency.

 

Remember, don’t be tempted by every offer! If it sounds too good to be true, it probably is.

These are some of the common crypto scams that you should be aware of in 2023. As you can see, scammers can be very creative with coming up with new ways to trick people, so you should always be cautious!

In part three of our Crypto Scams 101 blog post series, we will share some tips and best practices to help you stay safe and secure in the crypto world!

Stay tuned! 👀


This article is also published on Shard Labs Medium, where people are continuing the conversation by highlighting and responding to this story.

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