Exploring Common cryptocurrency scams and how to avoid them

Cryptocurrencies like Bitcoin and Ethereum have gained mainstream traction. Due to this, the illicit schemes to defraud crypto investors have also increased.The decentralized nature of cryptocurrency helps scammers to launch get-rich-quick-type schemes. After doing so they disappear without leaving any trace. Understanding common crypto scams can help investors avoid losing their hard-earned money. In this blog, we are going to look at some of these common crypto scams that you should be aware of. We'll also learn how to deal with these scams and how you can avoid them.

 Let's first look at a few of these scams

Ponzi Schemes

Among the most infamous cryptocurrency scams are Ponzi schemes. These schemes promise high investment returns by claiming to involve trading or mining. But, no real business activity occurs. Instead, the scammers pay existing investors using funds from new investors. They lured these investors with the promise of massive profits. This results in collapsing once new investor money stops flowing in.

One example is the notorious Bitconnect platform. It promised 1% daily returns through secretive volatility software. In reality, payouts to earlier investors came only from fresh deposits. Bitconnect collapsed in 2018 causing investors to lose $3 billion. Another crypto Ponzi scheme is PlusToken. It maintained the illusion of blockchain activity by creating fake wallet addresses. It also creates fake transactions to project the appearance of trading. They usually crash within months.

Warning signs of a crypto Ponzi include various things. Such as guaranteed high returns, consistent performance claims, and pushy sales tactics. Investors also have difficulty withdrawing funds when desired.

 Pyramid Schemes

Like Ponzi, pyramid schemes recruit new members with the promise of profit. This scheme promises profit if they enroll others beneath them. Generally, there's a need for a buy-in payment to join. Members at the top earn when new members join and pay up. As the number of entrants multiplies, the scheme collapses under its weight. This is because finding recruits becomes unsustainable.

By understanding how Ponzi and pyramid schemes operate in the crypto space. Investors can better recognize the red flags and protect their assets. Perform due diligence before entrusting money to any scheme promising easy crypto riches. 

Phishing Scams

Phishing remains one of the most common tactics to steal login credentials. It's also used to steal crypto assets from victims in the world of cryptocurrency.

Scammers create fake websites and messages. It's designed to impersonate legitimate crypto exchanges, wallets, ICOs or authorities. URL redirections and slight misspellings of entity names are common tricks. The phishing message urges users to log in or share confidential data. This is then captured by scammers. 

Fake ICOs and Token Sales

ICOs involve the issuance of new cryptocurrencies or tokens by blockchain projects. It's used to raise capital from public investors. But, the lack of oversight makes ICOs ripe for scams.

Fraudsters have done many things. Such as creating fake ICOs, and fabricated team credentials. They also created whitepapers and conducted mass marketing to attract unsuspecting investors. Billions get raised through such tactics. And then the promoters disappear along with the money.

There are a few tips which one can stick to, so as to avoid ICO scams. Scrutinizing the project team backgrounds

Assessing the feasibility of the proposed product or service

Checking for plagiarized content or discrepancies

Not falling for hype or FOMO (fear of missing out) psychology 

Cryptocurrencies are a new asset class. Education is key to preventing losses from the diverse scams.

Pump and Dump Schemes

"Pump and dump" schemes get designed to manipulate crypto prices. It's done through coordinated market manipulation. A group accumulates a token or less-known cryptocurrency when prices are low.

They "pump" the price by spreading misinformation to attract other investors. Once prices peak, the group "dumps" their holdings to cash out before prices crash. Thus, leaving others with losses.

Groups organizing such schemes often use Telegram or Discord. For example, a group pumped and dumped the BVB coin in 2021. This caused prices to shortly spike 2000% before nose-diving. Identifying and avoiding suspicious Telegram groups can protect against pump schemes.

Fake Wallets and Exchanges

As cryptocurrency adoption grows, fake wallets and exchanges have emerged. They impersonate legitimate services through deceptive URLs and branding. Users deposit funds assuming the site is genuine. But, the operators steal the money.

Red flags include various things. Such as registered domains, spelling errors, and peddling unrealistic promotions. It’s advised to Use verified, established services that have strong security practices.

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Pump and Dump Groups

Telegram groups like "PumpMyCoin" claim to provide signals on profitable pump opportunities. But, the organizers hold the coin before pumping begins, then sell it at the top. Regular participants rarely benefit in a consistent manner. Many such groups also spread misinformation and fake news to spur hype.

Avoiding groups making overt promises of orchestrating pumps protects against losses. Even following such manipulative behavior carries legal risks and ethical concerns. 

Safeguarding your Crypto Investments

Use well-reputed hardware wallets like Ledger and Trezor to store private keys offline. Enable two-factor or multi-factor authentication on accounts and apps for added security. Create strong unique passwords and change them.

Be aware of crypto investment tips on social media groups which are rife with scammers. Avoid placing full trust in crypto influencers promoting coins with no fundamentals. Conduct thorough due diligence before investing in new assets.

Track account activity for unauthorized transactions. Use email and SMS notifications to stay alert against phishing attempts. Update software wallets to the latest secure versions. Seek reliable crypto education, not hype or FOMO. Staying informed and vigilant is the best protection.

The crypto space still has complex challenges. But proper regulation and precaution can expand crypto adoption.

Case Studies: Notorious Crypto Scams


BitConnect was a crypto lending platform that promised 1% daily returns. But, the company was running an enormous Ponzi scheme with no true trading activity. BitConnect collected over $3 billion from investors before collapsing in 2018. 


OneCoin scammed investors by promoting sham blockchain services and educational packages. They priced both in the fictional OneCoin cryptocurrency. It’s Operated by founder Ruja Ignatova. OneCoin accumulated at least $4 billion from victims globally before Ignatova disappeared. Authorities have labeled it a pyramid scheme. 

Mt. Gox

Once the biggest Bitcoin exchange, Japan-based Mt. Gox shut down in 2014 after losing 850,000 Bitcoins belonging to customers and 100,000 of its coins. Most evidence suggests that Bitcoins got stolen by hackers over time exploiting vulnerabilities. The incident highlighted the risks of leaving coins on exchanges.  


Lack of understanding and greed makes cryptocurrency investors a victim of these scams. There are various measures you can take to help protect your assets. Such as Learning to identify red flags, conducting due diligence, using secure wallets. Also avoiding too-good-to-be-true schemes can help protect your assets. Spreading awareness can prevent more people from getting duped. With proper precautions and regulations, your crypto investments can be fruitful.