What is a Crypto Scam? Common Types of Crypto Scams

Introduction

DeFi is often regarded as a place that is riddled with scams and fraudulent activities. This article is all about common crypto scams and how to avoid them.

What is a Crypto Scam?

Cryptocurrency scams are fraudulent projects that are present in the market place with the intention to exploit cryptocurrency investors. Much like the traditional financial markets, cryptocurrency sector is also not free from the dangers of threat actors. Scammers can use various techniques, tools, and methods to earn gains at the expense of other investors.

When dealing with DeFi markets, investors must look for red flags that show unreliability and defrauding potential of a given virtual currency project. However, it is possible to avoid them by undertaking precaution and learning to identify them.

Common Types of Cryptocurrency Scams

Here are some of the most common types of cryptocurrency scams that every investor must beware of:

Blackmail and Extortion

Blackmail and extortion is one the oldest type of scam that anyone can face. Scammers in this situation try to get hold of personal information of cryptocurrency investors. They can use this information as means of extortion to demand payments in cryptocurrencies.

Depending on the situation, the scammers can continue to ask for more payments through blackmail over a period of time.

Rug Pulls

Rug pulls are one of the most dangerous types of cryptocurrency scams. The scammers in this scenario can introduce a new virtual currency project. Investors may start to flock around the new project when the token becomes available at trading platforms.

However, once the token gains a little bit of traction, the issuer of the token sell off their entire token reserves and run away with their profits. In this manner, the investors with positions in the token are left behind with losses.

This is a situation where scammers can promote a new token or an existing cryptocurrency. The scammers can give signals to the investors to increase traction and when the token gains some momentum, they can start to sell it.

Pump and Dump

The scammers acquire considerable reserves of the coin at low prices and they continue to pump the token at regular intervals while dumping the token in large quantities whenever it gains traction.

Impersonation Scams

Scammers can pretend to be someone else by impersonating famous personalities. They can create fake social media accounts, or use any other means to pose as a person with influence in crypto circles.

From there the scammers can ask people to send them cryptocurrencies or invest in scam token projects. Impersonating scams can also happen by hacking social media accounts of influencers.

Phishing Scams

Phishing is an attempt to gain access to the security credentials of a person which in case of cryptocurrency investors is private keys. Scammers can take various routes to get the log-in details of a person in order to break into their digital wallet reserves and steal their holdings.

Some scammers may also use psychological tricks while others can depend on malware such as stealing the information available on the clipboard of a crypto investor to commit the crime.

Giveaway Scams

Giveaway scams can take place in the form of ICOs and airdrops. Scammers can also the investors to send them virtual currencies with a promise to double their holdings.

However, once these targets send them their cryptocurrencies they disappear without a trace. It is currently very difficult to track, report, and recover these types of scams.

How to Avoid Crypto Scams

Investors must also stay connected to their community and discuss the claims that the scammers are making with their peers for confirmation.

Cryptocurrency investor must never ever share their private keys with anyone and store it in a secure place at all times.

Investors should use good quality cybersecurity measures such as antivirus and URL scanning tools to prevent downloading malware on their OS.

Conclusion

Scammers usually attack at a psychological level to trap their victims. Therefore, it is very important for cryptocurrency investors to stay alert and remain mentally present.

By increasing education and awareness about various types of scams in the community, everyone can contribute to curb them and discourage scammers from affecting more investors.