Watch out! Crypto scams are on the rise.

Cryptocurrencies have brought a lot of excitement in the finance industry. And like any new innovation, it’s not without its own weaknesses. Jumping into the industry just to make quick money without taking time to research and weed out scams would be disastrous for anyone.

Stories of a privileged few who have earned thousands of dollars worth of cryptocurrencies within days/weeks have attracted many people into the industry. What many of these people don’t yet understand is that the crypto sphere is still loosely regulated and its frenzy nature is helping most scammers to realize their dreams.

From every indication, not only do people need to be educated on blockchain technology and cryptocurrencies, they need to learn to steer clear of fraudulent deals. That said, here are 8 common scams in cryptocurrencies that you should learn to spot and avoid.

1. Fake ICOs

The crypto industry has recorded many fraudulent ICOs (initial coin offerings) over the years and might continue to do so (until properly regulated). In 2017 alone, more than half of all ICOs failed woefully. While some failures could be attributed to poor planning and execution, there’s no doubt that many of these ICOs were downright scams. So how do you avoid fake ICOs?

The team.

Behind every successful ICOs lies a team with a great deal of variety. You don’t want to invest in an ICO with a team of just one or two members because any obstacle (like someone falling sick) will prevent the project from further development.

A good team usually comprises of people from diverse backgrounds. For example, developers, entrepreneurs,  designers, community managers, advisers etc to become successful. Moreover, the team members should be actively engaged with their audience on all platforms, be it on Twitter, Telegram or Reddit. Any form of infighting or dirty talk among team members should be a call for concern.

The white paper.

This is a must-have for every ICO because it’s through the white paper that you get to discover the mission statement of the project. That is, the problem they have identified and the solution they want to put forward to solve the issue and above all, a clear strategy (roadmap) on how to accomplish their goals.

Generally, before you invest in an ICO, you need to do your own research – and it’s never easy because it takes time. But if done correctly, you won’t regret as the ROI will make up for the time you invested in the research.

2. Con wallets.

Fake cryptocurrency wallets usually carry names that are similar to those of legitimate wallets. Scammers do this by slightly tweaking the name of the wallet provider – like adding or removing a character from the original wallet name. For example, coinbase could become coinpase or conbase, such that if you’re not vigilant, you’ll just download the app to your mobile phone or PC.

Most often, you won’t realize immediately that you are using a fake wallet because the scammers allow you to make a series of successful transactions until you have loaded the wallet up to an amount they’re satisfied with. After that, everything disappears.

What you should do.

Always download apps only from their official websites and avoid third-party sites whenever you can. Even Google Play and the App store are not always safe – unless you are following a link from the wallet’s official website.

Also, take time to go through reviews and get to know what others have said about the app before you proceed to download. Take note of the total number of downloads and the corresponding rating associated with the app. Keep in mind that app owners can sometimes manipulate the rating, though this mostly happens to apps that have fewer downloads. So your focus should be on apps that have been downloaded the most and have a good rating.

3. Pump and dump schemes.

Pump and dump schemes can be very frustrating especially to those new to cryptocurrencies. Usually, a group of investors (pumpers) would purchase a significant amount of coins which leads to an increase in its price. They would then go to various media channels to spread the message, convincing people that it’s time to buy.

After external investors are persuaded and start buying the said coin/token, ( at a higher price) the pumpers quickly sell off their coins and leave the market. Thus, dumping the price of the token/coin

YOu’ll notice a pump and dump scheme when the price of a coin suddenly skyrockets without any signal (like an announcement or report) to back the surge in price. This is very common with cryptocurrencies that have a low trading volume and market cap (commonly called shit coins). To reduce your chances of falling for pump and dump schemes, do your best to avoid shit coins.

4. Cryptophishing.

The aim of phishing scammers is to obtain your username, passwords, and private keys to enable them to still funds from your wallet. For example, these scammers usually send out emails that appear to come from your wallet provider with an enticing offer which requires you to take action by clicking a link in the email.

Other times, it’s a fake security alert with claims that someone attempted to sign into your account using this or that address/browser. So all that is required of you is to click a link and make sure everything is intact. And when you click a link in such messages, all your funds are gone!

What you should do.

One of the best ways to avoid falling for phishing scammers is to make use of two-factor authentication so that even if scammers gain access to your passwords and username, your mobile device remains with you.

5. Shady exchanges.

It’s a common practice in the cryptocurrency industry to hear that an exchange has been launched today and tomorrow they are already bragging about their performance. And after a few weeks or so, they’ve disappeared from the scene, leaving customers helpless.

Before you ever sign up for an exchange, there are a few important points you need to check out. If these requirements are not met, then look for another exchange.

-They are transparent about commissions and fees.

-There is evidence that they store their coins in a cold wallet

-Customers need to verify their identities before being allowed to buy and sell on the exchange.

-They encourage people to use two-factor authentication.

-Good customer service and community interaction.


6. Impersonators

Scammers are always on the lookout for reputable companies and individuals in the cryptocurrency space to impersonate them and achieve their goals. The motive for impersonation is to ruin an individual’s reputation or defraud his followers. This is very common on social media platforms like Facebook, Twitter etc because it takes only a minute or two to set up an account.

7. Pyramid schemes.

Basically, a pyramid scheme is a business model where participants make money by recruiting new members usually with a promise of unreasonably high returns. The reason for such lofty returns is simple: the schemer knows that the business can come to a halt at any time – after all, they don’t have any meaning product to offer.

In a Pyramid scheme, early investors benefit the most and those coming in later only end up wasting their money. Cryptocurrencies have recently become a new found land for such fraudulent practices.

While having a referral program isn’t a bad idea, always verify that any company promising to reward you with crypto for referring others has an important product to offer. If it is a lending platform, make sure the profits are realistic. If you have any doubts, just do a quick review of the platform online to know what others have to say.

8. Cloud Mining scams.

The only way to get bitcoins without buying or exchanging them is through mining. But because it is unfortunately too expensive to buy mining hardware, many people tend to believe that cloud mining is the perfect solution. This has given birth to numerous fake companies that claim to provide cloud ming services.

Sure, there are a few legitimate cloud mining companies in the industry but a majority of them are Ponzi schemes. These fake companies usually do not have mining hardware that is set up in any location. Part of the money they receive from new members is used to pay older investors, just to encourage them to keep investing. Then all of a sudden the company disappears with all the funds.

You can avoid cloud mining scams by reviewing the company to get what others have to say about it. You could also visit to find out if the company has been labeled there as a scam. However, bear in mind that is not an all-in-one solution to finding scam companies but it does help. So if you come across a scam and don’t find it listed on the site, consider submitting it there to help others out.

If you understand and implement the above guidelines, be certain that you won’t fall into the hands of crypto con men. Plus, following reputable websites and blogs in the industry will help you to stay updated with the latest happenings. This should serve as a complete guide for you to stay safe and start enjoying the benefits of cryptocurrencies.

Related: How to buy ethereum with a credit or debit card.

Note: If you want to buy bitcoin, the above guide should equally serve you well.


Cryptocurrency enthusiast and writer

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