How to Avoid Cryptocurrency Scams

Developers create a token, hype it through social media influencers, attract investors, then drain all liquidity and disappear. The Squid Game token rug pull in 2021 stole $3.38 million in seconds. Warning signs include unlocked liquidity pools, anonymous teams, no code audits, and concentrated token ownership (top 10 wallets holding 50%+ supply).

Fake websites mimicking legitimate exchanges (e.g., "coinbse.com" instead of "coinbase.com") harvest login credentials and seed phrases. Scammers buy Google Ads to appear in search results, create lookalike mobile apps, and send phishing emails with urgent security warnings. Always bookmark authentic sites and only download apps from official stores.

Impersonators hack verified Twitter accounts or create fake celebrity profiles claiming "Send me 1 ETH and I'll send back 2 ETH!" These scams exploit trust in public figures like Elon Musk, Vitalik Buterin, or Michael Saylor. Real people never ask you to send crypto first to receive more—that's mathematically a scam 100% of the time.

These promise guaranteed returns (often 1% daily or 50% monthly) by paying early investors with new investor money. BitConnect, OneCoin, and PlusToken stole over $16 billion combined. Red flags include unsustainably high returns, recruitment incentives, vague investment strategies, and pressure to recruit friends/family. Legitimate investments never guarantee returns.

Fraudsters build romantic relationships online over weeks or months, then request crypto for "emergencies," "investment opportunities," or to "teach you about crypto." They often claim to be overseas military personnel, successful traders, or attractive singles. Once they receive funds, they disappear. The median loss per victim is $10,000.

Scammers launch fake Initial Coin Offerings with professional-looking websites, copied whitepapers, and fabricated team profiles using stock photos. They collect Ethereum or Bitcoin during the "presale," then vanish with investor funds. Always verify team identities on LinkedIn, check GitHub activity, and review third-party audits before investing.

Fraudsters pose as exchange support staff, MetaMask validators, or government officials via email, phone, or direct message. They claim your account is locked, you need to "verify" your wallet, or you owe crypto taxes. Legitimate companies never ask for seed phrases, private keys, or remote access to your computer. Always contact support through official channels.

Coordinated groups artificially inflate a low-cap token's price through hype and fake volume, then sell their holdings at the peak, leaving retail investors with worthless bags. These occur on Telegram channels with "VIP signal groups" promising insider info. The "pumpers" always profit; followers always lose. Avoid tokens with sudden 100%+ price spikes and low liquidity.

Always double-check URLs for exact spelling before entering credentials. Phishing sites use lookalike domains (e.g., "coinbsae.com" instead of "coinbase.com"). Bookmark legitimate exchange sites and only download apps from official app stores. Check for HTTPS encryption (padlock icon) and verify SSL certificates. Enable browser warnings for suspicious sites. When in doubt, manually type the URL or use bookmarks—never click links in emails or direct messages.

Activate two-factor authentication (2FA) using authenticator apps (Google Authenticator, Authy), not SMS which can be intercepted via SIM swapping. Use hardware security keys (YubiKey) for critical accounts. Set withdrawal whitelist addresses on exchanges, enable email/SMS notifications for all transactions, and use strong unique passwords stored in a password manager like 1Password or Bitwarden. Consider geographic restrictions—block logins from countries you don't visit.

Before investing, verify the team's identities on LinkedIn (check employment history, connections, endorsements), check code audits from reputable firms like CertiK, Trail of Bits, or OpenZeppelin, read the whitepaper for technical substance (not just buzzwords), review tokenomics for fairness (avoid tokens where devs hold 50%+ supply), check liquidity locks on DexTools or RugDoc (must be locked 6+ months), and assess community sentiment on Reddit, Twitter, and Discord. Red flags: anonymous teams, no GitHub activity, copied whitepapers, pressure to buy quickly.

Your 12-24 word seed phrase is the master key to your wallet. Legitimate companies never ask for it—not exchanges, not support staff, not "validators." Anyone requesting your seed phrase is a scammer, period. Store seed phrases offline on metal backup plates (Cryptosteel, Billfodl), split storage across multiple secure locations, and never photograph, email, cloud store, or enter them on websites. Treat them like nuclear launch codes. Learn more about cryptocurrency wallet security best practices.

Scammers exploit psychology: creating urgency ("offer expires in 1 hour!"), impersonating authority (fake Elon Musk tweets), exploiting emotions (romance scams, fake charity), and promising guaranteed returns. Learn to pause before acting—legitimate opportunities don't require split-second decisions. Verify all claims independently, ignore unsolicited DMs on Discord/Telegram, consult trusted crypto communities (Reddit's r/CryptoCurrency), and remember: if it sounds too good to be true, it's always a scam.