Top Crypto Scams to Avoid

• Fake exchange/crypto websites posing as legitimate
• Phishing scams on social media
• Fake mobile crypto apps and dApps
• Crypto rug pulls

In all these situations, the most important information is essentially the same: make sure the platforms you’re using are legitimate and never, under any circumstance, share your crypto wallet’s key phrase.

As new crypto investors dive into the different ecosystems of the market and learn more about the technology, it doesn’t take long to realize that there are several risks involved in crypto transactions. In fact, that is still the main obstacle for most people who are interested in investing in crypto; arguments that cryptocurrencies are dangerous and revolve around several scams.

These issues in fact exist, and present a greater threat towards general adoption than the volatility of the market. Online scams are everywhere and are able to target anyone if they are not careful - with crypto, there’s no difference. If you’re not careful enough, there’s a legitimate (albeit low) chance that you may lose some of your investments in cryptocurrencies.

With that in mind, this article provides a breakdown of the top crypto scams that investors suffer, and what must be done to avoid them.

Fake exchange/crypto websites posing as legitimate

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This is most likely the most common scam of all - websites that pretend to be legitimate crypto businesses, therefore requesting crypto users to connect their decentralized wallets to conduct transactions.

These websites come in various shapes and forms, offering a range of different scams to attract naive users; cryptocurrencies trading at a large discount, fake airdrops, currencies attached to fake events or simply a webpage imitating a regular service like the example above. When using decentralized services, there’s the issue of not needing any identity-verifying regulation towards allowing users to trade. They simply need to connect their wallets and start trading, which is great on one end - on the other, it makes these scams very easy to target new crypto users

Once the digital wallet is connected, the website may ask users to share their wallet seed phrase, which should never be shared under any circumstance. Once they are able to access that information, through some form of an excuse as to why the phrase is needed, then it’s game over: the scammers can easily access your funds and withdraw to a separate wallet.

The solution? Be absolutely certain that you’re connecting your digital wallet to an official website. Also, even if the website itself is legitimate, make sure you’re using reputable sources - just because a business is legitimate doesn’t mean that its security measures are up to standards. And lastly, of course, never share your seed phrase.

Phishing scams on social media

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Phishing is also an extremely popular method not only for crypto, but to take advantage of any situation - a strategy where scammers pretend to be someone else, usually from a legitimate organization, and ask for your private information in exchange for a reward or service.

In the screenshot above, we can witness one of the biggest phishing scams in history. Last year, a group of hackers invaded the Twitter accounts of several major celebrities; Bill Gates, Elon Musk and Barack Obama just to name a few. The message displayed was the same in all accounts; if you sent out a certain amount of Bitcoin to their wallet, they would send double the BTC back to you. Sounds too good to be true? Well, it most obviously was.

These phishing scams are usually conducted in the most used social media platforms for crypto; Twitter, Telegram and Discord. The best way to prevent these situations from ever happening is to make absolutely sure that you’re speaking to the real people behind the username; is their Twitter handle the same? What is their number of followers? On Telegram and Discord, do they have the “admin” label of the crypto group?

Mindfulness is key here. And obviously, once again - never, ever share your wallet key phrase or any private information. There is no circumstance where a group administrator or even an actual developer of a crypto project would need your personal details.

Fake mobile crypto Apps and dApps

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Much like fake crypto websites mentioned before, another very common way for scammers to target crypto users is through fake crypto mobile apps and dApps (decentralized applications). The stunt works very similarly to its browser counterparts, but within mobile usage - which already takes up a huge portion of crypto users. Say, for instance, that you’d like to use Uniswap - the biggest decentralized platform based on the Ethereum network. Their original website and mobile exchange address is app.uniswap.org. Criminals, however, could create another platform virtually identical to Uniswap under the address say app.uniswapexchange.com.

The solution to avoid this issue is the same as the first item on this list - making sure that you’re using the right address and not sharing any private information whatsoever. Also, it’s always useful to use trustworthy crypto wallet apps like Trust Wallet - where they provide a previously-established list of the most used and verified dApps like Uniswap and PancakeSwap. You can access other dApps any way you desire, but will be doing so at your own risk.

The infamous crypto rug pull

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Rug pulls are the most intricate, long-lasting and elaborate scams on this list, but also the ones that often do the most damage to an entire community. Basically, the scammers create a project and advertise it as a legitimate initiative, full of goals, team members, roadmaps and such. Once the crypto’s value has reached a desirable price, the founders literally steal the crypto from the community and sell everything as fast as possible. Figuratively “pulling the rug” on their supporters, as the expression conveys.

According to Chainalysis, rug pulls netted over $2.8 billion dollars to scammers in 2021 - an absolutely massive amount of money in the hands of criminals who took advantage of investors by creating projects upon false hopes and pretenses.

Avoiding rug pulls is quite trickier than the other items on this list. In a nutshell, you have to be absolutely sure that the crypto project or company is legitimate. Have a look at the founders; are they anonymous? Although several crypto projects have anonymous contributors, it does make things much more risky. What about their official files like the website and whitepaper, do they make sense towards an ambitious project or is the whole point to make money? Have they been around for long? Also, it’s always valid to check if they have any mentions around traditional media like crypto news websites.



Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.

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