Skip to main content

Crypto scams

Stop and think to reduce the risk of crypto scams

Page reading time: 6 minutes

Scammers use cryptocurrencies, like bitcoin or ether, because they are not easily recovered. Crypto can be sent overseas quickly with limited oversight.

Crypto is a very high-risk and volatile investment. The value can go up or down quickly and there are no guaranteed returns.

If you lose your money to a crypto scam, your money is likely gone. If you buy crypto, only invest what you can afford to lose. 

How to spot a crypto scam

If you're investing in crypto, watch out for these potential red flags.

Unexpected contact

Someone you don't know contacts you with investment advice or offers:

Recommendations from someone familiar

You may hear about it through:

Pressure to take action

You are being pushed to:

Something doesn’t feel right

You're not sure about:

To find out more about how scammers operate, see investment scams.

How crypto scams work

There are three main types of crypto scams:

Fake trading platforms or fake crypto wallets

These may mimic a real online exchange or wallet, but can work in different ways:

Fake crypto trading apps

Scammers create fake crypto trading apps to steal your money. The giveaway is usually that they ask you to download the app from their website. They may appear on legitimate platforms like Google Play and Apple, but are usually promptly removed. If you find one on an app store, check for overly positive reviews and be cautious.

Fake crypto tokens, investments or trading jobs

Scam tokens in crypto wallets – A mystery token appears in your crypto wallet, seemingly worth thousands. If you sell it, a 'smart contract' is activated. This transfers your legitimate crypto tokens and private keys to the scammer.

Initial Coin Offering (ICO) 'rug pull' scam – Similar to a pump and dump scam, in a rug pull crypto scam an ICO is hyped through marketing and social media. When the amount invested reaches a certain level, the scammer cashes out the coins and disappears. With the liquidity gone, the value plummets and your coins are worthless.

Crypto ponzi scheme – You are promised large ‘returns’ by investing in crypto. But the promoter uses money from other investors to pay your ‘earnings’. For more on how these scams work, see ponzi schemes.

Jobs 'trading crypto' – You apply for a job ad for 'crypto traders', for a fake or impersonated financial services firm. You are told to set up multiple bank and crypto accounts, and are paid well for a few hours of work a week. You think you're trading crypto for the entity’s ‘investors’ or ‘clients’, but you're actually money laundering for the scammers. You could be charged by state or federal police.

Baiting interest via crypto – You read an article about a celebrity-endorsed trading software program for crypto. This turns out to be a baiting tactic. You‘re led to a website, generally based overseas, to sign up for a high-risk financial product that is not crypto.

Using crypto to pay scammers

Requests for payment in crypto – An online romantic partner or acquaintance, job recruiters, work from home job, or fake financial services firm asks for payment in crypto only, including buying crypto at a 'Bitcoin ATM' or 'Crypto ATM'. 

Giveaway scams – Fraudulent posts on social media offer to match or multiply crypto invested with them in a crypto giveaway scam. Often, this uses fake celebrity endorsement.

Blackmail/extortion – You're told by a scammer they have your internet browsing history, compromising photos or videos. They demand payment in crypto.

What to do before you invest in crypto

Scammers are skilled at convincing people to part with their money by overpromising and using flashy marketing.

Here are some ways to be alert to crypto scams:

If you're already investing in crypto:

If you do these checks, it could still be a scam. Be alert and remember if something looks too good to be true, it probably is.

What to do if you've been scammed

If you think you've been targeted by scammers, act quickly. See what to do if you've been scammed.

Money lost through crypto transactions can be hard to recover, so you may not get it back.

Man sitting on a stool, holding a tablet.

Costa's friend is scammed $10,000 by a crypto asset rug pull

Costa's friend Pat saw a new crypto asset promoted on social media offering an annual percentage yield (APY) of 35%. Pat wanted a better return than his savings account, where he was earning 2.25% per year.

The post had a link to a website promising “guaranteed returns”. Charts showed the crypto asset was growing fast. There was a calculator displaying how much an investment of only $1,000 could yield. And a running tally of people who had their “interest” paid to them over the last day.

Pat invested $1,000 in the crypto asset. The site showed the value of the crypto going up over the next few days, so he invested $9,000 more.

Costa checked the crypto's white paper before investing. He noticed spelling mistakes and couldn't find any information about the people listed in the project. There was a lot of hype online about the project and overly positive reviews. Costa also noticed an extreme price increase shortly after the crypto was founded. Because of these red flags, he decided not to invest.

A few days later, Pat discovered the crypto asset's price had dropped to almost zero overnight. The crypto developers had withdrawn all the coins from the liquidity pool, making the investment worthless.

Pat lost his entire $10,000.