How to Avoid Crypto Scams

February 14th · 11 min read

When it comes to scams, crypto unfortunately has a bad reputation due to the fact that it has taken off so quickly. This should be expected because anytime there is a lot of “hot money” to be made, it attracts people looking to take advantage of the situation. Most scammers are simply looking to take advantage of a lot of uninformed money looking for fantastical gains. Most of the time, once the public starts to get involved in what has been a long running money making endeavor, a lot of that money is ripe for the taking.

That being said, a lot has changed in the crypto markets over the last few years. Regulators are starting to take a serious look at the way crypto is bought, sold, stored, and even used all over the world. Because of this, crypto will lose one of its original appeals, stepping away from the system, but at the same time it allows much more clarity when it comes to the ecosystem itself, and of course how to allocate capital to crypto in general. The everyday citizen of course needs to know that there is some type of regulation in order for crypto to continue growing, so even though there is a completely different conversation to be had about whether or not regulatory governance goes against the initial ideals of crypto, the reality is that for mass adoption to happen, regulation has to as well.

While it is true that crypto scams tend to reach the headlines quite often, the reality is most crypto exchanges and uses of crypto are safe, if you know what to look for. It is much like the foreign exchange markets when retail traders first started to get involved, there is a bit of a “Wild West feel” to the asset, but things are quickly changing and therefore with just a little bit of work, you can avoid most crypto scams, especially if you are using a crypto wallet, in order to keep the keys to your coins off-line.

In this article, we will take a look at some of the most common scams, and how you can deal with them. With an eye on “what is too good to be true”, and a little bit of extra effort, you should feel safe trading and investing in cryptocurrency.

Giveaway scams

One of the more common crypto scams is what is known as a giveaway scam. More often than not, giveaway scams are found on social media, and typically offer to give away a certain amount of tokens or coins to an investor. Most of the time, the scammer suggests that it is a major crypto currency exchange or celebrity that is hosting a giveaway.

When the potential victim reads the details, they will often say that you need to send a certain amount of crypto to a giveaway address so that your crypto address can be confirmed, and your share of the giveaway will be sent back to you. It is at this point that they have your bitcoin or other assets and are now in control of those assets. However, crypto transactions are irreversible, and as a result there is nothing that the victim can do to recover their funds. While sometimes in larger cases the FBI or other such law enforcement agencies can track crypto, the reality is that scammers get away with this a majority of the time, and have little to fear from law enforcement.

While there are some legitimate exchanges that offer giveaways, you should never send any amount of crypto to an address in order to “confirm your wallet address.” Your crypto wallet address should be protected much like your bank account number, or your credit card number. Once a scammer has access to that, you can find yourself in serious financial trouble.

On another note, celebrities are not necessarily the best place to look for crypto giveaways, because there have been a lot of “social media influencers” pumping various forms of crypto for others. Quite often these projects that celebrities or influences are involved in have paid them large amounts of money to mention them. Celebrities/influencers are not financial experts, so it goes without saying that you cannot jump into any market simply because they said it was a good idea.

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Phishing scams

Phishing scams are scams that focus on obtaining information about an online crypto wallet. These crypto wallets are known as either a “hot wallet”, or “warm wallet.” The difference between the two is that a hot wallet is on an exchange, and a warm wallet is downloadable software such as Metamask that crypto traders can store their assets in. Both of these crypto wallets remain online, which makes them less desirable than the other alternatives.

The method of crypto phishing scams is similar to other phishing scams that you may have seen previously, insomuch as quite often it is done via an email that has a link sending victims to a website that asks them to enter private key information. Once the scammer has access to these private keys, they can steal the cryptocurrency stored in those wallets. In order to avoid this scam, you should not only avoid ever giving your private key information, but storing your crypto in a “cold wallet” is by far the best way to go. This is essentially a storage unit much like a USB thumb drive, but stores all of your private keys offline. Trezor and Ledger are two of the biggest competitors in this field, offering some of the most commonly used crypto wallets globally.

How to Avoid Crypto Scams

Investment scams

Investment scams are a little bit more complex than some of the other ones, because they can come in so many different forms. Generally, it is someone who claims outrageous returns for their investors, with a minimum deposit required. Typically, they do not even require crypto, because they will take US dollars or other fiat currency to put into the crypto markets and try to build wealth. However, much like Bernie Madoff, most of the time it is either a Ponzi scheme or outright theft.

If you choose to use an investment advisor, make sure that they are regulated with the local authorities. For example, if you are in the United States the person should be in good standing with the SEC, or perhaps be a large institution with pedigree over the last several decades in other assets. Having said that, most people are better served simply going on a regulated exchange and buying the assets themselves. This is because crypto exchanges have made it very easy to buy cryptocurrency, especially if you are simply looking to invest for the long term. An investment is not something that you flip back and forth very often, so going on to a highly regulated exchange and buying bitcoin should not be that difficult if you do not plan on doing other things with it anytime soon.

Unfortunately, there are legitimate asset managers out there who are also doing something that is not quite a scam, but it certainly is not necessary. There have been advertisements recently that money managers are more than willing to manage a crypto portfolio for you, but if it is a long-term investment there is no need for that. It is simply Wall Street looking for its cut of the action. Crypto is about moving away from Wall Street, so although asset managers are not a scam, they also are not necessary.

Imposter websites

Imposter websites have been a problem for almost as long as the Internet has been around. They are simply websites that look like other legitimate websites and are set up to steal your information. Most legitimate websites will never have you for your private keys unless you are trying to move the crypto. Most exchanges have a multilayered security protocol in order to withdraw crypto and fiat, typically involving something like an SMS message and email in order to even get the process moving.

The most common way to avoid imposter websites is to simply look at the address itself. As a general rule, you should already know the address of the major exchanges, and of course transferring crypto should be a multi-step process. Quite frankly, if it is too easy to do, that is a major red flag. Ironically, one of the biggest complaints that people have about crypto is one of its biggest strengths, the fact that moving crypto isn’t always easy and quick to do. Granted, that is a problem that will eventually get fixed, but for now expect multiple hurdles to jump through in order to pull your crypto from one spot to another most of the time. It is a good thing, because once your crypto is out of your wallet and on its way to someone else, it is gone forever.

Fake apps

Fake apps are also a problem for crypto as well as many other facets of online life. Quite often, these fake apps will appear in online app stores, but generally are taking down rather quickly. One of the best ways to avoid them is to only download apps from trusted exchanges that you know. They should be apps that have been downloaded thousands of times and have decent ratings and reviews. Downloading a crypto app that only has a handful of downloads is asking for trouble.

Crypto has been around long enough that most popular apps have been downloaded tens of thousands of times and reviewed just as much. Unless you are day trading, there is probably no real reason to use a lot of apps when it comes to crypto. In fact, most traders only use the actual exchange app if anything at all on their phones.

Social media

As we continue to see the explosive growth of social media, it makes a certain amount of sense that crypto will have made its way into the fold. Crypto scams are abundant on some social media platforms, and typically involve people bragging or impressing upon the fact that they have made massive amounts of money. Having said that, they are willing to help you learn how to make the same type of money, for a small fee. Quite frankly, if somebody has made millions in the crypto markets, it does not make any sense that they are willing to “give away their secrets” for a small fee.

Unfortunately, social media is really good at one thing in particular: creating envy. That envy is where the trouble begins. Social media crypto scams happen quite a bit, and typically will lead somebody from a place like Instagram into a Discord server, or maybe a Telegram group. It is in those private chat rooms that the scam truly starts to pick up momentum, and the idea of sending your money or crypto to the scammer starts to present itself. When it comes to social media crypto scams, it is probably best to simply avoid social media altogether when it comes to investment advice. The best and brightest minds in the crypto world, or any other financial market for that matter, do not have a lot of time to go on to social media and brag about how well they have done.

Scamming emails

Scamming emails happen quite often as well, and normally involve some type of combination of the other scams mentioned. As a general rule, a bitcoin millionaire is not going to be emailing you randomly. In fact, the easiest way to avoid scamming emails is to simply not answer them. Let us put it this way: if they were really doing that well in the crypto markets, why are they bothering sending out emails to random strangers?

This advice is true not only with crypto, but with anything else. The world is full of free information when it comes to crypto, as well as plenty of regulated exchanges. Because of this, any decision that you make when it comes to crypto markets should be made on your own, and not based upon being “nudged” by a sales pitch from random strangers.

The crypto exchange


To begin with, one of the most common and easily obtainable defenses against crypto scams is to simply use a bit of common sense. If it appears to be “too good”, then it probably is. This will be the same with crypto as it will be with any other facet of your life. Crypto is no different in the sense that there are good and bad players. After all, we have seen multiple scandals when it comes to Wall Street over the last several decades, so it does make a certain amount of sense that there will be people flooding to this market in order to take advantage of it.

Keep in mind that your crypto wallet private keys are the same thing as your bank account number, credit card number etc. You should treat them as such and therefore never give them out easily. Cold storage crypto wallets are by far one of the best ways to take advantage of the crypto markets but do so in a safe way as once those private keys are stored in your cold wallet, they are offline and therefore cannot be taken. If you are concerned about using a cold wallet, perhaps because you may lose the password, there are multiple fail safes built into the ecosystem of these wallets in order to keep your access possible. (Including being able to access your assets when you have to replace the wallet.)

Never send crypto to someone in hopes of receiving more. One way to think of it is why would you have to send a dollar to someone in order to have five sent back? Furthermore, would you do that if the transaction was irreversible? Giveaways can be a clever marketing idea by a crypto exchange, but that is about as far as I would go with it, and I would make sure that I was already a customer of said exchange.

Influencers and celebrities can be bought at a price. Most crypto scammers know this, and most celebrities or influencers either do not know any better, or simply do not care enough to do any due diligence. Just because somebody you follow on social media thinks that the latest dog themed crypto is the way to go, does not necessarily make that true. If you pay attention to social media, you will quite often see that the only thing they talk about is “XXX coin is going to the moon!” However, they do not give you a use case scenario. These are the coins that although they can make massive amounts of gains in short-term bursts, they should be avoided at all costs as they have no utility and are essentially the same as during the tech bubble of the 1990s. They typically will go to zero.

As time goes on, there will be more regulatory oversight when it comes to crypto. That has been obvious for a couple of years. Regulatory bodies, especially those in the United States, take their time to get things right. In other words, you will still have to be very diligent for the foreseeable future. However, there is a light at the end of the tunnel, as SEC Chairman Gary Gensler has recently made crypto a priority, as well as many of his counterparts around the world. As you are starting to see the same things around the world, makes sense that we will have to go through a certain amount of growing pains. It is not too far into the distant future that crypto trading simply takes its place right along with other assets such as stocks, bonds, and commodities. In the meantime, protect yourself by taking some of the simple steps mentioned in this article.

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