Course 4.3 Protecting Your Crypto: Top Scams to Avoid in 2024

Introduction
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Welcome back, students! In our previous lessons, we discussed how to strategically invest your crypto into various crypto and Web3-related projects. A major point of concern for crypto investors, no matter their level of experience, is the risk of scams. In 2023 alone, $3.9 billion in cryptocurrency was lost to scammers and fraud - which was a worrying 53% increase from the previous year. 

This shocking figure only proves that, even with blockchain technology and safety measures advancing, scams will continue to evolve and cost investors billions. The best way to protect yourself from fraud is by learning about the most prevalent scams that criminals will use to target you. 

In this article, we’ll dive deep into the world of crypto scams in 2024. From the best (yet most underrated) preventative measures to take, as well as the most common and creative modern scams you have yet to hear of.

What Are Cryptocurrency Scams?
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Scams are any type of fraudulent activity with the purpose of tricking people into unintentionally giving away their crypto assets or sensitive information. There are a wide range of tools and strategies that criminals will use to steal your funds - from fake emails and website links to sophisticated cyberattacks on your devices. Some scammers will even connect with you in person, getting you to build a trusting connection with them before striking. 

The cryptocurrency industry is vulnerable to scams and other financial fraud for a number of reasons. 

• Anonymity - While this is a massive advantage for many crypto users, the anonymous and private nature of blockchain tech also allows scammers to remain undetected, and unidentified.
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• Lack of regulation - In most countries, crypto is regulated to a degree, such as the SEC overseeing the crypto space in the US. However, as a still-emerging digital asset, regulations and oversight aren’t as established as with other investment vehicles, like stocks. 
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• Volatility - Crypto has a high growth potential, due in part to the constant changes in the market. Many investors allow emotions like excitement, fear, or greed to cloud their judgment, resulting in hasty decision-making. 
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• Irreversible transactions - When you make a crypto transaction, it is recorded on the blockchain and essentially carved into stone. There are no take-backs; and while you might have the public key of the wallet you transferred funds to, that doesn’t mean you’ll have any other means of contacting them.
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If you suspect your being scammed, or have experienced being scammed, don’t feel shame. Scammers use all means of advanced technology and psychological manipulation to deceive their victims. It can truly happen to anyone - from individual investors to massive corporations. The best protection against fraud is knowledge and awareness. Let’s dive into 2024’s most common scams, and make sure to share this with your crypto circle so they can also stay educated and safe. 

Phishing Scams
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Phishing scams aim to grab your personal details, such as your full name, account passwords, or your digital wallet’s private key. Phishing attacks come disguised - like the Trojan horse. You may receive an email text message pretending to be an authority or a platform you use. They’ll then direct you to follow the link they provide, leading you to a very official (normal) looking site - the same one you may use every day, and enter your information. These communications may ask you to reset your passwords, or to verify your identity; but once the scammers have your information, they’ll lock you out of your accounts and take your funds.

Pump-and-Dump Schemes
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Pump-and-dumps manipulate cryptocurrency prices by generating false hype around the project, getting people to invest in new crypto and increase its value. The project creators will spread deceptive, or wildly exaggerated, information, such as claiming that the crypto is sure to generate massive profits. Once prices have significantly increased, the scammers will sell off their portions and run, tanking the price and leaving other investors with huge losses.

Sometimes, even celebrities get caught up in the scam. In 2017, DJ Khaled and professional boxer Floyd Mayweather promoted Centra Tech’s ICO, only for the project to crumble when the developers were charged with fraud. Unfortunately, it was too late; many people had followed the advice of their favorite celebrities to invest and were left with major losses.

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Rug Pulls

A cryptocurrency usually starts out as a token. Once enough seed money is raised for the developer team to continue building, that token becomes an entire blockchain platform. At that point, it’s a fully functioning cryptocurrency coin. However, during this stage, developers raise seed money, and scammers will take advantage. They create a promising token with lofty goals, selling it to investors and driving its price up. Once they have enough money, the scammers will disappear instead of following through, leaving investors with a defunct token. 

Giveaway (and Imposter) Scams

Scammers love to prey on emotions, including positive ones. Giveaways are a great way to lower investors’ defenses, with the opportunity for winning free crypto overriding caution. Often, the scammer poses as someone famous and/or trustworthy, like a crypto expert, influencer, or popular celebrity, to attract more attention. The impostors may even craft entire fake websites, social media profiles, and email campaigns just to draw you in. 

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Beware of giveaways that specify a huge amount of crypto, like ‘10,000 Bitcoin’ or ‘5,000 ETH’ paired with an extremely limited-time offer - such as just one day or one week. They may also claim that once you enter the giveaway by transferring their crypto, they will multiply what you’ve sent and send it back to you. This tactic is to pressure you into making a fast decision, leaping into the giveaway without researching it thoroughly first. Another indicator is a lack of reputable press and other legitimate sources covering the giveaway.

Emotional Manipulation Scams

These scams can include blackmail, posing as a loved one, or hurtful threats. The scammer may use a phishing tactic to install software on your device that monitors your online activity or even accesses your personal files, then blackmail you with the information; threatening to release your sensitive information to the public unless you send them crypto.

Keep in mind; that they may also just lie about having this information. Another manipulative scam is to build a romantic connection with you, and then use your emotions to plead for crypto funds. The scammer may even claim they’re experiencing an emergency, such as a terrible hospital bill, to pressure you into urgently sending them funds. 

How to Stay Safe
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Let’s summarize the red flags to look out for:

• Pressure to take action: Scammers use emotional pressure and time limitations to force investors into acting without logically thinking through and researching their options. 
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• Too good to be true: Anytime you’re promised lofty results, including guarantees of profit, it’s a warning sign. Even if beloved celebrities are making these claims; never fully believe them until you’ve done your own research and verified the information. 
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• Ambiguity: All crypto tokens, giveaways, and other projects should provide detailed information regarding their plans, processes, team members, and regulatory compliance.
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• Unanticipated requests: If you receive surprise messages or emails from someone you don’t know (or from popular influencers) stay cautious. Why are they contacting you directly, and what are they asking for?
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Always stay informed on the latest trends in crypto scams by following reputable news sources, such as this blog, and online resources like the official Crypto Scam Tracker. If you want to report a potential scam, look up your country’s relevant regulatory agency or local police station. In the USA, you can report scams to the Consumer Protection Bureau. Crypto exchange platforms and apps also usually have their own reporting system for users.