You either create or destroy good things. As cryptocurrencies are a new and complex technology, some people would choose to wreak havoc into the system for their own benefit.  This is where fraudulent transactions come into play.

As digital asset technology evolves and new cryptocurrencies enter the market, this lends itself to difficulties for those participating in the currency markets to fully understand how the technology works – it amazes many but confuses some. This is why at these times, you need to learn how to protect yourself from cryptocurrency fraud.

Types Of Cryptocurrency Fraud and Scams

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Some people take advantage of the ignorance of others and it can be very lethal. All too often, lack of expertise and insight provide fertile ground for those looking to conduct scams and commit fraud. Practicing due diligence is paramount. Research and continuous education of cryptocurrencies and the markets will arm you with the highest protection level possible.  If you know more than enough, then it gets more difficult to lure you into any trap. Below we break down the familiar scams that gnaw around cryptocurrencies.


Malware is one of the oldest “weapons of choice” for online scam artists. The complexity of cryptocurrencies and the technology upon which they operate increases the efficacy of malware. Thieves and scammers in the crypto ecosystem write malware to attack your digital wallet, empty your accounts, spy on your clipboards to steal your cryptocurrency addresses, and swap out your exact addresses for those belonging to a scammer.

This type of malware is called ‘Cryptocurrency Clipboard Hijackers,’ and it works by monitoring Windows clipboards. Even Mac OS users are vulnerable in some circumstances when using Slack and Discord chats. In some instances, malware converts your computer into a cryptocurrency miner. This tactic hijacks your computer and your electric bill for others to mine more bitcoins.

How to Avoid This:

  • Always keep your virus software up to date.      
  • Do not download or execute any files that are coming from an unknown source
  • Be wary and avoid opening suspicious attachments.


This is considered to be one of the most popular scams when it comes to digital cash. Most of us are familiar with the term ‘phishing.’ It is hardly a new type of online fraud, but it is one that is increasingly popular among cryptocurrency scammers. This type of scheme comes to you from your crypto exchange or digital wallet provider. Thinking it’s an email from their exchange or wallet provider, investors click on the link provided, which takes them to a site that looks and feels exactly like their exchange or wallet site. However, the site is fraudulent. By entering your account and login information into this fake site, you give the scammers all the information they need to empty your accounts.

How to Avoid This:

  • Ensure that your private key is kept confidential. Never give this information to anyone.
  • Examine the URL in the link thoroughly to ensure it is the link to your exchange or wallet.
  • Never click on any suspicious link to avoid compromising your security.

Fraudulent Wallets and Exchanges

There are wallets and exchanges that look real enough to attract people. Fraudulent bitcoin exchanges operate in much the same way as phishing scams, and they look, feel, and sound authentic.  Some methods employed in fraudulent wallet and exchange scams are to scare unsuspecting customers or provide outrageous offers such as generous ‘bonuses’ to those making large deposits. These ‘exchanges’ may then charge exorbitant fees to start draining your accounts.  They also make it difficult or impossible to withdraw your funds or empty your accounts and disappear.

The fraudulent wallet is another scheme for cryptocurrency investors to pay attention to. These sophisticated methods of theft trap you by offering mobile apps for your smartphone. Once you download and install them, they access whatever information they need on your smartphone and hack your accounts. One might think they can count on app stores to safeguard consumers from these high-tech thieves, but some apps find their way into the Google Play store.

How to Avoid This:

  • Keep your business with only the trusted and reputable exchanges.
  • Don’t be pressured by anyone to deposit funds or provide personal information. You have complete control of what you do with your own money or personal data.
  • Download only the legitimate apps and exchanges for your total convenience and safety.
  • Research any wallet or exchange service before jumping in.

Identity Theft Scams

Social media platforms are a haven for celebrity impersonation frauds. Scammers set up celebrity profiles and announce giveaways or promotions where they ask people to send them small amounts of bitcoin with the promise of returning larger amounts in exchange, often promising double what you send them. This type of scam is rampant on Twitter but also pops up on live-streaming platforms.

Identity theft or Impersonation scams tend to appear very convincing as the Twitter accounts have the verified blue checkmarks. The scammers accomplish this by taking over a verified account and merely changing the name. They pad the number of retweets, likes, and other stats using bots to make the account look legitimate.

How to Avoid This:

  • Check the name and handle on the account closely to the celebrity’s real name.
  • Use the blockchain explorer to check on the address sending out this giveaway information.
  • Always assume than a celebrity account is a fraud to avoid trusting too much.


Blackmail never goes out of style. Albeit, this is one of the oldest tricks any scammer can pull off. One typical bitcoin blackmail comes in the form of an email, where the scammer claims to have hacked your computer and can now access all your files. They threaten to release incriminating or embarrassing data that you might not like to be set loose on the internet. They may even threaten to send it to everyone on your contacts list or spam your social media connections unless you send them cryptocurrency.

In this case, the blackmailers usually never possess incriminating information. They play a game by sending out as many blackmail letters as possible, knowing that some small percentage of investors will fall for the scheme and provide the ransom. Using a virtual private network (VPN) when you surf the internet will be one way to keep blackmail emails at bay.

Ponzi Schemes

Ponzi schemes are nothing new. Named after Charles Ponzi (circa 1920), early variations of this scam date back as early as the mid-nineteenth century. One of the more notable Ponzi schemes in recent memory was run by Bernie Madoff. What a Ponzi scheme does is sell to investors a promise of high returns. As they continue to sell the promise to new investors, the schemer pays out a portion of the new incoming investment funds to earlier investors who think they are legitimate returns. Believing the investment is a good one, they pour even more funds into the shame.

At some point, either it becomes too much of a challenge to entice enough new investors into the scheme to continue paying out to earlier investors, or the scammer absconds with the money. In either case, the scheme collapses. Cryptocurrencies are not immune to such schemes. Any crypto investment promising returns too high to make sense or one that asks others to recruit new investors should raise red flags for you.

Mining Scams

Cloud mining is a variant of cryptocurrency mining that enables miners to mine without using expensive hardware. Cloud mining services rent out server space at set rates to allow miners to mine their coins. While this is legitimate, scammers often promote mining opportunities with absurdly high returns and exorbitant hidden fees designed to empty your accounts.

It is worthy to note that even honest cloud mining operations fall short compared to simply purchasing cryptocurrency. Leasing any mining equipment is typically a more flawed investment than investing in coins. This is baked into bitcoin economics; no matter the price fluctuation, buying is superior to mining similar digital currency amounts.


Made famous by the movie ‘The Wolf of Wall Street’, the Pump-and-Dump scam has been around for a long time. This scam comes to life when an investor or a group of investors identifies an alternative coin with a small market cap and buys out the digital currency.  Along with false promotion, this triggers a buying spree in the market by investors not wanting to miss the next big thing. When the price—and profits—reach a favorable point, the initial pumpers dump it. This is an old trick in the traditional finance and investing industry and a highly illegal one. No such regulations exist in cryptocurrency markets yet to prevent this. It is quite common.

Fraudulent ICOs

The rise in the price of bitcoin is nothing short of meteoric over the past few years. Those who got in early have reaped the benefits of seeing prices jump to the tens of thousands of dollars.  Naturally, cryptocurrency investors are on the lookout for the next bitcoin to snap up early and see similar gains. However, knowing that investors are eager to find the next big score, scammers are just as keen to ensnare them.

One of the best ways to get in early for a particular coin is to purchase during an initial coin offering or ICO. Buying these coins and tokens during an ICO is the easiest way to get in early. Even legitimate coins often fail and are at best a very risky proposition. This is another area where doing your homework pays off.

How to Avoid This:

  • Read the white papers.
  • Determine what the currency is for.
  • Know and understand what technology is behind it.
  • Get to know the team behind it.

Ways To Keep Your Digital Cash Safe Online

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  • Use cold storage wallets.
  • Two-factor identification.
  • Only conduct business with known and reputable service providers.
  • Keep your keys private; never share them.
  • Confirm all addresses.

Arm Yourself With Crypto Knowledge

The best protection from scams and frauds would be to arm yourself with enough knowledge about the cryptocurrency ecosystem so you won’t fall prey to these scams. Ultimately, there is no magic bullet when it comes to avoiding cryptocurrency scams. As cryptocurrencies gain popularity, more scammers and scams are sure to follow. The best thing you can do for yourself is to keep reading and educating yourself about the crypto space and stay current on all the trends and scams that arise. With that mindset, you will always be in the loop of what’s happening in the digital space and in the way cryptocurrencies flow so you will detect any scam and protect your digital assets.

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