F-Secure Article - How to identify and avoid crypto scams

[jasonX]

Crypto scams are fraudulent schemes that aim to steal crypto­currency or personal information. These scams are on the rise, as digital currencies gain popularity. Crypto scams often involve fraudulent schemes that trick investors into sending crypto­currency to fake platforms or impersonators.

Cryptocurrency scams come in many forms, each designed to trick you to part with your crypto assets. By recognizing common crypto scams, you can avoid significant financial and emotional distress. Below are some of the most common crypto scam types.

Phishing scams

Phishing scams are a classic trick that can target your crypto wallet and email accounts to make you give sensitive information, like private keys, to scammers. Imagine receiving an email that looks exactly like it’s from your crypto­currency exchange, telling you to click a link and enter your crypto­currency account credentials. Once you do, the scammers have the keys to your wallet. They can then empty the wallet of crypto­currency.

Rule of thumb: never enter secure information through email links. If some­thing seems off, always go directly to the web­site by typing the URL into your browser. Better safe than sorry.

Rug pull scams

Rug pull scams work by hyping up a new crypto project, attracting investors, and then vanishing — leaving every­one with worthless tokens. These scams often involve fake initial coin offerings (ICOs) and flashy promises that seem too good to pass up. But if some­thing sounds too good to be true, it probably is. Always do your research before investing, and be wary of projects that rely more on hype than substance.

Impersonation scams

Impersonation scams trick people with scammers pretending to be legitimate organizations or famous figures, creating a false sense of urgency. They might pose as job recruiters or well-known personalities on social media, asking for crypto­currency to “verify your account” or settle a fake debt.

One of the most common tactics is the fake celebrity give­away — claiming that if you send them some crypto, they’ll send back even more. Spoiler: they won’t. These scams can be surprisingly convincing and often lead to major financial losses, so always double-check before sending crypto to anyone.

“As cryptocurrencies gain popularity, they often attract endorsements from influencers. Unfortunately, some of these promotions are linked to deceptive schemes, where trusting followers end up bearing significant losses,” says Sarogini Muniyandi, Senior Manager of Scam Protection Engineering at F‑Secure.


Emerging trends in crypto scams

With AI making scams more sophisticated and realistic, even cautious investors can get caught off guard. Some scams now involve money laundering, tricking victims into unknowingly facilitating illegal trans­actions. Emerging threats like romance baiting — long-term scams that build trust before draining victims’ funds — and fake initial coin offerings (ICOs) are designed to outsmart even the most skeptical investors. Staying informed is your best defense.

Romance baiting scams

Romance baiting scams are long-term cons where scammers build trust with victims, showing fake investment gains to lure them into bigger and bigger investments — only to disappear with every­thing. These scams rely on psychological manipulation and can be devastatingly effective. “Romance baiting“ scam is the new term of the perhaps more familiar, widely used but stigmatizing term “pig butchering”. The original term comes from the way scammers “fatten up” their victims with false profits before the final “slaughter,” taking their investments completely.

Fake initial coin offerings (ICOs)

Fake ICOs are an emerging scam trend where scammers create convincing web­sites and marketing materials to attract investments in fake tokens and non-existent crypto­currency projects. Promising high returns, they vanish once they’ve collected enough funds, often leaving investors with worthless tokens.

Always do thorough research before investing in an ICO, and be extra cautious with new projects that don’t provide detailed, trans­parent information.

How to spot crypto scams
 

• Spotting a crypto scam can save you from big losses. Always watch out for red flags like:
  
  
• Low quality white papers
  
  
• Lack of transparency about team members
  
  
• Overhyped marketing
  

Trust your gut: if some­thing appears too good to be true, it usually is. Engaging with the crypto community can also help you stay informed about potential scams and protect your investments.

Evaluate white papers

White papers are crucial for assessing a crypto­currency project’s legitimacy. A good white paper explains the project’s protocols and functionality in detail. Fraudulent ICOs often have poorly written white papers with fabricated details to mislead investors.

Research team members

Researching the team behind a crypto­currency project also gives you valuable information. Credible projects provide verifiable information about team members. Trans­parency is key; lack of information is a red flag and should alert you.

Analyze marketing strategies

Legitimate projects focus on solving real problems rather than relying on celebrity endorsements. Be wary of hype-driven approaches and celebrity endorsements without substance.

How to prevent crypto scams
 

• Preventive measures can protect you from crypto­currency scams:
  
  
• Secure your digital wallet
  
  
• Avoid unsolicited offers and
  
  
• Research thoroughly to protect your investments
  

Securing your accounts is crucial as cyber criminals use various methods to steal crypto­currency.

Secure your digital assets wallet

Your digital wallet is the doorway to your crypto­currency account, so its security is paramount for your crypto account.
 

• Use strong and unique passwords
  
  
• Consider biometric authentication
  
  
• Avoid public Wi-Fi and ensure you have a secure connection
  
  
• Add 2-step verification if possible
  
  
• Always verify URL & email sources
  

There are different types of wallets, including digital and hard­ware wallets which offer different levels of security. Do your research and choose the type that suits you best and keep your crypto assets safe.

Avoid unsolicited offers

Unsolicited investment offers — those you didn’t ask for — are often red flags that some­thing is too good to be true. Legitimate investments don’t typically come through random emails, messages, or phone calls. Scammers use these offers to lure in unsuspecting victims, promising high returns with little risk. Engaging with such offers can quickly lead to significant financial losses.

Research thoroughly

Always do your own research — it's your best defence against fraudulent crypto investments. Identify credible sources and evaluate risks before making any investment decisions. A little diligence goes a long way in protecting your money from scams.

“For people considering crypto investments: research them thoroughly,” says Munyiandi. “Be cautious of newly created coins that rely on hype and lack substantial backing. Avoid rushing into decisions; take time to evaluate the risks of any investment opportunity.”

Reporting crypto­currency scams

Reporting crypto­currency scams helps authorities track down scammers and fight fraud and protect other investors from further fraud.

Contact relevant authorities

If you suspect a crypto­currency scam, contact relevant authorities immediately. Also we advise to report to organizations like the Internet Crime Complaint Center and the Commodity Futures Trading Commission to support their investigations and prevent further fraud.

Inform your crypto exchange

Inform your crypto exchange about suspected scams. It helps to prevent further fraud and creates an alert system for other users. Act fast to minimize the impact on your investments and increase your change to recover lost funds.

Learn from the past — case studies of crypto scams

Learning from past scams can provide valuable lessons. Romance scams, where scammers build trust through online relation­ships and then persuade victims to send crypto, are common. Two other popular examples include Hawk Tuah Girl’s pump-and-dump scheme and the Squid Coin rug pull, both resulting in significant financial losses for investors.

Hawk Tuah Girl's pump-and-dump scheme

Haliey Welch’s cryptocurrency, HAWK, skyrocketed to a market cap of $490 million before plummeting by 95% within hours. Insiders controlled 80–90% of the token supply, leading to accusations of a pump-and-dump strategy. Investors are suing the creators for unlawful promotion and sales of the crypto­currency.

The Hawk Tuah Girl scheme high­lights the dangers of investing in hyped projects without substance. Research thoroughly and be wary of projects relying heavily on celebrity endorsements.

Squid Coin rug pull

The Squid Coin rug pull is another example where a trending topic, the Netflix series Squid Game is used to scam investors. After the squid coin was hyped up, the price soared. How­ever, trading of the coin was rapidly halted, leaving investors with worthless assets. This case under­scores the importance of due diligence and skepticism when investing in new projects.


FULL Info HERE

Data and info derived from F-Secure with permission