13 Common Cryptocurrency Scams and Ways to Avoid Them

  • By Ian Cheeseman
  • August 4, 2023
cryptocurrency scams

With the rapid growth and popularity of cryptocurrencies, the world of digital finance has also become a breeding ground for cunning crypto scammers seeking to exploit unsuspecting investors. 

According to the Chainalysis Crypto Crime 2022 Report, crypto-related crimes amounted to a staggering $20.6 billion in 2022, encompassing cases of ransomware, hacking, and stolen funds. While there is some relief that crypto scammers have taken $3.3 billion less in 2023 than the previous year, investors must remain vigilant to safeguard their digital currency investments.

This article covers the nine most common cryptocurrency scams that continue to pose significant threats to the crypto community in 2023. From fraudulent websites to elaborate investment schemes, these scams have the potential to cause devastating financial losses and even lead to identity theft.

By understanding the tactics employed by cryptocurrency scammers and learning how to spot and avoid these scams, you can fortify their defences and navigate the digital landscape with confidence.

Delve into the world of cryptocurrency scams and equip yourself with the knowledge to avoid fraudsters preying on the unwary. It's time to protect our assets and embrace the full potential of cryptocurrencies without falling victim to the deceitful schemes that lurk in the shadows.

While this article may make the crypto and blockchain space look threatening, if you use the proper precautions, you can safely navigate the space. 

To learn more about how to keep yourself safe when journeying through the world of crypto, check out Localcoin’s crypto fraud information page

Key Takeaways

Take a quick look at the most common crypto scams that you need to lookout for in 2023:

  1. Amazon Scams — scammers deceive users at Bitcoin ATMs by impersonating Amazon.
  2. Business-targeted Scams — frauds exploit businesses by posing as clients or partners.
  3. Cash Clearing Scams — scammers offer premiums for Bitcoins in exchange for cash.
  4. CRA Phone Call Scams — by impersonating CRA officials, scammers demand Bitcoin payment.
  5. Investment Scams — fraudsters propose fake investment schemes with high Bitcoin returns.
  6. Job Scams — the scammers demand upfront Bitcoin payments with no hiring intention.
  7. Loan & Grant Scams — false promises of loans/grants are provided.
  8. Online Marketplace Scams — tricksters promise Bitcoin payment and vanish post-goods receipt.
  9. RCMP / Police Scams — scammers impersonate law enforcement and demand Bitcoin fines.
  10. Rental Scams — fraudsters exploit students seeking rental properties for the first time.
  11. Romance Scams — scammers manipulate emotions to steal cryptocurrencies.
  12. Shipping Scams — swindlers trick victims into paying for goods or services that do not exist.
  13. Utility Scams — scammers impersonate utility providers, such as electricity providers.

Understanding the 13 Common Crypto Scams

Let's look at how cryptocurrency scams work. Following are the 13 common scams that involve cryptocurrency transactions:

1. Amazon Scams

These scams target unsuspecting users at Bitcoin ATMs by impersonating the popular online marketplace, Amazon. Scammers may promise lucrative deals or discounts on Amazon products in exchange for Bitcoin payments. However, after making the payment, victims receive nothing in return, falling victim to false promises and losing their Bitcoins.

2. Business-targeted Scams

In these scams, fraudsters target businesses using Bitcoin ATMs. They may pose as potential clients or partners, convincing businesses to transfer Bitcoins as part of a business transaction. However, once the payment is made, the scammers disappear, leaving businesses defrauded and facing financial losses.

3. Cash Clearing Scams

Scammers approach individuals at Bitcoin ATMs, claiming they have a large sum of cash that they need to convert into Bitcoins urgently. They offer to pay a premium for Bitcoins, luring victims into exchanging their digital currency. However, the cash given to the victim is often counterfeit or stolen, leaving them with worthless bills and no recourse.

4. CRA Phone Call Scams

Impersonating Canadian Revenue Agency (CRA) officials, scammers contact victims who are using Bitcoin ATMs, claiming they owe taxes or have outstanding payments. They demand immediate payment in Bitcoin to avoid legal consequences. Unsuspecting victims may fall for this trick and end up losing their Bitcoins to fraudulent callers.

5. Investment Scams

Scammers set up fake investment schemes, promising high returns on Bitcoin investments made through ATMs. They persuade users to deposit their Bitcoins into these schemes, but the promised returns never materialize. Instead, the scammers disappear with the victims' Bitcoins, leaving them with significant financial losses.

6. Job Scams

Targeting job seekers, scammers advertise fake job opportunities where they offer to pay in Bitcoins for services. However, the scammers never intend to hire anyone, and they request an upfront payment or deposit to secure the job. Once victims send their Bitcoins, they are left jobless and cheated out of their digital currency.

7. Loan & Grant Scams

Scammers target individuals seeking financial assistance by advertising fake loans or grant opportunities at Bitcoin ATMs. They ask for an upfront payment of Bitcoins as a processing fee or collateral, but no loan or grant is ever provided, leaving victims without their Bitcoins and the promised financial help.

8. Online Marketplace Scams

Scammers exploit online marketplaces where users sell or trade goods using Bitcoins. They may offer to buy products at inflated prices and ask for payment in Bitcoin. However, once the payment is made, the scammers disappear, leaving sellers with no payment and their products gone.

9. RCMP / Police Scams

Scammers impersonate law enforcement officials, including the Royal Canadian Mounted Police (RCMP), and claim that the victims' identity or financial information is compromised. They demand immediate payment in Bitcoin as a fine to resolve the issue. Victims who fall for this scam end up losing their Bitcoins without any actual legal involvement.

10. Rental Scams

In rental scams, scammers pose as landlords or property managers, advertising fake rental properties. They ask potential tenants to pay a deposit or first month's rent in Bitcoin to secure the rental. However, the property does not exist, and victims lose their Bitcoins without getting a place to live.

11. Romance Scams

In romance scams, scammers build fake online relationships with individuals, gaining their trust and affection. Eventually, they ask for financial help and request payment in Bitcoin, citing various reasons such as emergencies or travel expenses. Victims may send their Bitcoins, but the promised relationship is nothing more than a ruse.

12. Shipping Scams

In shipping scams, scammers pretend to be buyers at online marketplaces and use Bitcoin to pay for products. After receiving the goods, they reverse the Bitcoin transaction, leaving sellers without payment and their products stolen.

13. Utility Scams

Scammers target individuals and businesses in utilities scams, impersonating utility companies and threatening service disconnection. They demand immediate payment in Bitcoin to avoid disruption. Victims who comply with the demand lose their Bitcoins and may still face service disconnection.

How to Avoid Cryptocurrency Scams

Guidelines Description
Use a Secure Wallet Using a secure non-custodial wallet is essential for safeguarding your cryptocurrencies. Hardware wallets, such as Ledger or Trezor, offer an offline and secure storage solution for your digital assets. They provide an extra layer of protection by keeping your private keys offline, away from potential online threats. Software wallets with strong security features are also available for use on computers and mobile devices. Choosing a reputable and well-reviewed crypto wallet is crucial to ensure the safety of your crypto holdings.
Avoid Unsolicited Communications Scammers often initiate contact through unsolicited emails, messages, or social media posts, promising investment opportunities, airdrops, or giveaways. It is crucial to exercise extreme caution and avoid responding to such communications. Legitimate businesses and projects typically do not reach out to individuals with unsolicited offers. If you encounter such messages, it is best to ignore or report them to avoid falling victim to potential scams.
Use Websites with HTTPS Encryption When interacting with cryptocurrency-related websites, always ensure they have HTTPS encryption. The HTTPS protocol encrypts data exchanged between your browser and the website, making it more challenging for malicious actors to intercept sensitive information. A padlock symbol in the website's URL bar indicates that the connection is secure. Avoid entering personal information or making transactions on websites without HTTPS encryption, as they could be vulnerable to cyberattacks.
Verify Cold Calls Cold calls from unknown individuals claiming to represent cryptocurrency projects or financial institutions can be a sign of potential scams. Scammers may use persuasive tactics to lure victims into making hasty investment decisions or disclosing sensitive information. Always verify the legitimacy of any caller before providing any personal details or engaging in financial transactions. It is advisable to independently look up the official contact information of the company or project they claim to represent.
Conduct thorough Research Before Investing Before investing in any cryptocurrency project or participating in an Initial Coin Offering (ICO), conduct extensive research. Investigate the project's whitepaper, team members, technology, community support, and online reputation. Consider the project's goals, use case, and potential for adoption. Take your time to fully understand the risks and rewards associated with the investment. Avoid making impulsive decisions, as haste can lead to falling victim to fraudulent schemes. Patience and due diligence are essential when navigating the cryptocurrency market.

How to Spot a Crypto Scam

Scam Indicators Description
Too-Good-to-be-True Offers & Guaranteed Returns Scammers often entice potential victims with offers that seem too good to pass up, promising incredibly high returns on investments with minimal risk. However, in the world of cryptocurrency, such guarantees are unrealistic. Legitimate investments come with inherent risks, and any promise of guaranteed returns should be treated with extreme skepticism. Investors should conduct thorough research and exercise caution when encountering such offers.
Verify the Presence of a Whitepaper A whitepaper is a crucial document that outlines the technical details, purpose, and goals of a cryptocurrency project. It provides insight into the technology behind the coin, the problem it aims to solve, and the team's vision. A reputable cryptocurrency project will have a well-written and transparent whitepaper available for public review. Investors should thoroughly read the whitepaper and assess the project's viability before making any investment decisions.
Research Team Behind the Project Legitimate cryptocurrency projects are usually led by a team of experienced professionals with relevant expertise. Investors should research the background and credentials of the team members to ensure they are qualified and credible. Transparency about team members' identities and their roles within the project is a positive sign of legitimacy. If a project lacks clear information about its team, it may be a red flag for potential scams.
Marketing Efforts from Unknown Sources Scammers often employ aggressive marketing tactics to promote their fraudulent schemes. These marketing efforts might come from unknown or unverified sources, bombarding potential victims with unsolicited messages or emails. Legitimate cryptocurrency projects rarely engage in excessive or pushy marketing. Investors should be wary of such promotions and should verify the legitimacy of any project before engaging or investing.

How to Report Crypto Scams

Reporting crypto scams is crucial to help combat fraudulent activities and protect both yourself and the broader community. You can report crypto scams to the following organizations:

  • Commodity Futures Trading Commission (CFTC)
  • Federal Bureau of Investigation (FBI)
  • Federal Trade Commission (FTC)
  • Internet Crime Complaint Center (IC3)
  • U.S. Securities and Exchange Commission (SEC)

Additionally, Localcoin has a dedicated Support Centre that helps you navigate through the process of reporting a crypto scam.

Closing Thoughts

With the rapid growth and popularity of cryptocurrencies, the world of digital finance has also become a breeding ground for cunning scammers seeking to exploit unsuspecting investors. 

These nine most common cryptocurrency scams continue to pose significant threats to the crypto community. From fraudulent websites to elaborate investment schemes, these Bitcoin investment scams have the potential to cause devastating financial losses and even lead to identity theft. By understanding the tactics employed by scammers and learning how to spot and avoid these scams, crypto investors can fortify their defences and navigate the digital landscape with confidence.

Conduct thorough research before investing and take your time making decisions, avoiding hasty choices that could lead to financial losses. If you do encounter a crypto scam, report it to the appropriate authorities.

In this evolving landscape of cryptocurrencies, knowledge and vigilance are paramount. By staying informed and adopting best practices, you can protect your assets and embrace the full potential of cryptocurrencies without falling victim to scams.

For those looking for cryptocurrency purchase investment guidance and make transactions using crypto, Localcoin provides a non-custodial option that ensures you keep complete control of your asset. Use the over 900 Localcoin Bitcoin ATMs across the country to buy and sell Bitcoin, Ethereum, Dogecoin, and Litecoin and join the crypto space today! 

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