Cryptocurrency Scam and Fraud: How to Protect Your Money

Author & Guarantor: Anton Yurchenko
6 min read

Cryptocurrency Scam and Fraud: How to Protect Your Money

What do cybercriminals do to deceive users and get their funds and what should be done to avoid becoming a victim of fraud? Also, is cryptocurrency a scam? Crypto-Auditor unveils all the secrets!

As the scam and fraud reason in the cryptocurrency industry, it’s possible to point to

  • The unclear legal status of digital assets
  • The anonymity of counterparties
  • Difficulties in tracking and
  • The impossibility of classifying cryptocurrency as objects of civil rights.

Most Common Crypto Currency Scam Schemes

There are several of the most common schemes and techniques used by scammers:

Pyramid with MLM Elements

For example, the One Coin project is a cryptocurrency that did not have its own blockchain, but attracted €4 billion in investments over the three years of its existence.

Gifts Distribution (aka “Giveaway”)

As part of this fraud scheme, users are offered to send cryptocurrency to a specific wallet and get twice as much back.

This is usually done on behalf of famous people, for example, the head of Tesla and SpaceX, Elon Musk, or the creator of Ethereum, Vitalik Buterin.

For this, fake accounts are created on social networks, such as Twitter, Telegram, and Facebook.

Quick Earnings Promised

The scam cryptocurrency fraudsters lure their victims with easy money, quick and/or large income without heavy labor costs.

At the same time, in order to make a profit, it is often necessary to first send money to fraudsters.

Romance Scam

It means making personal connections with the victim, followed by an offer to invest in some crypto project.

Schemes Combinations

A combination of schemes is often used, as well. For instance, a scammer met a Linkedin user, gained confidence in them, thanks to which it was possible to have earned “the fastest $50 in their life”, allegedly on cryptocurrency trading. Then the Linkedin user gave all of their savings, and ended up losing $78,000.

Crypto Scam Engagement Channels

Users regularly lose money on phishing sites. Fake Internet resources look almost exactly like the real site of a real project, but they have almost imperceptible differences.

Fake Mobile Apps

A separate scam is fake mobile apps available for download through Google Play and the App Store. They look almost like the real thing, but they may differ slightly in the logo.

Fake mobile apps have been found for crypto exchanges

  • Gemini
  • Bitwala
  • Kraken
  • Binance
  • BitcoinHK
  • Bittrex
  • BitFlyer, and
  • TDBank.


In 2021, scammers often impersonate Elon Musk. For example, a German citizen lost $560K on the “distribution of gifts” on behalf of Elon Musk. On Twitter, on behalf of the businessman, the scammers promised to double bitcoins if a person had time to transfer them to the specified account before a certain time.

Julie Bushnell, a teacher from Brighton (UK), fell into the same scheme: an announcement that Musk would double all her money was posted on the fake BBC News website.

Bushnell invested everything that she’d saved to buy a house — ₤ 9 thousand. According to the US Federal Trade Commission (FTC), over the past six months, Elon Musk’s imitators have stolen at least $ 2 million.

According to data published by the FTC, the number of cryptocurrency fraudsters has risen sharply since October 2020, reaching a record level in the first quarter of 2021: 7 thousand people were affected, the total amount of losses exceeded $ 80 million, the average was $ 3.25 thousand.


The number of applications from US citizens increased 12 times, the reported losses—by 1000%, compared to the same period a year earlier.

According to FTC statistics, people between the ages of 20 and 49 suffer the most from investment crypto scams; over the past four years, their appeals to law enforcement agencies have increased fivefold. People over 50 yo lose money less often, but the amount they lose is greater.

How Government Agencies Try to Protect Citizens

First of all, regulators fight against cryptocurrency fraud to warn people about possible dangers. For example, in January, the British regulator FCA warned that when investing in cryptocurrencies, users should be prepared to lose everything.

In July, a spokesman for the DFSA, the UAE’s regulator, urged foreigners and citizens of the country to be more careful when investing in cryptocurrencies.

How to Keep Away From Cryptocurrency Fraud

Any offer to send cryptocurrency to an unknown or suspicious organization, or to an individual, is most likely fraudulent. Likewise, with great distrust it is worth referring to messages with various “generous offers” coming to the mail, messengers and social networks.

In order not to get caught on phishing sites, you need to use only verified links. It is worth remembering that any fixed and guaranteed return is a characteristic feature of a dubious financial institution.

Fraudsters take advantage of people’s ignorance, as there are always many newcomers to the crypto market. Therefore, first of all, in order to protect yourself from fraud, you need to improve your financial literacy and understand how the blockchain industry works.

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