Crypto Scams Glossary

The rise of cryptocurrency has attracted a wide range of crypto scams that prey on unsuspecting investors. In an environment where the potential for profit is high, so too is the risk of falling victim to fraud. Understanding the different types of scams is important for anyone looking to navigate the crypto space safely.

This article outlines a crypto scam glossary, detailing some of the most infamous scams in the industry. Familiarizing yourself with these types of crypto scams can help you better protect your investments and make informed decisions.

What is a Crypto Scam?

A crypto scam refers to any fraudulent scheme designed to deceive people into losing their money or personal information. These scams exploit the relatively unregulated nature of the crypto market to deceive investors and steal their funds. Crypto scams vary widely in their techniques and can target anyone, from novice investors to experienced traders.

In the world of cryptocurrency, scams often capitalize on the allure of high, rapid returns and the complexity of the technology. Crypto scams can be extremely damaging because cryptocurrency transactions are generally irreversible and difficult to trace, victims have little to no recourse once funds are lost. Scammers may impersonate reputable exchanges, create fake wallet apps, or deploy phishing tactics, all designed to gain access to a victim's funds or private information.

Common Types of Crypto Scams

As the cryptocurrency market expands, so does the range of scams targeting unsuspecting investors. Understanding common crypto scams is important to navigating the market safely. Learn about some of the most common types of crypto scams that you should know about in our crypto scam glossary:

1. Pump and Dump Schemes

In a pump and dump scheme, scammers artificially inflate the price of a cryptocurrency by promoting it heavily through social media and other channels. Once the price rises due to increased demand, they sell off their holdings at a profit, leading to a sharp decline in value and leaving other investors with worthless assets.

The Squid Game token scam involved a cryptocurrency inspired by the popular Netflix series. Initially, the token's price surged due to hype and coordinated buying. Once the developers sold off their holdings, however, the price collapsed, leaving investors with worthless tokens. The scammers reportedly made around $3 million before disappearing.

2. Initial Coin Offering (ICO) Scams

ICO scams exploit the excitement surrounding new cryptocurrencies by offering tokens for investment before they are officially launched. Scammers create hype around their project to attract funds but often have no intention of delivering a legitimate product.

OneCoin is one of the largest ICO scams in history, where founder, Ruja Ignatova, claimed to offer a revolutionary cryptocurrency. Investors poured billions into the project, which turned out to be a Ponzi scheme with no actual blockchain or legitimate product backing it. Ignatova vanished in 2017, leaving many investors with significant losses.

3. Phishing Scams

Phishing scams involve cybercriminals impersonating legitimate companies or services to trick users into revealing sensitive information such as private keys or login credentials. This is often done through fake emails or websites that look authentic.

In 2020, a significant phishing attack targeted users of Ledger. Following a data breach in June 2020, the email addresses and personal information of over 270,000 Ledger customers were leaked on hacking forums. Armed with this information, cybercriminals launched phishing campaigns aimed at these users.

Victims began receiving emails that appeared to be from Ledger, instructing them to install a new version of the Ledger Live software and reset their PINs. These emails contained links directing users to a fake version of the Ledger Live application designed to steal their recovery phrases and secret passphrases.

4. Giveaway Scams

Giveaway scams promise participants that if they send a certain amount of cryptocurrency to a specified address, they will receive back double or triple that amount. These scams often use fake celebrity endorsements to appear legitimate.

Scammers frequently impersonate celebrities like Elon Musk, claiming to run giveaways on social media platforms. Victims are tricked into sending funds under the false promise of receiving larger amounts in return, only to find that the scammer disappears with their money.

5. AI Deep Fake Crypto Scams

AI deep fake scams represent a new frontier in cryptocurrency fraud, leveraging advanced artificial intelligence technology to create hyper-realistic fake videos or audio recordings of legitimate individuals, such as celebrities or well-known figures in the crypto space. Scammers use these deep fakes to impersonate trusted personalities or celebrities, often claiming they are endorsing a new cryptocurrency project or investment opportunity. The sophistication of these deep fakes can make it exceedingly difficult for victims to discern the authenticity of the content, leading them to invest significant sums based on false representations.

A recent AI deep fake crypto scam occurred during the highly anticipated launch of the iPhone 16, involving Apple CEO, Tim Cook. Scammers created a convincing deep fake video that appeared to show Cook live streaming an announcement about a new cryptocurrency investment opportunity. In the video, the deep fake version of Cook urged viewers to invest in this new cryptocurrency, promising to "double their money" within a short period.

6. Rug Pulls

A rug pull occurs when developers abandon a project after attracting significant investment, taking all the funds with them. This often happens in decentralized finance (DeFi) projects or newly launched tokens.

The SafeMoon token, while not definitively labeled as a rug pull, faced scrutiny over its structure and transparency early on. Concerns about its sustainability led many to view it skeptically due to ambiguous practices regarding liquidity and tokenomics.

7. Pig Butchering Scams

Pig butchering scams involve a long-term con where scammers build trust with their victims, often through emotional manipulation or romantic relationships. The term refers to the practice of fattening a pig before slaughter, symbolizing how scammers cultivate a relationship before extracting large sums of money. Initially, the scammer engages in casual conversation, gradually steering the discussion toward investment opportunities, particularly in cryptocurrency. Once trust is established, they convince the victim to invest in fraudulent platforms, showcasing fabricated success stories and manipulated data to encourage further investments. Ultimately, the scammer disappears with the victim's funds, leaving them devastated.

8. Crypto Money Mule Scams

In a crypto money mule scam, individuals are unwittingly recruited as money mules to launder funds for criminals by transferring money on their behalf under the guise of legitimate job offers.

A common scenario involves scammers posting fake job ads for “crypto traders,” where victims are instructed to set up multiple bank accounts and transfer funds received from other victims, believing they are working for an investment firm.

9. Fraudulent Trading Platforms

Fraudulent trading platforms lure investors with promises of high returns on investments, but ultimately disappear with deposited funds once users try to withdraw their earnings.

Coobe.im, a fraudulent trading site that attracted victims through social media ads promising high returns on crypto investments, left many unable to withdraw their deposits after being told they needed to pay additional fees first.

10. Address Poisoning Scams

An address poisoning scam is a sophisticated scam that targets cryptocurrency wallet users by manipulating their transaction history. In this scheme, scammers send a small amount of cryptocurrency to the victim's wallet from an address that closely resembles their own. The goal is to "poison" the victim's transaction history with this fraudulent address, making it likely that the victim will mistakenly copy and paste the scammer's address for future transactions. Since blockchain transactions are irreversible, any funds sent to the scammer's address are permanently lost.

Enhancing Crypto Security with the Trust Wallet Security Scanner

The Trust Wallet Security Scanner is an important feature for enhancing security in cryptocurrency transactions. This built-in tool scans transaction addresses for potential risks, enabling users to make informed decisions and protect their assets effectively. Analyzing various data points, the scanner assigns a risk level to each transaction - low, medium, or high - and alerts users with warning messages when threats are detected, such as phishing attempts or unauthorized transactions.

One of the key benefits of the Trust Wallet Security Scanner is its real-time monitoring capability. It continuously evaluates transaction addresses, notifying users of any unusual behavior that could indicate a security breach. Additionally, it excels in phishing detection, identifying suspicious addresses before users engage with them. The user-friendly interface is integrated directly into the Trust Wallet app, ensuring that both novice and experienced users can easily access its protective features, without needing to activate it manually.

The Trust Wallet Security Scanner empowers users by providing them with full control over their transactions. While it offers critical alerts about potential risks, the final decision to proceed with a transaction remains with the user. Here’s an example of how the Trust Wallet Security Scanner works:

Closing Thoughts

As the cryptocurrency market continues to evolve, so too do the tactics employed by scammers seeking to exploit unsuspecting investors. This crypto scam glossary has illuminated some of the most notorious scams.

The allure of quick returns and the complexity of cryptocurrency technology can make it easy for anyone to fall victim to fraud. Staying informed and vigilant, can help you protect yourself from these deceptive practices. Always conduct thorough research before investing, verify sources, and be skeptical of offers that seem too good to be true.

Additionally, using tools like the Trust Wallet Security Scanner can enhance your security by providing real-time monitoring and alerts for potential threats. Stay safe, stay informed, and may your investments thrive in a secure environment.

Disclaimer: Content is for informational purposes and not investment advice. Web3 and crypto come with risk. Please do your own research with respect to interacting with any Web3 applications or crypto assets. View our terms of service.

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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.