Crypto Scam Types

Written by Steven Hatzakis
Edited by John Bringans
Fact-checked by Joey Shadeck

December 11, 2024

Due in part to the irreversible nature of crypto transactions, the last decade has seen an explosion of crypto scams. I’ve been writing about cryptocurrency and blockchain technology for over a decade and I’ve made several thousand crypto trades. I believe strongly in the importance of cybersecurity best practices, and I wrote this guide to help everyday traders protect themselves from financial fraud and crypto scams.

How common are crypto scams?

Cryptocurrency, often referred to as crypto, is a type of decentralized digital asset (or, currency) that is verified, recorded, and secured by cryptography. According to the FBI's IC3 division's latest annual report, "investment fraud with a reference to cryptocurrency rose from $2.57 billion in 2022 to $3.96 billion in 2023, an increase of 53%."

Clever crypto scammers can mismanage funds, commit fraud, steal money, and disappear – leaving holders of crypto with no way of recovering their money. Crypto scams might be lurking in comments on social media posts, hiding in forums and message boards, imitating high-profile investors, or masquerading as legitimate businesses.

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Types of Common Crypto Scams

In my ten years covering the crypto space, I’ve observed countless crypto scams. I’ve detailed below the common crypto scams that are the biggest threat to everyday crypto traders:

1. Fake Crypto Exchanges

A crypto exchange is a marketplace where users can buy and sell popular cryptocurrencies. A common crypto trading scam involves setting up a fake crypto exchange with the express purpose of stealing customer deposits. Some of these fake crypto exchanges will create legitimate-looking websites, create fake customer testimonials, send detailed trading reports, and produce false profit statements in an attempt to appear genuine.

However, this information is just meant to be a smokescreen; there is no trading going on within fraudulent crypto exchanges. In reality, the crypto wallet addresses that are provided for client deposits are just a means of stealing client funds.

2. Fake Crypto Wallet Providers

Crypto wallet scams lead you to believe that their purported crypto app is either a protected custodial wallet (hosted by a trusted party such as a bank or broker) or a secure non-custodial (self-hosted) wallet provided by the app. In either case, fake crypto wallets are designed to steal your money. They may even impersonate a genuine crypto wallet brand by mimicking it with a similar-sounding domain name or by using a similar design and color scheme.

3. Rug pull scams

Often taking the general shape of a pump-and-dump scheme, a rug pull is more complex than a fake crypto wallet scam or a social media impersonator. A rug pull scam occurs when the founders or developers of a crypto project (like a new crypto token or the sale of NFTs) raise money from investors, and then either sell off their own shares (or tokens) with no regard for their investors, or simply disappear with the funds.

4. Crypto mismanagement

It’s important to watch out for signs of mismanagement and lack of due diligence when dealing with any cryptocurrency projects, exchanges, wallet providers, or businesses. A crypto-based business doesn’t need to be unregulated or an outright scam to be considered risky. Businesses can still be mismanaged, founders can be negligent (or corrupt), and investor funds can be squandered.

FTX was a large, regulated crypto exchange that operated for years with no apparent issues. In reality, FTX was mismanaging company funds and investor assets and suffered catastrophic losses from leveraged positions that caused investors to lose billions of dollars.

5. Celebrity endorsements and sponsorships

High-profile, highly expensive endorsements from celebrities, professional athletes, and public figures have become a popular way for burgeoning crypto firms to purchase mainstream interest and credibility. However, celebrity endorsements do not necessarily indicate a reliable investment opportunity.

Tom Brady and Steph Curry have both been sued by investors for their endorsements of FTX, the collapse of which resulted in multi-billion dollar losses for consumers. The SEC has also taken action against celebrities like Kim Kardashian for making unbalanced endorsements and claims about crypto projects, and SEC Chairman Gary Gensler recently advised investors to “use caution” when encountering celebrity endorsements with crypto projects.

True or false: A celebrity endorsement is a good sign that your crypto investment is reliable.

Reveal answer

False! Celebrity endorsements should never be taken as a guarantee that your investment opportunity is viable or reliable (FTX is a great example of this – before FTX crumbled, it was endorsed by the likes of Steph Curry, Tom Brady, and Shaq).

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6. Social media crypto scams

Social media has made it easier than ever for scammers to ensnare and defraud unsuspecting crypto traders. I can’t tell you how many times I’ve received messages on social media from potential scammers, claiming to offer an airdrop or promoting a “lucrative” investment for an “amazing” new crypto token.

Sadly, I am often contacted by victims of potential crypto scams who are trying to figure out where their money went, and whether they can recover it (in most cases, they cannot).

I’ve personally been dragged into the world of social media scams. My name, likeness, social handles, and even my personal photos have been stolen countless times to create fake social media accounts. These profiles are meant to imitate me in order to swindle investors and traders by claiming to offer a variety of investment opportunities, products, and services.

I’ve had some degree of success reporting these imposter accounts to various social media platforms. In many cases, however, I've been unable to get fake social media accounts removed. Twitter and Telegram will purge fake accounts relatively quickly, whereas Facebook, Instagram, and YouTube are extremely slow to take action. This is an important reminder not to make assumptions: just because an account is still up, doesn’t mean that it’s legitimate.

Do any regulators have blacklists of crypto scams?

Can you recover stolen crypto?

What can I do if I get scammed out of crypto?

Avoiding Forex & Crypto Scams

• How to Avoid Crypto Scams
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• How to Avoid Forex Trading Scams in 2024
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• What To Do if You’ve Been Scammed by a Forex Broker

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About the Editorial Team

Steven Hatzakis is the Global Director of Online Broker Research for ForexBrokers.com. Steven previously served as an Editor for Finance Magnates, where he authored over 1,000 published articles about the online finance industry. A forex industry expert and an active fintech and crypto researcher, Steven advises blockchain companies at the board level and holds a Series III license in the U.S. as a Commodity Trading Advisor (CTA).

John Bringans is the Managing Editor at ForexBrokers.com. An experienced media professional, John has a decade of editorial experience with a background that includes key leadership roles at global newsroom outlets. He holds a Bachelor’s Degree in English Literature from San Francisco State University, and conducts research on forex and the financial services industry while assisting in the production of content.

Joey Shadeck is a Content Strategist and Research Analyst for ForexBrokers.com. He holds dual degrees in Finance and Marketing from Oakland University, and has been an active trader and investor for close to ten years. An industry veteran, Joey obtains and verifies data, conducts research, and analyzes and validates our content.