Bitcoin Scams: Types, Prevention, and Protection

Bitcoin scams are a growing concern, with many people falling victim to these types of scams every year. According to our research, phishing scams are the most common type of Bitcoin scam, accounting for over 50% of all reported cases.

Phishing scams often involve emails or messages that appear to be from a legitimate source, but are actually designed to trick victims into revealing their login credentials or other sensitive information. These scams can be very convincing, with scammers using tactics such as spoofing and social engineering to gain trust.

To protect yourself from phishing scams, it's essential to be cautious when receiving unsolicited emails or messages. Always verify the sender's identity and be wary of links or attachments that seem suspicious.

Common tactics used by scammers include creating fake websites or social media profiles that mimic those of legitimate companies, in order to trick victims into sending them money or revealing sensitive information.

Bitcoin scams are on the rise, and it's essential to be aware of the warning signs. Scammers often create fake websites that mimic legitimate exchanges, so be cautious of unfamiliar URLs.

Fake exchanges can be incredibly convincing, with some even using the names of well-known exchanges. Be wary of any website that asks for personal or financial information.

Scammers also use social media to spread false information about Bitcoin. They might claim that a certain investment opportunity is guaranteed to make you rich. Never invest in anything that seems too good to be true.

In 2022, a phishing scam targeted over 100,000 people, resulting in losses of over $1 million. Be cautious of emails or messages that ask you to click on a link or download an attachment.

Scammers often use fake job postings to get people to invest in Bitcoin. They might promise unusually high returns or guaranteed success. These promises are almost always false.

It's crucial to do your research before investing in Bitcoin or any other cryptocurrency. Check the website's security and make sure it's a legitimate exchange.

To get started with Bitcoin, you'll need to create a Bitcoin wallet, which can be done through a reputable exchange like Coinbase or through a mobile wallet app like Blockchain.

A Bitcoin wallet is essentially a digital storage system for your Bitcoin, and it's essential to keep it secure to avoid losing your funds.

There are several types of Bitcoin wallets, including software wallets, hardware wallets, and paper wallets, each with its own advantages and disadvantages.

To store your Bitcoin safely, it's recommended to use a hardware wallet, such as a Ledger or Trezor, which provides an additional layer of security through a physical device.

It's also crucial to keep your wallet software up to date, as older versions may have security vulnerabilities that can be exploited by scammers.

To get Bitcoin, you can buy it from a reputable exchange, such as Coinbase or Binance, using your credit card or bank transfer.

You can also purchase Bitcoin from a peer-to-peer marketplace, where you can buy directly from another person.

First, you'll need to create an account on the exchange or marketplace, which typically requires providing some personal and financial information.

This process is often faster and more straightforward than buying from a physical location, but be sure to follow the exchange's guidelines for verification and security.

Once you've set up your account, you can deposit funds and use them to buy Bitcoin.

Make sure to choose a reputable exchange or marketplace to ensure your safety and security.

You can store your Bitcoin in a digital wallet, which can be online, on your computer, or on an external hard drive.

A digital wallet has a wallet address, which is usually a long string of numbers and letters.

If you store your Bitcoin online, you need to be aware that if the online exchange platform goes out of business, you might lose access to your funds.

A digital wallet address is typically a hash of a public key, and a private key is akin to a password.

You should keep your private key safe, just like you would a password, to prevent your Bitcoin from being stolen or compromised.

If you lose the password to your digital wallet or your digital wallet is stolen, you're likely to find that no one can step in to help you recover your funds.

Bitcoin ATMs have become increasingly popular, but they're also a hotbed for scammers. Fraud losses at BTMs are soaring, with $65 million in losses reported in the first half of 2024 alone.

Scammers are impersonating large companies like Apple or banks, claiming suspicious activity or unauthorized charges on an account. They'll say your money or identification is at risk and you need to act quickly to protect it.

Some scammers claim BTMs are "safety lockers" and trick people into depositing cash into the machine. They'll text a QR code to scan at the machine, which sends the money to the scammer's wallet.

Be cautious when using BTMs, as not all losses are reported. The actual number of losses may be much higher than $65 million.

Paying with Bitcoin can be a unique experience, especially when compared to traditional payment methods. Cryptocurrency payments, including Bitcoin, do not come with legal protections like credit cards or debit cards do.

This means that if something goes wrong with a purchase, you may not be able to get your money back easily. To minimize risks, research the seller's reputation before making a payment.

Some information about your transactions may be public, recorded on a public ledger called a "blockchain". This includes details like the transaction amount and the sender's and recipient's wallet addresses, which can sometimes be used to identify the people involved in a transaction.

People use Bitcoin for quick payments, which is a major advantage over traditional payment methods.

Others use Bitcoin to avoid transaction fees that banks charge, which can save them a significant amount of money.

Some individuals hold Bitcoin as an investment, hoping the value will go up over time.

Paying with Bitcoin is different from other payment methods in some key ways.

Cryptocurrency payments, including Bitcoin, do not come with the same legal protections as credit cards or debit cards. If something goes wrong, you may not have a clear process to get your money back.

Before you buy something with Bitcoin, know the seller's reputation. Research the seller's history and reviews to ensure a smooth transaction.

Some information about your transactions will likely be public. Bitcoin transactions are recorded on a public ledger called a "blockchain." This means that the transaction amount, sender's wallet address, and recipient's wallet address may be visible to anyone.

Here are some key differences between paying with Bitcoin and other payment methods:

Once you pay with Bitcoin, you can usually only get your money back if the person you paid sends it back. Be cautious and only do business with reputable sellers.

To avoid falling victim to bitcoin scams, it's essential to be cautious when dealing with financial matters online. Never click on suspicious links or dial phone numbers that promise easy money or cryptocurrency transactions.

Be wary of requests to give out your private cryptocurrency keys, as no legitimate business needs them to facilitate a transaction. Those keys control your wallet access, and sharing them can put your funds at risk.

Legitimate businesses won't contact you via social networks or text messages, so be skeptical of unsolicited communications. Conduct thorough research on any project or investment opportunity to learn about the team behind it.

Scammers often promise "free" money or cryptocurrency, but nothing is truly free, especially when it comes to financial transactions. Be cautious of offers that seem too good to be true.

Some common red flags include:

By being aware of these potential scams and taking steps to protect yourself, you can reduce the risk of falling victim to a bitcoin scam.

If you suspect a cryptocurrency scam, it's essential to report it to the right authorities. You can report fraud and suspicious activity involving cryptocurrency to the Secret Service, which has observed a significant increase in cryptocurrency and digital asset investment scams.

To protect yourself from scams, be aware of common red flags, such as promises of large gains or double the investment, only accepting cryptocurrency as payment, and contractual obligations. These tactics are often used to manipulate victims into investing in fake schemes.

Here are some additional warning signs to watch out for:

To keep your digital wallets safe, practice good digital security habits, such as using strong passwords, secured connections or VPNs, and choosing safe storage. Consider using hardware wallets, which store information offline within a device, to protect your cryptocurrency from hackers.

Reporting cryptocurrency scams can be a straightforward process. Report fraud and other suspicious activity involving cryptocurrency to the Secret Service.

The Secret Service has observed a significant increase in cryptocurrency and digital asset investment scams, often targeting victims who use social media, online dating, or professional networking platforms.

Your responses are voluntary when reporting cryptocurrency scams. Based on the information provided, you may be contacted by the Secret Service or other law enforcement entity and asked to provide additional information.

The Secret Service cannot act as your attorney or provide you with legal advice. However, you may seek the advice of an attorney with respect to this or other related legal matters.

To report cryptocurrency scams, you can provide information about the suspicious activity. This may include details about the scam, such as how you were targeted and any losses you've incurred.

The Secret Service is responsible for detecting, investigating, and arresting individuals who violate laws related to financial systems, including those involving digital assets.

Protecting your cryptocurrency from scammers requires being aware of common red flags. Avoid investments that promise large gains or double your investment.

Be cautious of scammers who only accept cryptocurrency as payment, as this can be a sign of a scam. Never give in to contractual obligations, as these can be binding and difficult to escape.

Keep an eye out for misspellings and grammatical errors in emails, social media posts, or any other communication from potential scammers. These can be a sign of a phishing scam.

Some scammers use manipulation tactics, such as extortion or blackmail, to get what they want. Be wary of promises of free money, as these are often too good to be true.

Fake influencers or celebrity endorsements can be used to make a scam seem more legitimate. Be cautious of minimal details about money movement and the investment, as this can be a sign of a scam.

There are two types of wallets: digital and hardware. Digital wallets are hosted online and have a higher rate of getting hacked, so be sure to choose a secure one.

To protect your digital wallet from scammers, practice good digital security habits such as using strong passwords and choosing safe storage. Never give wallet keys or access codes to anyone.

Bitcoin scams fall into two main categories. The first type aims to obtain access to your digital wallet or authentication credentials, which can include physical hardware like a computer or smartphone.

Scammers may try to get your private keys or security codes to access your digital wallet. This can happen through impersonation, fraudulent investment or business opportunities, or other malicious means.

Some common methods used by scammers include phishing, where they send an email with links that lead you to a website asking for your private keys, and social media cryptocurrency giveaway scams, which promise bitcoin giveaways but ask for verification and often include malicious links.

Here are some common types of Bitcoin scams:

Social engineering fraud is a type of scam where scammers use psychological manipulation to gain control of vital information relating to user accounts. They condition people to think they are dealing with a trusted entity, such as a government agency, a well-known business, tech support, a community member, a work colleague, or a friend.

These scammers will take as much time as necessary to gain the trust of a potential victim, and then eventually ask the individual to reveal private keys or send money to their digital wallet. The victim may even be convinced to buy or give money in some form of cryptocurrency, only to have the scammer disappear with the funds.

In fact, romance scams, which involve relationships online, have cost consumers $1.179 billion in 2023, according to the FTC. These scams often involve convincing the victim to buy or give money in some form of cryptocurrency.

Scammers may use dating websites to make unsuspecting individuals believe they are in a real relationship, and then shift the conversation to supposedly lucrative cryptocurrency opportunities. The FBI found that in 2022, over $735.8 million was lost in romance scams, and in 2023, more than $652.5 million was stolen.

To avoid falling victim to social engineering fraud, be wary of any communications sent your way and conduct research on every project to learn about the team behind it. If someone is attempting to scam you, it is likely they have tried it with others. Search for the cryptocurrency using the word "scam" and see what you find.

Blackmail and extortion schemes are a type of social engineering method scammers use to trick victims into sharing their private keys or cryptocurrency.

Scammers claim to have a record of adult websites or other illicit web pages that the user frequents, and threaten to expose them unless they comply.

This is a criminal extortion attempt and should be reported to a law enforcement agency.

Blackmailers often use this tactic to exploit their victims' fears of being exposed, and it's essential to remain calm and not give in to their demands.

By reporting these cases to the authorities, you can help prevent others from falling victim to these scams.

ICOs and NFTs can be breeding grounds for scammers.

Some scammers create fake websites for ICOs and instruct users to deposit cryptocurrency into a compromised digital wallet.

Rug pull scams involve investment scammers "pumping up" a new project, non-fungible token (NFT) or coin to get funding.

After the scammers get the money, they disappear with it, leaving investors with a valueless investment.

A common type of rug pull scam is a fake initial coin offering (ICO), where scammers promote a non-existent project or coin.

The Squid coin scam, for example, made about $3 million from investors who had to play to earn cryptocurrency.

The price of the Squid token went from being worth 1 cent to about $90 per token, only to eventually reach zero as people attempted but failed to sell their tokens.

Rug pull scams are also common for NFTs, which are one-of-a-kind digital assets.

Rug pulls are a type of scam where project members raise capital or crypto to fund a project, then suddenly remove all the liquidity and disappear.

A rug pull can occur with any type of project, including non-fungible tokens (NFTs).

Investors can lose all they have contributed in a rug pull scam.

Rug pull scams often involve fake initial coin offerings (ICOs), where scammers promote a non-existent project or coin.

The Squid coin scam is a well-known example of a rug pull scam, where investors were promised the chance to earn cryptocurrency by playing online games.

The price of the Squid token skyrocketed from 1 cent to $90 per token, but eventually, the money disappeared and the token value reached zero.

Rug pull scams can be devastating for investors, with some losing millions of dollars.

The scammers behind rug pull scams often abandon the project and become unreachable, leaving investors with nothing.

AI scams are a growing concern in the cryptocurrency market. Attackers can use AI chatbots to provide fake investment advice and promote pump-and-dump schemes to artificially inflate token value.

These chatbots are programmed to lure investors into high-yield investment opportunities that never pan out. By providing false information, attackers can dupe investors out of their money.

Attackers can also manipulate proof of work to make a cryptocurrency project seem more legitimate than it is. This can make it difficult for investors to research if a token is authentic.

Deepfakes are another tool used by attackers to scam investors. By using AI to create realistic fake videos, attackers can make it seem like a high-profile celebrity or business professional is endorsing a cryptocurrency project.

The promise of a high rate of return in a short time is a common red flag in these deepfakes. Be cautious of any investment opportunity that seems too good to be true.

Legitimate cryptocurrencies have readily available disclosures with detailed information about the blockchain and associated tokens.

Be wary of any communications sent your way from unknown sources, as legitimate businesses will not correspond with you via social networks or text messages. They also won't ask you for your private keys to help you with an action.

If someone is attempting to scam you, it is likely they have tried it with others, so search for the cryptocurrency using the word "scam" and see what you find. Visit official consumer protection sites like the FTC, FBI, and SEC to verify the legitimacy of a project.

Here are some questions to ask yourself:

If you answer 'yes' to any of these questions, be extremely cautious. Remember, if an investment opportunity sounds too good to be true, then it probably is.

Spotting a scam can be as easy as looking for red flags. Legitimate businesses won't correspond with you via social networks or text messages.

To spot a crypto scammer, conduct research on every project to learn about the team behind it. If someone is attempting to scam you, it's likely they have tried it with others. Search for the cryptocurrency using the word "scam" and see what you find.

Legitimate blockchains and cryptocurrency projects tend to have humble beginnings and don't have the money to advertise and market themselves. They won't post on social media pumping themselves up as the next best crypto.

Here are some warning signs to watch out for:

If an investment opportunity sounds too good to be true, then it probably is. Firms offering crypto products in the UK must be registered with the Financial Conduct Authority (FCA) or have permission to promote them.

Most fake crypto platforms only exist for a short period, so be cautious of websites that seem to come and go quickly.

Man-in-the-Middle Attacks can be a sneaky way for scammers to steal your private information. A scammer can intercept any information sent over a public network, including passwords, cryptocurrency wallet keys and account information.

Logging in to a cryptocurrency account in a public location can leave you vulnerable to these attacks. Scammers can gather sensitive information by intercepting Wi-Fi signals on trusted networks if they are in proximity.

Using a virtual private network (VPN) is the best way to avoid these attacks. A VPN encrypts all the data being transmitted, so thieves cannot access personal information and steal cryptocurrency.