How to Avoid Cryptocurrency Scams and Protect Yourself in 2025

Cryptocurrency has gained popularity due to its decentralized nature and potential for high returns. However, this popularity has also attracted numerous scammers and fraudulent schemes. Understanding how to avoid cryptocurrency scams and protect yourself is crucial for all users.

In this article we will cover common types of fraud, how to avoid them, and provide practical tips to safeguard your assets.

Research on Common Types of Fraud

Cryptocurrencies attract scammers due to their anonymity, irreversible transactions, and lack of central regulation. Below are the most common scam schemes that users encounter, along with a detailed explanation of how they operate.

Ponzi Scheme

How It Works The Ponzi scheme is named after Charles Ponzi, who, in the 1920s, deceived investors by promising profits from arbitraging postal coupons. In the crypto space, scammers attract investors by promising high returns from “unique” trading strategies, mining, or other supposedly profitable operations. Instead of generating real profits, new investments are used to pay “returns” to earlier investors, creating the illusion of success. When the influx of new funds slows down, the scheme collapses, and the organizers disappear with the money. In the crypto industry, this is often disguised as “referral programs” or “multi-level marketing” (MLM).

Example: BitClub Network (2014–2019) promised profits from Bitcoin mining but actually used new investments to pay returns, stealing over $722 million, according to an IRS investigation.

Signs: Unrealistic promises of stable profits (e.g., “1% per day”), lack of transparency in operations, inability to withdraw funds without new investments, fake profitability reports. The main income depends on the number of people recruited, with no real product or service, focusing on “team building.”

Pump and Dump

How it works: Organizers (often Telegram or Discord groups) artificially “pump” the price of a little-known cryptocurrency (usually with low liquidity) by spreading false rumors, fake news, or calls to buy. As the price skyrockets due to mass purchases, they “dump” their holdings at the peak, leaving others with a devalued coin.

Example: In 2018, the SEC fined the organizers of a scheme involving the Centra (CTR) token, where fake claims of a Visa partnership were used to inflate the price.

Signs: Sudden price spikes without fundamental reasons, aggressive social media promotions, urgent calls to “buy now,” followed by a price crash.

Giveaway Scams

How it works: Scammers announce a “giveaway” or “crypto doubling,” often impersonating famous figures (e.g., Elon Musk or Vitalik Buterin). The condition is to send a certain amount to a specified wallet to “receive more” in return. Once the victim sends the funds, they receive nothing, and the scammers disappear.

Example: In 2020, hackers breached Twitter accounts of celebrities, including Bill Gates, and collected $120,000 in Bitcoin through a fake giveaway.

Signs: Promises of doubling funds, urgency (“send now”), use of fake accounts or websites mimicking official sources.

Rug Pull

How it works: This type of scam is primarily associated with DeFi (decentralized finance). Developers create a new token or project, attract investors through liquidity pools or presales, and then suddenly withdraw all funds (e.g., removing liquidity from a DEX, like Uniswap) and disappear, leaving the token worthless.

Example: The Squid Game Token project (2021), inspired by the Netflix series, raised $3.38 million before developers withdrew the funds, causing the token price to drop to zero.

Signs: No liquidity lock, anonymous team, sudden project growth without a verifiable history, suspiciously high staking’а or farming returns.

Fake Trading Platforms

How it works: Scammers create fake exchanges or apps that look like legitimate ones (e.g., mimicking the design of Binance or Coinbase). Users deposit funds, see a fake increase in their balance, but cannot withdraw money as the platform either disappears or blocks access.

Example: In 2021, the fake Turkish exchange Thodex stole $2 billion from 400,000 users before its founder fled.

Signs: Lack of licenses, suspiciously low fees, design errors on the website or misleading URLs (e.g., binance.co instead of binance.com).

Phishing Attacks

How it works: Scammers send emails, direct messages in messengers (such as Telegram channels), or create fake websites that mimic legitimate services (wallets, exchanges). The goal is to steal private keys, passwords, or seed phrases. For example, a fake site may ask for your key to “restore your wallet.”

Example: In 2022, a phishing attack targeted MetaMask users, stealing millions of dollars through fake emails about a “password reset.”

Signs: Suspicious links (e.g., metomask.io instead of metamask.io), urgent data requests, spelling errors in messages.

Crypto Romance Scams

How it works: Scammers connect with victims through dating apps or social media, build trust, and then persuade them to invest in “profitable” crypto projects or send money directly. Once they receive the funds, they disappear.

Example: According to the FTC, Americans lost $139 million to crypto-related romance scams in 2022.

Signs: Rapidly developing “relationships,” requests for money, avoidance of in-person meetings, and links to unknown platforms.

Crypto Blackmail

How it works: Scammers claim to have compromising information about the victim (e.g., webcam recordings or browsing history) and demand a cryptocurrency ransom, threatening to expose the data. In most cases, this is a bluff, but fear makes some victims pay.

Example: Common scam emails with subject lines like “I know your secret” demand Bitcoin payments to anonymous wallets.

Signs: Threats without evidence, urgent payment deadlines, and the use of publicly available information to create an illusion of credibility.

Fake ICOs (Initial Coin Offerings)

How it works: Scammers launch a fake project, promising a new cryptocurrency with “huge potential.” They create a polished website, publish a fake whitepaper, and raise funds through an ICO before disappearing with investors’ money.

Example: The 2017 ICO of PlexCoin raised $15 million but turned out to be a scam; its organizers were arrested by the SEC.

Signs: No real development team, vague project goals, aggressive marketing with promises of quick riches.

Hacker Attacks

How it works: Cybercriminals use malware (such as keyloggers or trojans) and exploit vulnerabilities in wallets or exchanges to gain access to your funds. This can involve stealing private keys from infected devices or intercepting data over unsecured networks.

Example: In 2023, hackers exploited a vulnerability in Atomic Wallet, stealing over $100 million from users.

Signs: Suspicious downloads, slow device performance, unexpected requests for data access.

Dust Attack

How it works: Scammers send very small amounts of cryptocurrency (known as “dust,” e.g., 0.000005 BTC) to your wallet. The goal isn’t to steal these tiny amounts but to track your transactions and de-anonymize you. When you spend these “dust” coins along with your other funds, scammers analyze the blockchain to link your address to a real identity or other wallets. This information can then be used for phishing, extortion, or direct attacks on your assets.

Example: In 2018, Bitcoin users were targeted with dust attacks, where hackers sent “dust” to thousands of addresses and then linked them to exchange withdrawals. A similar attack targeted Litecoin wallets in 2020.

Signs: Unexpected small deposits in your wallet, especially if you haven’t made any related transactions; repeated tiny transfers from unknown addresses.

How Not to Fall Victim to Scammers?

Cryptocurrencies offer freedom and opportunities but also require vigilance. Scammers use sophisticated schemes, exploiting greed, fear, or lack of knowledge. Proven Ways to Protect Yourself and Your Assets:

Conduct Thorough Research (DYOR – Do Your Own Research)

What to do: Before investing in cryptocurrency, a project, or a platform, research them independently. Check the whitepaper (development plans), the development team, the project’s history, and community reviews.

Example: For fraudulent ICOs or rug pulls, look for liquidity lock information (on Team Finance or Unicrypt) and the team’s reputation. Anonymous developers are a red flag.

Tools: Use websites like CoinGecko, CoinMarketCap, or forums (Reddit, Bitcointalk) to verify legitimacy.

Verify Sources & Avoid Suspicious Links

What to do: Pay attention to website addresses and how they are written in the browser’s address bar. Always double-check URLs (e.g., binance.com vs. binance.co) and avoid clicking links from unverified emails or messages.

 Example: To protect yourself from phishing, ensure you are on the official wallet website (e.g.METAMASK, TRUST WALLET) before entering any details.

Tip: Bookmark official websites and always access them through your bookmarks.

Ignore “Too Good to Be True” Offers

What to do: Be skeptical of promises of “guaranteed profit” (e.g., “Double your Bitcoin in 24 hours”) or free giveaways. If an investment sounds too good to be true, it’s likely a scam.

Example: Giveaway scams and Ponzi schemes often lure victims with such claims. Never send cryptocurrency in response to promises of “getting more in return.”

Tip: Remember, there are no “quick money” schemes in crypto without risk.

Protect Your Private Keys and Data

What to do. Never share your private keys, mnemonic phrases, or passwords. Store them offline (e.g., on paper or in a hardware wallet).

Example: Phishing and dusting attacks aim to compromise your keys. Do not enter them on suspicious websites or spend “dust” to avoid revealing your addresses.

Tools. Use hardware wallets (Ledger, Trezor) for cold storage—this ensures your data and keys remain secure.

Enable Two-Factor Authentication (2FA)

What to do. Enable 2FA on all exchanges, wallets, and related accounts (e.g., email). Prefer authenticator apps (Google Authenticator, Authy) over SMS. This makes it harder for hackers to access your funds even if your password is leaked. Tip. Regularly review your account security settings.

Avoid Hype and FOMO

What to do. Do not invest in projects just because of social media buzz or sudden price spikes. Check fundamental indicators.

Example: Pump and dump schemes rely on mass panic buying. Wait for price stabilization before making a decision.

Tip. Stay updated with news, but filter out rumors from facts.

Test Platforms with Small Amounts

What to do. Before making large deposits, transfer a small amount and try to withdraw it to verify the platform’s reliability.

Example: Fake trading platforms and Ponzi schemes often block withdrawals. This can help detect scams in advance.

Tip. Do not transfer everything at once, even if the platform appears legitimate.

Store the Majority of Your Assets in a Cold Wallet

What to do. Keep most of your cryptocurrency in offline storage (hardware wallet or paper wallet) rather than on exchanges or hot wallets.

Tip. Store backup copies of your keys in a secure place (e.g., a safe).

Be Cautious with DeFi Projects

What to do. Check smart contracts for audits (CertiK, Hacken) and avoid projects with anonymous teams or no liquidity lock.

Example: Rug pulls often occur in DeFi. Ensure that liquidity tokens are locked for a specific period.

Tip. Use aggregators like RugDoc or DeFi Safety to assess risks.

Report Scams and Learn from Experience

What to do. If you encounter a suspicious scheme, report it to the community (e.g., on X or Reddit) and, if possible, to law enforcement agencies (FTC, local police). Tip. Read scam victims’ stories on Scam Tracker (DFPI) or forums to recognize fraud patterns.

Also read: A step-by-step guide to cryptocurrency for beginners, with examples and explanations.

FAQ

General Principles for Protecting Against Cryptocurrency Fraud

• Skepticism. Be wary of anything that demands urgency or personal data. This helps avoid rash decisions and data leaks.
• Education. Learn the basics of blockchain and crypto security (e.g., how wallets and smart contracts work). This will help you better protect your assets.
• Diversification. Do not store all assets in one place—spread them across wallets and platforms. This reduces the risk of total loss in case of a hack.
• Regular Monitoring. Check your addresses on blockchain explorers (Etherscan, BscScan) for suspicious activity. This allows you to detect and respond to potential threats in time.