How To Spot And Prevent Common Bitcoin Scams | VeePN Blog (2024)

What is a Bitcoin scam?

A Bitcoin scam is a malicious or fraudulent activity aimed at compromising your private data and stealing your crypto funds. Scammers use various approaches and techniques to deceive people, access their credentials, or make them invest in fake exchanges. And while cryptocurrencies are becoming mainstream among millions worldwide, scammers use this growing popularity for their own profit.

Need proof? Here you go. In the first quarter of 2022, cryptocurrency fraud losses were nearly $330 million. For comparison, the total loss was $130 million in 2020 and $680 million in 2021. Moreover, 70% of those scams targeted Bitcoin. And there is no surprise. Statista reports that Bitcoin still dominates the world of crypto, with a market cap of over 40%.

Furthermore, among thousands of real-life Bitcoin fraud examples, some were truly massive. For instance, in 2018, the Bitconnect project closed after stealing $2.4 billion from over 4.5 thousand people using a so-called Ponzi scheme. And this is only one of the hundreds of similar cases.

Now, let’s find out how Bitcoin scams vary and which techniques malicious actors use to compromise your cybersecurity.

How do Bitcoin scams work?

There are two most common types of cryptocurrency scams:

1. A scammer attempts to trick you into revealing your personal information, such as digital wallet credentials, private keys, and security codes. This way, they can access your wallet and steal your crypto.
2. Impersonation or fake investment offers strive to persuade traders and businesses to send Bitcoin directly to scammers.

In both cases, malicious actors use common scam techniques trying to confuse, tempt, or deceive you. However, those approaches are becoming even more sophisticated when it comes to Bitcoin. The thing is that scammers use the focus on privacy and the decentralized nature of crypto to compromise traders’ wallets and steal their funds.

As a result, if you’re trading or storing Bitcoin, you may face various types of scam, from fake investments and bogus exchanges to phishing emails and non-existent giveaways. Let’s look at the most typical ones in more detail.

The most common Bitcoin scams

As mentioned above, there are multiple techniques a scammer may apply to compromise your crypto wallet keys or encourage you to store your BTC in an unreliable wallet. According to the statistics, the most widespread type of Bitcoin fraud is related to crypto investments, followed by romance scams and imposters. Here is the latest data based on fraud reports to the FTC’s Consumer Sentinel Network. It shows crypto losses due to scams in January 2021 – March 2022.

Now, let’s reveal the most common Bitcoin scams and learn how to avoid them.

1. Bitcoin phishing scams

Phishing attempts are some of the most typical crypto-related scams. Normally, these are emails sent by malicious actors to trick users and encourage them to expose confidential information. Phishing scams often impersonate popular crypto-related services, like Binance and Coinbase. Such fake alerts seem urgent and require users to click on a provided link right away. However, if doing so, you will be redirected to one of fake crypto sites, where hackers can steal your crypto wallet credentials.

The example below is an email that may look legitimate at first glance. It tells you that you’ve received a cryptocurrency payment to your Blockchain wallet. Moreover, it kindly provides a link to view the “transaction.” But if curiosity makes you want to check what’s going on, you will fall for a phishing hook.

How to avoid it?

• Do not click on any links
• Check the sender’s address
• Type the legitimate website address in your browser
• Report a potential scam to Federal Trade Commission (FTC)

2. Fake Bitcoin investment scams

The FTC report we’ve mentioned above claims fake crypto investment to be the most widespread type of scam. Usually, these are too-good-to-be-true offers that guarantee high returns for low risk if you put your money into an initial coin investment (ICO). But most likely, it’s a malicious scheme aiming to steal your Bitcoin and close the project without any returns at all.

Unfortunately, it’s quite challenging to tell a fake ICO from a real one. As a result, many investors take this risk and fall victim to massive scams. In this case, the most significant red flag to watch out for is guaranteed returns. In the world of crypto, such offers do not bode well.

In the example below, a fake cloud mining service offers crypto enthusiasts to make a BTC deposit and promises 0.16% of the hourly profit. In fact, this is an illegal business using a Ponzi scheme to trick users.

How to avoid it?

• Do not trust unverified ICOs
• Stay away from too-good-to-be-true offers
• Don’t buy into promises of high returns
• Check crypto-related services before investing your funds

3. Romance crypto scams

Did you know that on dating websites like Tinder, you may meet not only the love of your life, but also a dangerous crypto scammer? Yes, that’s true, romance fraud is the second most common cryptocurrency-related malicious technique. And here’s how it works.

Imagine you’ve met someone on a dating site. After several weeks of active communication, your new friend offers you to make a crypto investment and make good money. Oh, you know nothing about it? No worries! They will help you out and explain everything you need to do. But at some point, the invested funds will be moved to a malicious exchange, leaving you unable to withdraw a single penny.

Here is an example message sent to a romance scam victim.

How to avoid it?

• Do not accept suspicious crypto investment offers
• Store your money only in well-protected digital wallets
• Avoid crypto exchange scams

4. Bitcoin giveaway scams

Elon Musk is giving ten thousand BTC and wants to share with anyone interested? No, it’s not a generous giveaway, but a scam you may face on social media like Twitter, YouTube, and Instagram. Once you click on the link and confirm that you want to participate, they will ask you to make a verification payment. And, when you send your Bitcoin to the provided Blockchain address, you will be left with nothing.

How to avoid it?

• Do not participate in suspicious Bitcoin giveaways
• Do not click on any links provided in crypto giveaway posts
• Report a potential scam to Twitter, YouTube, or Google SafeBrowsing.

5. Man-in-the-middle (MITM) attacks

Although man-in-the-middle (MITM) isn’t an actual scam, it’s a widespread cyber attack you should be aware of. In the crypto context, hackers perform MITM attacks to steal the credentials and private keys of traders using a public WiFi network. Here’s how this scheme works.

A malicious actor can interfere with the traffic between your device and an unprotected hotspot when you are in a hotel, restaurant, or airport. And once you access your crypto wallet or make a Bitcoin transaction, your data will be compromised without you knowing.

How to avoid it?

• Try not to make Bitcoin transactions when using public WiFi
• Encrypt your traffic with a virtual private network (VPN)

6. Crypto imposter schemes

Remember a fake Elon Musk and his “generous Bitcoin giveaway?” Well, that’s just the tip of the iceberg. Scammers often use impersonation and imposter schemes, pretending to be celebrities, influencers, government officials, or reputable experts. For example, an impersonator may claim to represent a credible crypto exchange. They try to persuade people to invest in “profitable” projects and then vanish with the stolen funds.

Here’s an example of a common imposter scam. A person who pretends to be a high-ranking officer of a promising crypto-related company encourages a potential fraud victim to invest in a project to get “a license.”

How to avoid it?

• Do not respond to suspicious messages
• Do not open any provided links
• Report the scam to Federal Trade Commission (FTC)

7. “I know your password” scams

Blackmailing and extortion are the most brutal and, sadly, pretty common Bitcoin scams. This type of fraud usually involves an email where a sender claims to know your password or other confidential information. Then, they threaten a victim to disclose this data or transfer it into the hands of some mysterious “client.” Of course, they also promise not to do that if you send them a certain amount of crypto. Here’s an example of such an email.

To make the threat more convincing, fraudsters may even use some of your old passwords they’ve probably purchased on the dark web. All these tricks aim to make you worried and force you to act immediately.

How to avoid it?

• Do not respond to the message
• Do not send any money to the provided crypto wallet
• Report the scam to the FBI IC3 or eCustomer center.

How to identify a crypto scam

No matter how advanced a BTC scam is, you can always find a way to spot it. Here are several red flags to watch out for if you want to keep yourself away from crypto-related tricks.

Writing mistakes and typos

Spelling and grammar errors in emails, posts, and direct messages may seem minor. However, the devil is in the details. In fact, writing mistakes are one of the main signs someone is trying to scam you. So read the notification carefully before deciding how to act.

Too-good-to-be-true offers

Tempting deals, generous awards, and “free money” offers are most likely fake. In particular, you should never share your personal information in exchange for such proposals, no matter how honest they’re trying to seem.

Fake celebrity testimonials

Celebrity approval and fake testimonials are other common ways Bitcoin scammers use to trick people into investing their crypto funds. Do not trust influencers who might appear to be just as deceptive as their offers.

Also, make sure to pay attention to the reviews presented on a potentially malicious website. Take a look at the example below. A notorious movie producer Harvey Weinstein suddenly became Henry Alamin, a “crypto investor,” providing an “honest review.”

Manipulations and threats

Many crypto scammers try to blackmail users. For instance, they may threaten to reveal your private data and demand ransom. However, such threats are mostly feeble and often sent by Internet trolls and fraudsters trying to play on people’s feelings. So the best thing you can do here is report a scam.

Unreasonable demands

Phishing emails and scam messages often involve a sense of urgency. However, instead of clicking on the provided link or sharing any requested data immediately, check who’s the sender. Moreover, even if you know this person, a random message asking for your help (most likely, by sending a certain amount of BTC) is likely a scam.

How to protect yourself against Bitcoin scams?

Not to fall victim to Bitcoin fraud or mining scam, you can defend yourself by adhering to the following security best practices. Let’s take a closer look at the most effective ones.

Your digital wallet is the place where you can store your Bitcoin and other crypto funds. You should do your best to make it well-protected and carefully encrypted. For that, you can opt for either a cold (offline) or a hot (online) wallet.

Store crypto in a cold wallet

Your digital wallet is the place where you can store your Bitcoin and other crypto funds. You should do your best to make it well-protected and carefully encrypted. For that, you can opt for either a cold (offline) or a hot (online) wallet.

Cold wallets are normally more secure since they are placed on real hardware, not online. Meanwhile, hot wallets are more vulnerable to hacker attacks. This option is suitable for active crypto traders making many transactions. However, it’s worth keeping most of your crypto funds in a cold wallet.

Create strong passwords

Reusing a password may significantly compromise your wallet’s security. If hackers get access to one of your accounts, they can get access to others hassle-free. Here are several tips on protecting your crypto funds with a good password.

• Make sure your password consists of at least eight characters
• Do not link your passwords to any personal information
• Use unique passwords for every account
• Use a password manager tool to keep your wallet keys safe

Use trustworthy cryptocurrency exchanges

Many crypto exchanges aren’t real. These fake Bitcoin sites strive to steal users’private information and transfer it to hackers. So it’s crucial to pick a credible crypto exchange platform with a good reputation. Some of the most well-known examples are Coinbase, Binance, Crypto.com, and Kraken.

Before buying Bitcoin on the chosen crypto exchange platform, make sure it offers multiple powerful security features, including the following ones.

• Multi-factor authentication
• Insurance against data breaches
• Reliable offline storage for crypto funds
• Well-protected withdrawal
• Strong encryption

Avoid suspicious links and popups

Phishing emails and text message scams often encourage users to click on malicious links. They are trying to make you feel worried and confused by creating a sense of urgency. But don’t be hasty. Here is what you should do to protect yourself from getting into a phishing net.

• Verify the legitimacy of the sender’s email address
• Check if a potentially malicious website uses the HTTPS security protocol
• Avoid suspicious crypto-related ads and popups
• Type URLs manually instead of clicking on the provided links

Use VPN

A virtual private network (VPN) is a powerful tool that ensures online privacy and, at the same time, helps you stay secure when surfing the web. In particular, it’s worth adopting a VPN tool to safeguard your Bitcoin transactions and avoid various scams.

Thanks to reliable AES-256 encryption and multiple security features, a VPN will keep you away from phishing attempts, malicious links, and dangerous websites. On top of that, a virtual private network can protect you from many other cyber threats, such as MITM attacks, DDoS attacks, BTC miner scams, and crypto hijacking.

Secure your Bitcoin transactions with VeePN

Looking for a powerful security solution to keep your bitcoins safe? Consider VeePN! It’s a premium VPN service providing a wide range of features that will help you defend yourself from crypto-related threats. In particular, NetGuard will allow you to avoid Bitcoin scams, phishing attacks, malicious links, and potentially infected popups. VeePN enables you to choose one of the proposed pricing plans that suits your needs best and take advantage of a 100% money-back guarantee.

Written by VeePN Research Lab VeePN Research Lab is dedicated to provide you latest posts about internet security and privacy.