Crypto Investors Must Read: Common Scam Tactics and How to Respond

Why Do Crypto Scams Become Investment Black Holes?

Global financial markets are turbulent, and the cryptocurrency market has attracted a large influx of novice investors during this wave of volatility. However, what follows are layers upon layers of scam tactics by fraud groups. Compared to traditional financial markets, why do virtual currency scams occur so frequently?

The answer is simple—the anonymity and irreversibility of cryptocurrencies make them a paradise for scammers. Traditional banking systems have regulatory mechanisms to oversee transactions, but the decentralized crypto market lacks this safeguard. Meanwhile, quantitative easing policies by central banks worldwide have led to declining purchasing power, increasing public distrust in central financial institutions, which in turn boosts the appeal of cryptocurrencies—precisely the psychological gap scammers exploit.

The fixed total supply of cryptocurrencies, high investment returns, and strong appreciation potential make investors easily driven by greed and less vigilant. Especially for newcomers, lacking in-depth understanding, it’s easier to become victims of scam groups.

The Three Main Types of Crypto Scams

1. Ponzi Schemes: An Ever-Running Money Game

Ponzi schemes are old tricks but still effective—using new investors’ money to pay interest to existing investors, creating a false illusion of profit. Scammers often claim to have high-yield investment plans, promising annual returns far exceeding industry averages, attracting continuous investments.

When new funds dry up and cannot sustain old investors’ interest, the project team either runs away with the money or fabricates reasons like “system hacked” or “under maintenance” to delay withdrawals, ultimately causing heavy losses for investors.

Real Case Review:

The 2022 Terra (LUNA) collapse shocked the world. The project promoted the “Anchor Protocol,” claiming to offer 20% annual yields, attracting massive capital inflow. However, these excess returns were supported solely by new funds and LUNA token issuance. When capital started fleeing, UST stablecoin decoupled, and LUNA eventually hit zero. Global investors lost over $40 billion.

The same year, the “Fintoch scam” was equally shocking—scam groups impersonated a blockchain project under Morgan Stanley, offering 1% daily investment returns. In reality, it was a pure capital pyramid scheme, ultimately evaporating $315 million.

Tips to Prevent Ponzi Schemes:

• Be wary of any promises of abnormally high returns beyond industry norms. Normal crypto trading or lending annual yields are around 5-15%; promises over 20% are red flags.
• Reject platforms that require actively recruiting new investors. If a trading platform hints at finding new investors through rewards or other means, it’s a typical sign of a fund-raising chain, stay far away.

2. Phishing Scams: Carefully Crafted Information Traps

Phishing scammers impersonate government agencies, exchange staff, or well-known media outlets, using fake emails, messages, or social media posts to lure you into clicking malicious links or providing sensitive information under the guise of “account risk,” “system vulnerabilities,” or “identity verification.”

More cunningly, they clone legitimate websites, using very similar domain names (e.g., “binance.com” becoming “binancc.com”) to deceive victims. Once you input seed phrases, private keys, or exchange passwords on these fake sites, your assets are instantly stolen.

Real Case:

In a 2024 phishing incident, scammers pretended to be a well-known financial media outlet, approaching a crypto trader with a malicious webpage link. The victim mistakenly thought it was a normal business interaction, clicked the link, and entered information, resulting in the complete theft of ETH from their wallet.

How to Prevent Phishing Scams:

• Never click on links from unknown sources, whether via email, social media, or SMS. Legitimate institutions will not request sensitive info through these channels.
• Before entering any passwords or private keys, double-check the URL. Develop the habit of installing ad and phishing blockers in your browser.
• Regularly back up important data. In case of hacking, backups can help you restore your system quickly.
• Remember: your private keys and seed phrases should never be entered on any webpage or app unless you are operating your own wallet directly.

3. Airdrop Scams: The “Free Giveaway” Trap

Airdrops are a normal marketing method for blockchain projects but have been exploited by scammers as harvesting tools. They set up fake websites claiming to distribute “hot project airdrops” (like zkSync, Starknet, etc.). When you connect your wallet and sign a transaction, you are actually authorizing a scam contract to transfer your assets.

Common airdrop scams include:

• Fake phishing links posted by impersonating official channels, claiming that connecting your wallet will receive an airdrop, but actually signing an authorization transaction.
• Demanding “gas fees” or “verification fees” before claiming the airdrop, with the fees sent to scammers, and the airdrop never arriving.
• Fake celebrity endorsements announcing “limited airdrops” to lure fans into clicking malicious links and authorizing their wallets.

How to Avoid Airdrop Scams:

• Genuine airdrops never require you to sign transactions or pay fees. If asked to pay, treat it as a scam.
• Before participating, verify the information on the project’s official website, not just social media posts.
• When receiving unknown token airdrops, do not attempt to swap or trade them; ignore these as they are often bait for subsequent phishing.

Exchange Scams: The Most Hidden Asset Harvesting

Fake Exchange Traps

Scammers clone legitimate exchange interfaces and functions, promoting fake platforms through social media, crypto communities, and web ads. Victims believe they are on a real exchange, but all deposits flow into scammers’ accounts.

On fake exchanges, all trading records and profit figures are fabricated. The goal is to lure you into continuous deposits. When you try to withdraw, the platform will refuse with excuses like “account frozen” or “need to pay a guarantee deposit.” Once identified, the platform disappears or shifts away.

Similarly dangerous are fake wallet apps available on official app stores; once downloaded, your private keys and funds are stolen.

How to Identify Fake Exchanges:

• Check if the domain spelling is exactly correct, especially watch out for confusing similar characters.
• Verify the exchange’s licensing and registration info; legitimate exchanges display these transparently.
• Only download apps from official websites or app stores; avoid unknown sources.
• Be cautious of platforms that offer “personal one-on-one customer service,” as scammers often use this to build trust.
• Prefer established exchanges with long operating histories and large user bases; bigger scale means better risk control.

ICO (Initial Coin Offering) Scams

When new crypto projects conduct their ICO, this stage becomes a “money grab” for scammers. They use attractive whitepapers, fake celebrity endorsements, exaggerated promotions to lure investors into buying tokens. After raising funds, they disappear immediately, leaving investors’ tokens worthless.

Recent Case:

In early 2024, the “GPT Coin” incident involved scammers riding the ChatGPT hype, launching a token with the same name, claiming to integrate AI and blockchain. They promoted “10x returns for early investors” in Telegram groups. After raising funds, the team disbanded the community, and the token price plummeted to zero.

How to Avoid ICO Scams:

The safest approach is to completely avoid investing in new tokens during the ICO phase. If you don’t want to miss opportunities, wait until the project has a certain scale before entering, even if it means missing some gains. Any project promising guaranteed returns or guarantees during ICO should be blacklisted.

Collusion of Whales to Trap Retail Investors

Some crypto tokens are concentrated in the hands of a few large holders, known as “whale coins.” If the top 10 addresses hold over 60% of the supply, it’s a red flag.

Whales often create hype on social media, releasing “good news” (fake exchange listings, financing, partnership announcements) while buying large amounts to pump the price. Retail investors chase the high, and whales start selling off at the top, causing prices to crash, trapping retail investors. These scams are in a legal gray area; whale behavior is hard to classify as scam.

The PEPE incident in May 2024 is a typical example: a KOL and whales claimed “PEPE will list on a top exchange,” large holders bought low and manipulated trading volume, causing the token to surge nearly 300% in a short time, attracting hundreds of thousands of retail investors to chase the high. Whales then quietly sold off at the peak, and within two days, the token dropped 80%, causing billions in losses for retail investors.

How to Recognize and Avoid Whale Traps:

• Use on-chain analysis tools (Nansen, Arkham, etc.) to check token distribution; avoid projects with excessive concentration.
• Monitor CEX (centralized exchange) fund flows; large sudden deposits often precede dumps.
• Be skeptical of “good news” on social media, especially unverified by official channels.
• Learn to distinguish facts from hype; avoid blindly following the crowd.

Special Alert: BTC Options Scam

Bitcoin options scams have become a recent targeted fraud against crypto investors. Scammers claim to launch “BTC options trading” platforms promising high leverage and high returns, attracting investors to deposit funds.

In reality, these platforms lack real counterparties; all trades are executed within fake systems. The platform controls the price movements, and regardless of how retail traders operate, losses are inevitable. When investors try to withdraw, the platform makes excuses or shuts down directly.

How to Protect Against BTC Options Scams:

• Only trade options on regulated, reputable exchanges; verify if the platform holds a valid license.
• Be wary of platforms promising “stable profits”—options are inherently high-risk.
• Avoid small, unknown exchanges for options trading; larger exchanges have better risk controls.
• Study options trading thoroughly before participating; do not blindly follow others.

If You’ve Been Scammed? Take Immediate Action

Immediate Emergency Responses

If scammed on an exchange: Log into your account immediately, cancel all pending trades, contact customer service to freeze your account, preventing further operations by scammers.

If bank transfer was made to scammers: Call your bank’s customer service hotline immediately, request to freeze the scam transfer. If the funds have not been withdrawn, the bank can temporarily freeze the recipient’s account, buying you time to recover.

If wallet authorization was stolen: Visit Revoke.cash (Ethereum network) or BscScan (BSC network) to revoke all malicious contract authorizations, preventing further asset transfers. Transfer remaining funds to a new wallet address immediately; your old wallet is now completely unsafe.

Collect Complete Evidence

Save all chat records with scammers, contact info provided, identity info, all transfer records, screenshots of trading platforms, etc. These evidences are crucial for subsequent reporting and legal action.

Report to Local Law Enforcement

Taiwan: Call the anti-fraud hotline 165 or report to the local police station, especially those experienced in handling telecom fraud. Although cross-border crypto crimes are difficult to trace, there’s still a chance to recover some funds through police and international cooperation.

Other Regions: Report to local police and financial regulators, providing complete scam evidence.

Beware of Secondary Scam Traps

Many victims, after reporting or sharing their experiences, receive private messages claiming to be “lawyers” or “senior recovery specialists,” offering to help recover stolen funds but requiring “service fees” or “query fees” upfront—this is another scam. No legitimate professional will demand payment without a formal contract.

Final Defense: Improve Your Risk Awareness

The crypto market is full of opportunities but also traps. The core principle behind all scams is human nature—scammers exploit greed, fear, and herd mentality.

The best way to enhance your scam prevention ability is through in-depth learning of crypto knowledge—understanding blockchain technology, smart contracts, tokenomics, exchange operations, etc. The more knowledgeable you are, the better you can identify deception and traps, and protect your assets.

Key Scam Prevention Rules:

• Only trade on regulated, licensed exchanges
• Never click on unknown links
• Never trust profit guarantees
• Do thorough research before investing; diversify your portfolio
• Be highly alert to extraordinary opportunities; avoid blindly chasing

By adhering to these principles, you can avoid 99% of crypto scams and navigate the virtual currency market more confidently.