Cryptocurrency Scams Are on the Rise. Here's How to Spot and Avoid Them

The potential high payoff of crypto attracts droves of scammers. In 2023, crypto scams cost victims $5.6 billion, according to the FBI.

Cryptocurrency markets have experienced a resurgence after the presidential election, with coins like bitcoin, ethereum and dogecoin leading the charge. The price of a single bitcoin, for example, recently eclipsed $100,000 for the first time.

Experts attribute this trend to several factors, including President-elect Donald Trump's favorable comments about cryptocurrency on the campaign trail, renewed interest from retail investors and increased institutional adoption.

Crypto is notoriously volatile. The digital assets' value can swing wildly in a matter of days or hours, making them both a thrilling and high-risk investment. But there's another dangerous side of the crypto boom: the resurgence of crypto scams.

Crypto presents a golden opportunity for scammers. The crypto market is mostly unregulated and once a transaction is made, it's nearly impossible to reverse it. That means if a scammer takes off with your crypto, there's little you can do to get your money back.

If you're actively investing in crypto or keeping an eye on digital currencies, make sure you know how to spot these get-rich-quick schemes and other ploys.

Top cryptocurrency scams to watch out for

The potential high payoff of crypto attracts droves of scammers. In 2023, crypto scams cost victims $5.6 billion, according to the FBI. These are some examples of common crypto scams.

Phishing attempts

A phishing scam tries to get you to reveal sensitive personal or financial information by sending you a fraudulent email, text or phone call.

Crypto phishing scams take on many forms. For example, it's common for bad actors to impersonate legitimate exchanges to try to trick you into sharing your private key -- a unique passcode that lets you access your crypto -- by prompting you to click an embedded link in a text or email.

Other examples of phishing attempts related to crypto, according to the FTC, include:

* Fraudulent emails or texts that appear to be from a cryptocurrency exchange, a hardware wallet manufacturer or a well-known figure in the crypto space. These messages typically contain a link that takes you to a phishing site designed to look like the real thing. Once you enter your login credentials or other sensitive information on the phishing site, the scammers have what they need to access your crypto holdings.

* Scammers may also create fake websites or social media profiles that closely resemble those of legitimate cryptocurrency exchanges or influencers. If you're not paying close attention, you could easily be fooled into visiting one of these fake sites and falling for a phishing scam.

* Another common phishing tactic is for scammers to send out emails or texts that contain QR codes. When you scan one of these QR codes with your mobile phone, it could take you to a phishing site or automatically download malware onto your device.

Social engineering

Scammers can also build deep connections with you and then try to manipulate your emotions to compel you to make a rash decision, such as going all in on a new type of crypto.

"In a bull market, scammers lean into human greed, promising high returns and exploiting the fear of missing out. In a bear market, they play on fears that cryptoassets are at risk," said Nick Percoco, chief security officer at cryptocurrency exchange Kraken.

Percoco added that investors should be wary of high-pressure tactics. "Scammers know that if you ultimately do nothing, they lose. Take your time and research opportunities carefully."

Rug pulls and fake tokens

Developers often create new tokens designed to look like legitimate crypto coins to attract investors into purchasing cryptocurrency. Once a purchase is made, the fraudster takes your money and vanishes, leaving you with nothing except a counterfeit token.

Many times this scam happens when bad actors encourage investors to act fast to get in on a new crypto project before the price skyrockets. If you're not sure if a token is legitimate, be sure to research the asset, its website, the project's founders and the digital coin's transaction activity. If no website exists or the project's creators are anonymous, it could signal high risk.

Bitcoin ATM scams

In this scam, a cybercriminal tries to trap you by posing as law enforcement or a financial institution. The scammer might tell you that you need to pay a fine or that a bill is past due. To avoid legal action, the scammer instructs you to use a bitcoin ATM to send them funds.

Legitimate entities will never ask for payments via bitcoin ATMs. You should ignore such requests entirely.

What if I fall for a cryptocurrency scam?

If you fall for a cryptocurrency scam, it's unlikely that you'll get your money back. Part of what makes these swindles attractive to cybercriminals is that cryptocurrency transactions are irreversible. Money is also hard to track after it's sent because scammers can transfer it to any part of the world.

"Investors should exercise caution and conduct thorough research before engaging with any cryptocurrency platform or investment opportunity," Jacqueline Cooper, CEO