How to avoid crypto scams and keep your money safe

Crypto scams are becoming more and more of a problem in the world, causing many people to lose everything. So, just how is cryptocurrency fraud turning the financial world on its head?

Investment fraud, in general, is a major source of financial scams. And, with crypto, that type of fraud is becoming more of a problem. When you put your money into crypto, that’s an investment. Since crypto started to become more popular, we’ve seen countless stories of almost-miraculous tales of people cashing in millions using the blockchain.

It turns out cryptocurrency is kind of a great vehicle for scamming people, given that it’s decentralized and hard to fully regulate. Without government oversight, bad actors can use the cryptosphere to swindle users without taking on much risk. They can also remain pretty anonymous on the blockchain by using fake names and by fudging associations with more reputable organizations. Pump-and-dump schemes are also popular, with scammers artificially inflating the value of certain coins to lure in victims, selling it to them before the value totally crashes.

Recently, the US Federal Trade Commission has started to crack down on certain crypto platforms, but the crypto ecosystem still exists in a legal gray area. Governments don’t really insure crypto the way they insure money in a bank account, so there’s no way to recover lost funds.

"The issue is basically that people are seduced by the hype about huge profits on crypto trading and unfamiliar with the technology," explains University of Pennsylvania professor Kevin Werbach, who studies crypto.

Many of these scams find their way to people through social media. Banks have been reporting a surge in fraud cases on Meta’s websites and apps – Facebook, Instagram and WhatsApp specifically. Scam advertisements are all over these platforms, and they often claim to be endorsed by or associated with trusted financial companies.

To avoid getting duped by a crypto scam, you shouldn’t engage with offers that seem too good to be true, job listings that require you to pay a fee, guaranteed returns promises or random communications telling you to use crypto to send in a payment to solve a problem or get involved with a business.