Top 5 Cryptocurrency Scams in 2023
There is an influx of new scams you need to watch out for in 2023. The rising popularity of digital assets demands you get familiar with common cryptocurrency scams.
Cryptocurrency crime surged 79% and broke all records in 2021, with criminals duping $14 billion worth of funds last year. Cryptocurrency scams naturally made up a considerable chunk of the total, followed by stolen funds from cryptocurrency businesses.
Digital assets are a growing part of the global financial ecosystem, with cryptocurrency transaction volume surging 567% in 2021 to $15.8 trillion. So, it becomes critical that you are updated with the various ways you can be conned.
5 crypto scams to look out for in 2023
- “Pig butchering” crypto scam
- “Pump and dump” crypto scam
- “Rug pull” crypto scam
- Airdrop crypto scam
- Phishing crypto scam
1. ‘Pig Butchering’ Crypto Scam
Sounds pretty fun, right? But its consequences on its victims aren’t.
The scam typically is carried out on online dating sites, with the scammer trying to lure in the “pig” with an attractive profile and fattening them up over time by texting them and getting closer to them.
The perpetrator tells them about the huge gains they made in cryptocurrency markets after gaining the “pig’s” trust and gets their mark to follow some investments that seem to do pretty well on paper first. Scammers use phony sites to dupe their victims into sending huge amounts of money to this fake account. The money was lost the moment it was sent.
There’s no way for the victim to withdraw their money, and the fattened “pig” is left to hang. The scam is believed to be from China and is notable for its long duration of playing.
2. ‘Pump and Dump’ Scam
These scams are not new to cryptocurrency, and its lack of regulation makes it the wild ground that has to suffer from fraud, including the pump-and-dump scam. These scams are often primed to occur in the stock market in penny stocks. They are characterized by a small group of insiders who own a digital asset and hype it up through rigorous publicity, be it through social media, word of mouth, or other marketing strategies.
When naive investors buy the cryptocurrency, typically newly issued with little to no trading history, the insiders sell or ‘dump’ their shares at high prices, sparking a steep sell-off and making money at the expense of their victims.
3. ‘Rug Pull’ Scam
Here, a cryptocurrency asset’s promoters pump their new coin to hike the prices before vanishing with the funds. Investors are then left with a token worth nothing. This mostly happened with coins with no fundamentals and no future.
The rug-pull scam is different than a pump-and-dump scam, mainly because here, the token is coded in such a way that only insiders are allowed to sell. There are various other ways insiders execute these cryptocurrency scams.
The most popular rug-pull scam of 2021 was based on a cryptocurrency named after a popular Netflix Inc. series Squid Game where all contestants are killed except one, who emerges with riches. It lived up to its fame and did not allow investors to sell.
SQUID, the coin’s ticker, began selling at one cent and then shot up to $90 dollars and plummeted to zero when the scammers “rugged” the masses.
4. Airdrop Scams
This scam is prominent in decentralized finance or Defi. Recently, nefarious actors have gotten hold of the popular trend of airdropping tokens, typically done to start and grow a grassroots community. An airdrop drops tokens in your digital wallet as a reward for certain actions with a certain platform or software.
Here, an entity airdrops you a token that purportedly has value, and when you try exchanging that airdrop for another well-known token, you give a protocol more permissions than you know. This enables the hacker to access all the assets in your wallet.
Hence, do not give an unknown user permission to your decentralized wallets without understanding the access you are granting this person.
5. Phishing Scam
The phishing scam is a common cryptocurrency scam and is not limited to just digital currency. Here, scammers trick the victims into revealing sensitive details like passwords, keys, etc. And by keys, we mean the “private keys” required to open a secure crypto wallet. It is similar to your password; it is the only thing that gives you exclusive access to your funds. Phishing scams mostly resort to email with the scammer posing as some authority and asking for credentials. These scams are used for identity theft and other corporate frauds. It can also make use of social media to reach out to you.
Hence, it is important you do not click on random links posted on Twitter. Do not fall for promises of riches and ‘yields’ in exchange for your sensitive information. Verify the Twitter handles or the Discord IDs first. Ensure that the links you are sourcing are from real and verified accounts. It may be time-consuming, but it is worth it.
In conclusion
The financial ecosystem is focused on cryptocurrency, and so are the nefarious actors. Hence, it is your responsibility to tread lightly and be vigilant.
