Despite the progress it’s made toward maturity in recent years, the cryptocurrency marketplace remains a Wild West, with the lack of regulation breeding a hotbed for scammers.
According to a report from the FBI, “pig butchering” and other crypto-related scams cost Americans $5.6 billion in 2023. Losses from investment scams in crypto increased by 53% over 2022.
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Just like any other relatively new technology, the world of cryptocurrency offers plenty of opportunities and challenges for investors. Blockchain-based frameworks are a major driver of decentralized finance (DeFi), which has contributed to the emergence of many new and exciting projects within the ecosystem.
In terms of investment opportunities, Bitcoin (BTC) has continued to grow to new all-time highs in 2024, helping speculative investors build their cryptocurrency portfolios.
However, just like any prosperous landscape, the prospect of significant profits invariably attracts scammers. As a cryptocurrency investment becomes more sophisticated, so, too, does the power of the technology used in crypto scams. With this in mind, let’s take a deeper look at the top five cryptocurrency scams to watch out for in 2024:
— Fake trading platforms.
— Phishing scams.
— Pig butchering.
— Rug pulls.
— Impersonation.
Fake Trading Platforms
According to the Department of Financial Protection and Innovation (DFPI), 87% of reported crypto scams involve the use of a fraudulent website or trading platform. These will generally involve a website or app that attempts to convince unwitting investors to deposit funds to the platform in return for an investment opportunity that can’t be accessed elsewhere.
The platform that perpetrates this fraudulent behavior can appear legitimate, and may even mimic the price fluctuations of leading cryptocurrencies while producing artificial gains. Such websites can be marketed in a similar way to existing cryptocurrency trading platforms, which makes them a specific threat to investors.
To avoid falling into this trap, investors should conduct sufficient due diligence before using a platform. It’s important to always double-check URLs to ensure that only the official exchange is being accessed, and users should always be mindful of a website or platform that has a URL beginning with HTTP, rather than HTTPS, because this can indicate insufficient security measures.
Phishing Scams
Phishing scams are extremely common when it comes to cryptocurrency investing. The reason for this is that the ecosystem is so new, in relative terms, that scammers believe they can prey on victims who are unfamiliar with ways to invest their money.
Recently, a cryptocurrency phishing scam received attention because the search engine DuckDuckGo was found to be displaying a known phishing website among its top results for queries related to Etherscan, a renowned Ethereum (ETH) block explorer and analytics platform.
Phishing scams have been around long before cryptocurrency, and they remain a low-effort means for cybercriminals to steal from unsuspecting victims.
The scam works when an attacker sends a link directing investors to a website that steals their credentials. Focused on stealing crypto wallet keys and passwords, the scam is less likely to work on investors who double-check the websites they use and the individuals they share their wallet passwords with online. If an individual or platform promises suspiciously high returns, it could be a scam.
Non-fungible token owners have also been regularly targeted by phishing scams with promises of making cosmetic improvements to the NFTs they hold, all with the intention of stealing their digital property.
Pig Butchering
Using the DFPI’s live cryptocurrency scam tracker, an excellent due diligence resource for investors to monitor for suspicious activity, we can see a growing number of “pig butchering” scams taking place in 2024.
Pig butchering refers to a long-term scam in which a victim is tricked into contributing more and more money to a scheme that promises high profits on an ongoing basis. Like the fattening of pigs, victims are “fattened up” to encourage more deposits and gain their trust before the theft happens.
To get a victim to deposit more money, fraudsters will post artificial profits on a platform that suggests the victim is making a healthy return on their investment, encouraging them to invest more into the scheme.
However, there’s never an option to withdraw these profits, and victims could be lured into spending more money with bogus claims about service charges or IRS taxes before accessing any profits.
This type of scam can be more prevalent on social media, and scammers could even get in touch via WhatsApp or text to promote their pig butchering scheme. Again, it’s important to avoid accepting unsolicited messages from individuals or social media influencers that make bold statements about profitable schemes online.
Rug Pulls
Rug pull scams became prevalent on social media in recent years and have been responsible for the theft of $760 million in 2023 alone, according to Bitquery.
This type of exit scam focuses on one or multiple nefarious individuals creating a crypto project that raises money from investors by selling a brand new cryptocurrency token, only to suddenly disappear, pulling the rug from underneath the feet of investors by leaving them with worthless tokens.
The danger of rug pulls is that they can be well-crafted operations that involve real-world influencers and celebrity endorsements.
As a warning against the voracity of rug pulls, 2024 saw key U.S. influencers and artists like Jake Paul, Lil Yachty and Soulja Boy face a lawsuit for their promotion of SafeMoon, a cryptocurrency involved in rug pull allegations. CEO Braden John Karony and his colleagues have been accused of periodically selling off their stash of tokens despite claiming the project would go “to the moon.”
Rug pulls are generally at their most dangerous during periods of high growth within the cryptocurrency market, with investors inspired by the price rallies of tokens in a way that encourages them to take on riskier, newer tokens in the hope that they’ll embark on astronomical price rallies.
As a rule of thumb, investors should try to treat promises of high returns with suspicion and always look for more information on new and unusual projects.
Impersonation
Another scam that’s becoming a major threat to investors online is through social media impersonations of influencers that falsely claim to be giving away cryptocurrency or trick unsuspecting users into paying cryptocurrency to unfreeze their accounts as part of an IRS investigation, for instance.
With Elon Musk becoming a significant figure in cryptocurrency, the billionaire has long been the subject of impersonation scams on social media, and recent AI-generated deepfakes of Musk inviting users to deposit their crypto on a shady website highlight the dangers that generative AI poses.
In June, Binance co-founder Yi He took to social media platform X to warn followers that an impersonator was attempting to use his identity online to steal their money.
With AI technology becoming increasingly sophisticated over time, it’s essential that more investors are wary of the capabilities of generative AI and its ability to produce deepfake endorsements.
Takeaway
It can be difficult for investors to stay vigilant in the face of increasingly sophisticated cryptocurrency scams online. One great rule of thumb is to remain suspicious and critical of every new project or piece of information that seems excessively confident about generating significant returns on investment.
As expectations of a future Bitcoin rally grow, we’re likely to see more aggressive crypto scams emerge. For investors, the coming year could be full of new opportunities and risks, and managing that balance will be key to preserving profits.
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5 Top Crypto Scams to Watch in 2024 originally appeared on usnews.com
Update 09/23/24: This story was previously published at an earlier date and has been updated with new information.
