Cryptocurrencies allow for the rapid transfer of funds across national borders, but the irreversibility of transactions is also exploited by criminals. Fraudulent investments, suspicious platforms, people posing as consultants, and requests to deposit money via Bitcoin ATMs are just a few examples of the risks involved.
A cryptocurrency scam can look professional. Scammers create websites that resemble real exchanges, post ads featuring images of famous people, and contact potential victims by phone, instant messaging, or social media.
In this guide, we explain how cryptocurrency scams work, what red flags should raise your suspicion, and what you can do to reduce the risk of losing your funds.
What exactly are investment scams in the crypto market?
An investment scam involves tricking a user into transferring money or cryptocurrency under the pretext of making a profit. The scammer may pose as an advisor, broker, exchange employee, funds recovery specialist, or representative of a well-known institution.
The victim is offered an investment opportunity that is supposedly safe, easy, and exceptionally profitable. There are often assurances that:
- guaranteed profit,
- no risk,
- access to confidential information,
- an automated trading system,
- a limited-time offer,
- opportunities to quickly grow your capital.
In reality, no investment in cryptocurrencies offers a guaranteed return. FINMA points out that unauthorized financial service providers and investment scammers often use similar tactics, so you should thoroughly vet the company and the individuals offering the investment before transferring any funds.
What do cryptocurrency scams look like in practice?
The first contact usually occurs through an online ad, a message on social media, a dating app, email, text message, or phone call.
An advertisement may suggest that a well-known entrepreneur, investor, or TV host is promoting a platform that allows users to make money with Bitcoin. After filling out the form, an “investment advisor” quickly gets in touch.
At first, the scammer may ask for a small deposit. The user is then given access to a professional-looking dashboard where they can see their balance growing and apparent profits. However, the numbers displayed on the page may not correspond to actual transactions.
When a user tries to withdraw money, additional fees apply:
- income tax,
- withdrawal fee,
- verification fee,
- the cost of unlocking an account,
- security deposit,
- a fee related to anti-money laundering efforts.
After the payment is made, the scammers either demand more money or stop responding.
Why are cryptocurrency scams so common?
One reason is the nature of blockchain transactions. Once a cryptocurrency transfer is confirmed, it generally cannot be reversed in the same way as a traditional bank transfer.
Scammers also use:
- the international nature of the market,
- fast money transfers,
- interest in Bitcoin and new projects,
- the limited knowledge of novice users,
- difficulty in identifying a legitimate company,
- the ability to create anonymous profiles and websites,
- the pressure stemming from the fear of missing out on an investment opportunity.
The Swiss National Cybersecurity Center warns, among other things, against fake investment ads, phishing scams targeting cryptocurrency holders, and companies promising to recover money lost in a previous scam.
How do scammers use psychology to manipulate investors?
The effectiveness of many scams does not stem from advanced technology, but from skillfully manipulating the user's emotions.
Time pressure
Scammers claim that the offer will expire in a few hours or that the price of a particular cryptocurrency is about to skyrocket. The goal is to limit the time available to verify the information.
The Promise of Quick Profits
The victim sees sample results from other investors, fake comments, or fabricated withdrawal confirmations. This is intended to create the impression that making money is easy and almost guaranteed.
Building Authority
A criminal may impersonate a bank, the police, a government agency, a cryptocurrency exchange, a well-known investor, or a technical support representative.
Gradual increase in contributions
The first amount is small. Once the user sees a fictitious profit, the scammer persuades them to deposit a larger sum.
Instilling Fear
The victim is told that their account is at risk, that someone is trying to steal their savings, or that they have been linked to a crime. They are then instructed to transfer money to a supposedly secure wallet.
Isolating the Victim
Scammers may ask you not to notify your family, your bank, Bitcoin ATM staff, or the police. They claim that the transaction is confidential or that third parties could block it.
The Most Common Types of Cryptocurrency Scams
Free Rewards and Fake Airdrops
The user is notified that they can claim free tokens. The requirement is to connect their wallet to the website or sign a message.
A fake website may gain the ability to transfer tokens from your wallet. Another possibility is a request to send a small amount to “activate” a reward.
A legitimate airdrop should not require you to provide a recovery phrase or private key.
Ransomware
Ransomware is malware that either blocks access to a device or encrypts the files on it. The cybercriminals then demand a ransom, often in cryptocurrency.
Paying the ransom does not guarantee that you will recover your data. The most important safeguards are keeping your system up to date, exercising caution when opening attachments, and regularly backing up your data on a device separate from your main device.
Blackmail
The victim receives a message in which the sender claims to have compromising recordings, data, or a history of online activity. In exchange for deleting the material, the sender demands payment in Bitcoin.
Messages like these are often sent in bulk. They may include an old password from a previous data breach to make the threat seem more credible.
Do not pay or respond. You should change your passwords, enable two-factor authentication, and report the blackmail attempt to the appropriate authorities.
Rug pull scam
A rug pull occurs when a project's creators promote a new token, raise capital from users, and then drain liquidity or abandon the project.
It's worth being cautious about projects that:
- do not provide information about the team,
- they promise unrealistic returns,
- do not have a code audit,
- have unclear documentation,
- base their promotion exclusively on influencers,
- concentrate a large portion of the tokens in a few wallets,
- prevent the token from being sold freely.
Phishing Scams
Phishing involves impersonating a legitimate platform, wallet, bank, or government agency. The user receives a link that leads to a website that looks like the original site.
A fake website may attempt to steal:
- username and password,
- authentication code,
- recovery phrase,
- private key,
- card details,
- access to the wallet.
Before logging in, check the full website address. It's safer to use a bookmark in your browser than a link sent in a message.
Fake Gifts on Social Media
Scammers create profiles that resemble the accounts of well-known entrepreneurs, exchanges, or cryptocurrency projects. They then post information about giving away cryptocurrency.
A typical message promises to send back double the number of tokens if the user first sends a specified amount to the indicated address.
A legitimate company does not require you to send cryptocurrency in advance in order to receive a reward.
Ponzi Schemes
A Ponzi scheme pays out funds to earlier participants using money from new users' deposits. The system may appear profitable for a time, as the initial payouts are actually made.
Problems start when the number of new deposits drops. The organizers then limit withdrawals, impose additional fees, or disappear with the money.
A red flag is a consistent, high, and guaranteed return that is independent of market conditions.
Fake cryptocurrency exchanges
A fake stock exchange may look like a legitimate investment platform. It features charts, transaction history, account balances, and customer service, but all of this data may be controlled by scammers.
Before making a payment, please check the following:
- domain history,
- company information,
- Terms and Conditions and Contact Information,
- the option to make a small withdrawal,
- warnings issued by regulators,
- methods for securing accounts,
- independent opinions from various sources.
The mere presence of a Swiss address or the Swiss flag symbol does not mean that the company actually operates in that country. FINMA points out that some suspicious providers merely claim to have a Swiss office.
Attacks on flash loans
Flash loans are an advanced tool used in decentralized finance. They allow users to borrow funds without collateral, provided that the loan is repaid within the same blockchain transaction.
Attackers can exploit vulnerabilities in the smart contract, manipulate the token price or the oracle mechanism, and drain funds from the protocol.
This poses a threat primarily to DeFi applications and their liquidity providers. Before using the protocol, it’s a good idea to review its audits, project history, and risk management policies.
Bitcoin ATM Scams
A Bitcoin ATM is a legitimate device that allows users to buy or sell cryptocurrencies. The machine itself is not a source of fraud. The problem arises when a criminal tricks a victim into depositing cash and sending cryptocurrency to an address under the criminal’s control.
A scammer may impersonate:
- a bank employee,
- police officer,
- tax official,
- technical consultant,
- a family member,
- a stock exchange representative,
- investment advisor.
The victim receives a QR code and is instructed to scan it at a Bitcoin ATM. The code contains the scammer's wallet address. Once the cash is deposited, the cryptocurrency is sent directly to that address.
The FBI and the U.S. Federal Trade Commission are warning the public about scammers who use Bitcoin ATMs and QR codes to quickly steal funds. A common tactic is to pressure victims into acting quickly and to keep them on the phone while the transaction is being carried out.
The Most Important Safety Rule
Do not use a Bitcoin ATM at the request of a stranger who contacts you by phone or online.
Neither the bank, the police, a government agency, technical support, nor the ATM operator will ask you to send money to a “secure wallet” in order to:
- account security,
- cancellation of a suspicious transaction,
- payment of a fine or tax,
- unlocking the computer,
- protection of savings,
- proof of identity,
- to avoid criminal liability.
During a legitimate transaction, the user should only scan the address of their own wallet or the address of a recipient whom they personally know and have verified.
An example of how scammers operate in the cryptocurrency market
A user sees an ad on social media for a platform that invests in Bitcoin. The ad features the logo of a well-known website and a photo of a popular figure.
After providing a phone number, an “investment advisor” contacts the person. The advisor speaks professionally and helps set up an account. To start, the advisor suggests making a small deposit.
After a few days, the balance on the platform shows a significant profit. The advisor convinces the user that this is the best time to increase their investment. They suggest depositing a larger amount via bank transfer, credit card, or Bitcoin ATM.
When a user wants to withdraw money, they find out that they must first pay a tax. After paying the tax, another fee appears to unlock the account.
At some point, contact is lost. Then another company contacts the victim and promises to recover the funds in exchange for an upfront fee. This is the next stage of the same or a similar scam.
The Swiss NCSC warns that scammers offering to recover lost funds often target people who have previously fallen victim to a fraudulent investment.
How can you spot a cryptocurrency scam?
Special caution should be exercised when an offer includes one or more of the following elements:
- a guaranteed or exceptionally high return,
- pressure to make an immediate decision,
- a call from an unknown number,
- a request to install remote desktop software,
- an order to purchase cryptocurrency via a Bitcoin ATM,
- a QR code sent by a stranger,
- a request to provide a recovery phrase,
- the obligation to pay before distributing profits,
- a ban on contacting the bank or family,
- a promise to recover money previously lost,
- inability to withdraw funds on one's own,
- Unclear company information.
The higher the promised return, the more suspicious you should be about the level of risk. The Swiss NCSC recommends that you resist pressure from salespeople and check suspicious platforms against FINMA’s list of warnings, among other sources.
How can you protect yourself from cryptocurrency scams?
Check out the company before making a payment
Verify the company's name, address, management, terms and conditions, and supervisory information. Check FINMA's list of warnings and see if the regulator has published any information about the entity in question.
The fact that a company is not on the warning list does not automatically confirm its credibility. The list may not include all active scammers.
Don't trust guaranteed returns
Every investment involves risk. No one can guarantee a specific rate of return on Bitcoin, Ethereum, or other cryptocurrencies.
Never disclose your recovery phrase
The recovery phrase gives you full access to your wallet. Do not enter it on any websites or share it with technical support staff.
A legitimate wallet or exchange operator does not need a recovery phrase to resolve the issue.
Do not install apps at the consultant's request
Remote access programs allow another person to control your computer or phone. A scammer can use them to log in to your bank account, stock trading account, or digital wallet.
Enable additional security measures
Use:
- unique passwords,
- password manager,
- two-factor authentication,
- withdrawal restrictions,
- lists of trusted addresses,
- login notifications,
- the latest software.
Don't act under pressure
Hang up and contact the institution yourself using the number listed on its official website. Do not use the number provided by the caller.
Do not scan unknown QR codes at a Bitcoin ATM
The QR code may contain the scammer's wallet address. Before confirming the transaction, check to make sure the address belongs to you or to a recipient you know.
What should you do if you discover a cryptocurrency scam?
If you suspect that fraud has occurred:
- Cut off all contact with the scammer immediately.
- Do not send any more money, even if they promise to pay you.
- Back up your messages, phone numbers, email addresses, and screenshots.
- Write down the recipient's wallet address and the transaction ID (TXID).
- Make a note of the date, time, amount, type of cryptocurrency, and the network used.
- If the transaction was made at a Bitcoin ATM, note the location of the machine and keep the receipt.
- Contact the operator of the exchange, wallet, or Bitcoin ATM.
- Report the incident to the local police.
- Report a suspicious website or message to the Swiss NCSC.
- If the matter involves a suspected financial services provider, report the information to FINMA.
- Change your passwords and disable remote access to your devices.
- Transfer your remaining cryptocurrencies to a new wallet if your recovery phrase has been compromised.
Do not trust people who contact you after a scam with a promise to recover your funds in exchange for another fee. This may be a so-called "recovery scam."
Is it possible to recover cryptocurrencies sent to a scammer?
Recovering cryptocurrency can be difficult because a confirmed blockchain transaction cannot simply be reversed. However, that doesn't mean it's not worth reporting the issue.
Wallet addresses and fund transfers are visible on public blockchains. Law enforcement, exchanges, and specialized entities can analyze the transfer path. If funds are sent to a platform that requires user verification, it is possible, under certain circumstances, to link an address to a specific account.
Reporting the issue quickly increases the chances of securing the information, so be sure to keep the TXID, the recipient's address, and the entire transaction history.
Summary
A cryptocurrency scam can start with an enticing advertisement, a phone call from a bank, a message from a supposed advisor, or a request for help from someone you know. Most often, scammers use pressure, fear, and the promise of high returns.
The most important rule is to verify every transaction yourself. Do not disclose your recovery phrase, install remote access software, or send cryptocurrency to an address provided by an unknown consultant.
A Bitcoin ATM should be used to carry out your own informed transactions. If someone on the phone instructs you to deposit cash, sends you a QR code, and claims that this is how you’ll protect your money, you should end the call and not complete the transaction.
This article is for educational purposes only and does not constitute investment or legal advice.
Frequently Asked Questions
The most common red flags include promises of high returns, pressure to make a quick deposit, a lack of clear company information, and problems with withdrawing funds. It is also suspicious if you are asked to provide a recovery phrase, install remote access software, or send cryptocurrency to an address provided by a consultant.
No. The police, banks, government agencies, or Bitcoin ATM operators never ask you to deposit cash into an ATM and transfer cryptocurrency to a “secure wallet.” Such instructions are one of the most common signs of a scam.
Yes. A QR code may contain the wallet address of a scammer. Before making a transaction, make sure the address belongs to you or to a recipient you know and have verified yourself.
A confirmed blockchain transaction usually cannot be reversed. However, if you suspect fraud, you should contact the device operator as soon as possible, keep the transaction confirmation, and report the matter to the police.
You should immediately cease all contact, refrain from sending any further funds, and secure all evidence. It’s a good idea to keep the wallet address, transaction ID (TXID), messages, phone numbers, screenshots, and payment confirmations.
A guarantee of high or consistent returns is a very serious red flag. The cryptocurrency market is volatile, and no reputable company can guarantee a specific return without risk.
You should check the company’s information, terms and conditions, address, domain history, reviews from independent sources, and whether you can withdraw a small amount. In Switzerland, it’s also a good idea to check FINMA’s list of warnings.
Yes. Scammers can freely alter the balance and results displayed in the user dashboard. The profit shown does not mean that the funds are actually on the exchange or have been invested.
Cases of fraud should be reported to the local police and the Swiss National Cybersecurity Center. If the case involves a suspicious financial firm, the information can also be reported to FINMA.
