Crypto Scams: How They Work and How to Spot One
Crypto payments usually cannot be reversed. Learn how these scams work, the warning signs, and what to do after you pay.
How a crypto scam works
A crypto scam is any plan that gets you to send cryptocurrency to a thief. The FTC says cryptocurrency is digital money. It generally exists only electronically. You keep it in a digital wallet, which can be online, on your computer, or on an external hard drive. Each wallet has an address, which is a long string of numbers and letters.
The scam usually starts with a message, not with crypto. The FTC says these scams often start with a message on social media or a dating app. Someone offers to grow your money. They steer you to an investment website that looks real but is fake. You send crypto, and they show you fake reports that make it seem like your money is growing.
The FTC says the firm you hand your money to never invests it. There is no firm at all. Nothing was ever bought on your behalf. The numbers on the screen were invented for you.
How to check if a crypto offer is a scam
You can check most offers before you pay. The FTC says to search online for the company or person and the cryptocurrency name, plus words like review, scam, or complaint. What other people say about a company can warn you.
The FTC also says to check if the person or company has a license. Many investment scams start with people who have no license. The FTC says to look for information about the reputation of the investment company, its officials, and its promoters.
Someone offers you a new coin or token? The FTC says to look online. Check if that company really made one. Scammers pretend to be new and known businesses. Then they sell fake coins.
The FTC says honest investment managers share facts and can back them up. If you are not given details or documentation, that is a sign of a scam. The FTC says another red flag is someone who discourages you from taking time to do research.
The most common crypto scam formats
The investment manager who contacts you first. The FTC says a so-called investment manager who contacts you out of the blue is a scammer.
The celebrity multiplier. The FTC says a scammer may pretend to be a celebrity who can multiply any crypto you send them. No celebrity does this.
The online love interest. The FTC says an online love interest who wants you to send money or crypto to help you invest is running a scam. The FTC says never to mix online dating and investment advice.
The fake company. The FTC says scammers impersonate well-known companies like Amazon, Microsoft, FedEx, or your bank. They also pretend to be from the government, the police, or your power company. See our pages on the IRS scam and the email scam PayPal for two common impersonations.
The secret system. The FTC says scammers claim they will teach you a secret method or have a proven system to make money. The success stories they tell are made up or a rare exception.
The free money promise. The FTC says scammers promise free money, but free money promises are always fake.
Many of these are versions of an investment scam with crypto as the payment method.
What makes crypto payments different from card payments
This is the part that hurts after a scam. The FTC says credit cards and debit cards have legal protections if something goes wrong. The FTC says cryptocurrencies typically do not come with any such legal protections.
The FTC says you usually cannot reverse a crypto payment. Once you pay, you can usually only get your money back if the person you paid sends it back. A thief will not send it back.
Crypto accounts are also different from bank accounts. The FTC says no government backs crypto accounts. U.S. dollars in an FDIC insured bank account are insured by the government. The FTC says crypto is not insured that way. With credit card fraud, your card company has a dispute process. With crypto, there is often no one to dispute to.
The FTC says only scammers demand payment in cryptocurrency.
Steps to take after the payment is gone
If you already sent crypto, a few things are true and a few things help.
First, the FTC says wallet records can sometimes show who was part of a payment. Crypto transactions are recorded on a public list called a blockchain. That does not mean your money comes back.
Second, slow down before your next decision. The FTC says scammers use high-pressure tactics and want you to act fast. The FTC says before you invest, take time to talk to someone you trust who has your best interest in mind.
The signs that never fail
The FTC says only scammers will guarantee profits or big returns. All investments come with the risk that you will lose money, and there are no guaranteed returns. The FTC says only scammers promise huge profits. They promise you can quit your job or beat the stock market.
The FTC says scammers claim an investment comes with little risk, time, and effort. It says scammers want you to think their opportunity is risk-free, but it is not. Walk away from anyone who shrugs off the risk or brushes off the paperwork that explains it.
The FTC says the success stories scammers tell are completely made up or a rare exception. It says whether the market is up or down, scammers will tell you there is no better time than now to invest. The FTC says crypto prices can change fast, even by the hour. There is no promise the price will rise again.
If someone guarantees crypto profits, the answer is no. That person is a scammer, every time.