Investors, Beware: Common Cryptocurrency Scams and How to Avoid Them

Jay Pagkatotohan

Jay Pagkatotohan

Last updated June 01, 2022

Crypto investing can be lucrative when done right. For those whose spirits can’t be dampened by losses, it can be pretty thrilling, too. Needless to say, cryptocurrency has taken the world by storm. The technology behind it is fascinating, and its perceived gains appeal to a lot of people who want to have a better future. 

But crypto investing is not without risks. For one, it’s volatile. If you don’t play your cards well or you become greedy, you might lose big time. But more than that, the crypto industry’s rife with opportunists and schemers who won’t hesitate to take advantage of both seasoned and inexperienced investors.

Protect yourself from fraudsters by knowing the common cryptocurrency scams. Learn about them here.

What are the Common Cryptocurrency Scams to Watch Out For?

Some scams are easy to identify. However, some may require sharper eyes and a more astute perception. Here are some of the modus operandi of crypto scammers. 

1. Fake Coins

cryptocurrency scams - fake coin scam

The likes of bitcoin and Ethereum are already big and expensive, and you may have the impression that it’s too late to invest in them. As a result, you’ll look for altcoins (alternative coins) that have the possibility of getting big in the future.

However, scammers will exploit this area by introducing victims to a new coin, which is actually fake and non-existent. If you invest in a fake coin, the money that you put in it goes directly to the scammer. 

The U.S.-based virtual currency My Big Coin is one good example of this scheme. Randall Crater, the crypto’s operator, claimed that My Big Coin was backed by gold, a selling point that enticed investors. Later on, it was found that Crater spent clients’ investments worth $6 million for personal use, like buying jewelry and antiques. 

Prosecutors explained that Crate along with others had sought to scam investors from 2014 to 2017. In 2019, Crater was arrested for defrauding investors.

This case was a significant one since it led to one of the first court rulings holding that virtual currencies could be considered a commodity within the jurisdiction of the U.S. derivatives regulator.[1]

The lesson here? Be wary of people with out-of-this-world or too-good-to-be-true claims. If a good offer sounds impossible to happen, trust that it really won’t. 

Read more: 5 Essentials for Cryptocurrencies: Get Started Now

2. Rug Pull Crypto

Interested in pop culture-inspired cryptocurrencies such as Dogecoin?[2] If so, you might have already heard of a coin called Squid. Propelled by the international hit show Squid Game, Squid has been deemed a crypto scam. 

Launched in October last year, Squid’s value quickly skyrocketed, thus attracting more investors, including Filipinos. But one morning, all the coin’s value was lost. It appeared that Squid’s makers already cashed out the tokens, with an estimated value of over $3 million. The coin’s website also vanished, and its creators couldn’t be contacted anymore. This makes Squid a textbook example of a rug pull.

A rug pull in crypto is a kind of scam where the creators of a coin abandon the project and run away with the investors’ money. Initially, the creators ramp up the value of the coin by creating hype on different social media platforms. They usually exploit people’s fear-of-missing-out (FOMO) tendencies to get them to invest in the coin. 

3. Pyramid Schemes

cryptocurrency scams - Pyramid Schemes

Also known as pyramid scams, pyramid schemes are unsustainable business models that only favor the founders and early investors. Membership requires a fee or an initial investment, and the money that each newbie gives gets funneled to the founders or early investors who sit at the top of the pyramid. 

Such scams are well-documented in the Philippines. It’s even prevalent in the context of cryptocurrency. Here are three examples to take into account. 

The 2018 Bitcoin Scam 

One bitcoin scam that caught the attention of crypto investors in 2018 was the pyramid scheme organized by the couple Arnel and Leonady Ordonio. According to reports, the two scammed over 50 investors, collecting money amounting to PHP 900 million.[3]

Using their company named “NewG,” the couple managed to convince victims to invest money with a promise that each investor will receive their earnings every 15 days. However, this didn’t happen, as the couple apparently shut all their communications lines, making it impossible for their investors to contact them.  

The BitAccelerate Scam 

Another example in the Philippines is the BitAccelerate case. Also known as Bitaccelerateproject.com, BitAccelerator, and BA, it operated as a crowdfunding platform. BA claimed that it could provide investors with long-term active and passive income. 

The Securities and Exchange Commission (SEC) reported that investors were told they could earn up to 350% maximum passive income from their investments. That’s about 2% to 8% daily profit. The income would be generated depending on the number of referrals and membership fees that members collected. 

Read more: Best Long-Term Crypto Investments 2022: 8 Crypto Coins with Potential for Growth

Solmax Global and Igniter 100

These companies’ scheme involved their very own cryptocurrency called i100 or Equity Token, which was pegged at 0.38 pounds per share/token. They offered a suite of investment packages with prices ranging from £25 to £5,000.

Clients were guaranteed that they would earn 1% passive income per day. The companies also told investors that they could increase the returns to 2% per day for 100 days if they managed to recruit at least three more people into the scheme. 

Read more: Investment for Beginners: Find the Right Investment for You

4. Phishing 

cryptocurrency scams - phishing

Phishers usually target a person’s banking account login credentials. Others, however, will attempt to access your keys to your crypto wallet.

Sometimes, phishers pose as employees of a fake or even a legitimate company and then call or send their victims an email, explaining that their wallets have been compromised or are unsafe. There are others who tell their victims that they can help manage their crypto, which in turn convinces the victims to hand in their wallet’s login credentials. 

5. Giveaway and Influencer Scams 

A lot of influencers and high-profile personalities, such as Elon Musk, are very vocal when it comes to crypto. As such, scammers may create social media profiles using the names and photos of these people.

On their pages, the scammers will announce that they’ll be giving away tokens, which victims can only receive if they send money. 

One related case to this scam involves a trading platform called Bitcoin Lifestyle. In 2020, fake news claimed that the Philippine government created Bitcoin Lifestyle and that President Rodrigo Duterte urged Filipinos to learn how to use the platform so they could get involved. According to the Department of Finance, the fake news item suggested that the tax the Philippine government would procure from this would be huge and benefit the citizens. 

​​There’s another case where an organization called Bitcoin Revolution (www.the-bitcoinrevolution.com) attempted to collect money from unsuspecting investors. The said company was notorious for coming up with celebrity-centric materials to entice victims. Their so-called endorsers included Manny Villar, Manny Pacquiao, and Boy Abunda. Bitcoin Revolution even claimed that traders would become millionaires in less than two months if they became part of the scheme. 

Related reading: Crypto Gaming 101: How to Play and Earn Online in the Philippines

6. Social Engineering Fraud 

Scammers also resort to manipulation to get people’s money. To start their scheme, they may either befriend the target online or establish a connection in person. Some may even try to get romantically involved with the victim. 

When the scammer convinces the victim to trust them, that’s when they attack. At this crucial moment, the victim may unwittingly or willingly reveal their wallet’s login credentials or any piece of information that will give the perpetrator access to the crypto. 

Read more: Dabbling in Crypto? Learn More About Crypto Apps

How to Avoid Cryptocurrency Scams 

Crypto scams abound, but you can always do something to protect yourself from fraudsters and schemers. Here’s what you need to do. 

1. Stay Away from Offers That are Too Good to Be True

cryptocurrency scams - Stay Away from Offers That are Too Good to Be True

You want to make money, but don’t let tantalizing offers blindside you. When someone offers you an investment scheme with a very quick turnaround time in terms of profit, don’t get excited. Instead, quiz the person about the investment’s sustainability and its required start-up capital. 

When someone offers you such a crypto investment, observe how the word “GUARANTEED” is used, especially when it’s paired up with the terms “returns” and “payouts.”  Remember that crypto trading’s very volatile, and nothing’s ever guaranteed. 

In the same vein, don’t get carried away by the hype and overly optimistic predictions. You’re not supposed to take information at face value, so you must always do your research. This shouldn’t be a problem, as reviews and reports are always available online. While you’re at it, only source your information from reputable publications. 

2. Only Trade at Trusted Crypto Exchanges 

Be cautious when choosing a crypto exchange.[4] Some scammers may take the time to build apps or websites to attract more people to victimize. If someone recommends a new exchange, look it up online and read reviews about it. Moreover, only trade at exchanges that have a reputation for having an impeccable security system.

However, don’t just rely on the security features of your online wallet. Do your part by enabling two-factor authentication. Experienced investors recommend storing your private keys in a hardware wallet. This is a secure option since it’s inaccessible to hackers. 

3. Always Check the Websites That You Visit 

cryptocurrency scams - Always Check the Websites That You Visit

Some scammers may build fake websites that are almost identical to the popular and legit cryptocurrency websites. The intention is to mislead and get you to turn in important details about you, such as your wallet’s login data.

Consider a website suspicious if it’s not encrypted (not bearing https in its URL), or there are a lot of typographical and grammatical errors in the content. You may also check the quality of the ads and links on the page, but be careful not to click on any of them. 

4. Check New and Upcoming Coins 

You’re always free to find the next big coin, but do it with extra caution. Otherwise, you may fall prey to rug pullers. There are a few ways to check the legitimacy of a coin, though. 

First, check the coin’s website and whitepaper. Keep in mind that every coin is supposed to publish a whitepaper explaining the project’s technology and mechanisms.

Then, check the profile of the creators. While bitcoin’s Satoshi Nakamoto may be elusive and anonymous, it’s not wise to project the appeal of his anonymity to the creators of your prospective coin should they choose to remain unknown. The more information about the developers, the better. 

You may also want to check crypto trackers, such as CoinMarketCap and CoinGecko. These websites have information about coins that are publicly available. 

Read more: Coins Pro Trading: What You Should Know Before Buying Cryptocurrencies

5. Don’t Trust Anyone Easily 

When investing in crypto, trust is an important currency that you’re not supposed to give to anyone―even if it’s your mom, dad, brother, or sister. So as much as possible, don’t entrust them with your crypto-related credentials. Yes, your loved ones may be trustworthy. But their momentary or unexpected carelessness may compromise your crypto’s security. 

Keep your private key or seed phrase only to yourself. When you’re online, never accept unsolicited offers from unknown people. More often than not, they’ll ask for your sensitive information.

Take into account that these people usually send messages that sound urgent. If they claim that they’re representing a legitimate company, don’t hesitate to double-check their information.

Final Thoughts

With loose safeguards and almost no regulation, the crypto industry’s basically a sandbox where anything’s possible. With that, fraudsters have the liberty to do their misdeeds. 

Be smarter than the scammer. Add more security parameters to your crypto investment. Never trust anyone. And don’t let greed get in the way; sometimes, this very desire can cloud your judgment. 

If you’ve stumbled upon companies and individuals involved in cryptocurrency scams, send an email to the SEC via epd@sec.gov.ph. You can also call the agency at (02) 8818-6337.

On the other hand, you may contact the NBI Anti-Fraud Division at (02) 8525-4093 or afad@nbi.gov.ph if you receive malicious messages. You may also report such incidents to the PNP Anti-Crime Group via (02) 8723-0401 or acg@pnp.gov.ph. 

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Jay is a marketing communications professional who specializes in short-form and long-form content. He has written ads for TV, radio, print, and digital. He has also produced corporate blogs, magazine features, white papers, product listings, reviews, and press releases for clients here and abroad. When he’s not writing, Jay plays the piano or takes pictures for his visual diary. Follow Jay on LinkedIn.