Crypto offers an innovative digital way to store and transfer value. But with new and exciting opportunities come risks. While some people use cryptocurrency for legitimate investments, scammers see it as an easy way to steal money - fast, anonymously, and with little chance of getting caught.

What is a crypto scam?

Cryptocurrency - often shortened to crypto - is a digital currency, though it's rarely used to make purchases in day-to-day life. It uses blockchain technology to record transactions securely, which makes it difficult to alter or reverse. Popular types of crypto include bitcoin and ether.

Crypto has a few important features that make it attractive to criminals:

• Anonymity
• Irreversible transactions
• Lack of regulation
• Global accessibility.

A crypto scam is a malicious act that uses crypto to transfer value. For example, a scammer might trick someone into sending crypto or steal their login credentials to access funds. Whatever the approach, victims of crypto scams are unlikely to recover the money they've lost. Once it's gone, it's gone for good.

How do crypto scams work?

Crypto-related scams typically fall under one of three categories. Let's take a look.

1. The victim sends crypto to the scammer

This involves the scammer creating a scenario where the victim is pressured or deceived into making a payment usng crypto. Here are some examples:

• You see an ad for a work-from-home job. The "hirer" asks you to make a payment to them in bitcoin.
• You come across an ad on social media that claims to match or multiply the amount of crypto you invest in their app
• A scammer contacts you and says they have access to some kind of information—like your browsing history or even personal photos. They try to blackmail you by asking for payment in crypto.

2. Fake crypto exchanges, apps, or websites

These scams target people who are looking to legitimately invest in cryptocurrency. They work in a similar way to other phishing scams.

Malicious actors create fake online exchanges or even mobile apps. When you enter your information, it's stolen. Then, when you purchase crypto, the scammer logs in using your credentials and transfers it to their own wallet.

3. Fake cryptocurrencies or investment opportunities

These scams work by manipulating investors into purchasing a new token or cryptocurrency. This could be through an initial coin offering (ICO) with plenty of hype surrounding it on social media.

At first, it might look like the value of your investment is skyrocketing - you might even buy more as a result. But eventually, you're locked out of the site and lose all your money. Or, the scammer has orchestrated a Ponzi scheme - they're using money from other investors to pay you.

How to identify a crypto scam

Here are some of the tell-tale signs that you're dealing with a crypto scam.

You feel pressure to pay

Legitimate investments don't come with urgent deadlines or high-pressure tactics. However, scammers don't play by the rules. They have one goal and one goal only: to get your money.

So, if you feel like you are being pushed to buy crypto, transfer it, or use crypto to pay for a product or service, back away. Another giveaway is being told you must pay an upfront fee or invest more to access your funds.

Someone you don't know contacts you

A phone call from nowhere, an email out of the blue, a message on social media from a total stranger—these are red flags. If you get unexpected contact from someone claiming to be an investment manager urging you to buy crypto, ignore it.

You see ads featuring celebrities or influencers

Artificial intelligence (Ai) has the power to do a lot of good, but scammers are using it to their advantage. They create deepfake videos or edited images of well-known personalities, whether that be movie stars or social media influencers. They promote these videos or images across the web, hoping to trick people into believing the endorsement. The idea is to add credibility to their claims.

If you see a celebrity promoting a crypto opportunity, don't fall for it.

Things just aren't adding up

Some signs things might not be what they seem include:

• The investment guarantees big returns
• You see tokens in your digital wallet that you never purchased
• You search for an investment company online, and results come up about it being a scam
• The website or app looks unprofessional, with spelling mistakes or strange wording
• You can't find any clear information about who runs the company or how they operate.

Follow this checklist before you invest

Investing can be a great opportunity if you've done your research and understand the risks. But if you jump in blindly, you could lose everything.

Before you invest:

• Verify the platform. Check if the exchange or app is legitimate and well-reviewed.
• Look up the team.  Research who is behind the project. No transparency? Big red flag.
• Understand the risks. If something sounds too good to be true, it probably is.
• Check for regulations. Is the investment regulated in your country? If not, proceed with caution.

Always do your due diligence. Think long and hard before parting with your money. If something feels off, trust your instincts.