Crypto Scams | What are Cryptocurrency Scams?

Imagine waking up to find your digital wallet empty, drained by an invisible thief. This is the harsh reality of crypto scams, which exploit individuals through fake investment opportunities, phishing schemes, and romance scams.

The Federal Trade Commission (FTC) reported over 46,000 cases of cryptocurrency scams in the U.S. alone between January 2021 and June 2022, amounting to over a billion dollars in losses. The rapid rise in cryptocurrency’s popularity, along with the anonymity it offers, the absence of regulation and the public's general lack of understanding, creates a fertile ground for these scams to thrive.

In this article, we will explore cryptocurrency scams and how to detect and prevent them using advanced solutions like Pasabi’s AI-powered fake account detection.

What is a Cryptocurrency Scam?

Cryptocurrency is a digital or virtual form of currency that uses cryptography for security. Unlike traditional currencies, cryptocurrencies operate on decentralized networks based on blockchain technology. This distributed nature means there is no central authority to regulate or back cryptocurrencies, making them both appealing to fraudsters and risky for consumers due to their lack of oversight.

As the popularity of cryptocurrencies like Bitcoin and Ethereum has surged, so too has the prevalence of scams targeting novice and experienced investors alike. Crypto scams have become increasingly prevalent in regions with high cryptocurrency adoption, such as the United States and parts of Europe and Asia.

Crypto scams often occur on social media platforms, dating sites, and via direct messages, through methods such as:

Investment scams: Fraudsters promise high returns with minimal risk, enticing victims to invest their cryptocurrencies into non-existent projects.
Phishing scams: Scammers trick individuals into revealing their private login information through fake websites or emails that appear legitimate.
Romance scams: Scammers build fake relationships using fake accounts to emotionally manipulate victims into transferring their crypto assets. Find out more about his approach, which is known as ‘Pig Butchering’.

Cryptocurrency scams are particularly dangerous because unlike traditional financial fraud, where transactions can often be traced and reversed, crypto transactions are final and difficult to track. This makes it easy for scammers to disappear with victims' funds without a trace.

With a median individual reported loss of $2,600, crypto scams do not just target inexperienced investors; higher net worth individuals are often singled out due to the lucrative potential they offer. The psychological toll is severe, with victims experiencing stress, anxiety, and a loss of trust in digital financial systems.

How to Prevent Cryptocurrency Scams

Crypto scammers are almost always hiding behind fake accounts. So online platforms must implement robust detection and prevention strategies such as:

Monitor activity: Watch for unusual patterns, such as sudden large transactions or multiple new accounts, which can indicate fraudulent behavior.
Verify accounts: Use multi-factor authentication and additional checks for high-risk activities to ensure user authenticity.
Educate users: Provide resources to help users spot scams, including:some text
- Guaranteed returns: Inform users that no legitimate investment guarantees profits.
- Unsolicited offers: Warn users to be wary of unsolicited investment offers, especially from social media or messaging apps.
- Requests for personal information: Instruct users to never share private passwords or personal information.
- Urgency and pressure: Alert users to be cautious of anyone using urgency and pressure tactics, a common scammer strategy.
- Too good to be true: Advise users that if an offer seems too good to be true, it likely is.

Pasabi's Solution for Fake Account Detection

At Pasabi, our advanced fake account detection technology uses behavioral analytics to continuously monitor user behavior and detect patterns indicative of fraud, such as unusual account creations and interactions. Our AI algorithms analyze these behaviors, flagging suspicious activities that deviate from normal user patterns.

This approach allows platforms to promptly detect and remove scammers, protecting users from potential crypto scams and maintaining the platform's integrity.