How to Protect Yourself from Cryptocurrency Fraud

How to Protect Yourself from Cryptocurrency Fraud

What You Need to Know to Protect Yourself from Cryptocurrency Fraud

Cryptocurrency can be a great investment, both for businesses and individual investors alike. But as the crypto market becomes more easily accessible to investors across the financial spectrum, criminal actors have seen the increasing level of adoption as a new opportunity to target victims. Cryptocurrency fraud has skyrocketed over the past few years to record-breaking levels, resulting in billions of dollars in investor losses every year. In 2021 alone, the FTC reported more than a 1000% increase in cryptocurrency fraud and scams reported over the previous year.

While cryptocurrency investment inherently involves risks, falling victim to fraud shouldn’t be one of them. Below, we’ll take a look at some of the key indicators of cryptocurrency fraud and what you can do to protect your assets. 

Red Flags

Cryptocurrency scams are steadily becoming more refined, as digital criminals always seek new methods to cheat, steal, and con people out of their investments. Unfortunately for the unsuspecting victims of crypto fraud, once these assets have been transferred it is almost impossible to get them back. Knowing how to identify the most common tactics used by scammers is a key step in preventing fraud from occurring in the first place. 

According to security experts, these are the most reliable indicators that you are being targeted by a scammer: 

  • Demanding Crypto-Only Payment – If an individual or business entity claims that they cannot accept any form of payment other than cryptocurrency, it’s more than likely a scam. The cryptocurrency market is still a developing asset class, and credible business entities won’t accept crypto without also accepting conventional payment methods like cash, debit/credit cards, wire transfers, etc. 
  • Guarantees Profit – Cryptocurrency is a speculative asset, and there are no guarantees that it will increase in value. If an entity guarantees that your crypto investment will generate a profit, they are probably trying to scam you. 
  • Promises Quick Returns – Just as profit cannot be guaranteed, the amount of time that may pass before receiving a set return on crypto (such as doubling an investment) cannot be promised by anyone. 
  • Unsolicited Offers – Some scammers will send unsolicited job offers related to selling, mining, or managing crypto investments. These are job scams that are designed to gain access to your money and personal information. 

While these are some of the most common methods used by cryptocurrency scammers today, criminals are also known to resort to blackmail and extortion. Criminal scammers will send mass emails to unsuspecting investors, threatening to expose sensitive information unless a crypto payment is made, even claiming to have covertly activated laptop webcams to record people watching pornography. These attempts cast a wide net, hoping to frighten as many people as possible into making a payment to keep their information safe. However, these empty threats are fueled by lies and are criminal extortion attempts that should be directly reported to the FBI

Another strategy used by scammers is impersonation. This method relies on the scammer impersonating high-profile celebrities, politicians, business leaders and corporations. A recent example of this occurred in 2020, when the Twitter accounts of Jeff Bezos, Elon Musk, Barack Obama, Kim Kardashian, and more than 100 others were hijacked by scammers who sent public messages disguised as philanthropy, saying things like “I am giving back to the community.” Hijacked accounts then promised to double the amount of Bitcoin sent by users to their wallets. Prosecutors in this case estimate the crypto scam netted more than $100,000 worth of stolen Bitcoin. 

How to Protect Yourself

The best way to protect yourself from cryptocurrency fraud is to exercise caution and conduct thorough research. Before making an investment or transferring assets to a third party, investors should gather as much information as possible about the process and verify the identities of those involved.

Examining the Initial Coin Offering (ICO) whitepaper for a crypto project, researching the development team, and consulting with credible experts reduces the chance of overlooking red flags that would indicate a scam. 

As the laws regarding cryptocurrency are rapidly evolving in the U.S., some companies are already developing innovative solutions to integrate Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols into crypto transactions. is on the forefront of this effort, offering mobile ID validation solutions that confirm user identities, reduce fraud, and easily collect relevant information from ID images. 

By integrating’s AI powered mobile ID validation technology, businesses and financial institutions will be prepared for the eventual implementation of KYC/AML and other similar fraud protection protocols as the adoption of cryptocurrency increases.

Another blog you may like: KYC for Digital Wallets