Cryptocurrency

How To Spot And Report Crypto Scams? Step-By-Step Guide

By Sandra Easton

With the crypto industry evolving rapidly with each passing day, more and more people are flocking towards it in the hope of gaining profits. Bitcoin’s crossing of the $100K mark has also significantly contributed to this development. It has somewhat succeeded in increasing the urgency of people looking to join the crypto market. 

As their number keeps growing, so do the scams associated with the crypto world. There is also a chance that the crypto scammers will sell your details to other scammers, so you must know how to spot and report these scams. That’s why we have decided to bring forth this article to you. Here, we will look into the different types of scams, and how you can successfully identify and report them so that others won’t fall into their scams.

Crypto Scams & Their Types

A crypto scam is a financial fraud in which the fraudsters steal cryptocurrency from its holder by employing different tactics. The key things that scammers utilize to conduct their nefarious activities are privacy, decentralization, and the lack of regulations surrounding the crypto market. Many types of scams are currently happening in the crypto industry. Here, we will discuss the top ones among them.

1. Man-in-the-Middle Attacks

A man-in-the-middle attack is a cyberattack where the attacker intercepts communication between two parties. This is mostly done to steal sensitive information such as login credentials and other account information.

2. Impersonation Scams

In the crypto community, impersonation scams are a type of scam where the attacker poses as another person to ensure a sense of security for the potential victim to easily rip them off.

3. Pig-Butchering

Pig-butchering is another common scam that has been widely conducted in the crypto world. In this scam, the scammer convinces the victim to make a particular investment by showing proof of gains from it. Afterward, the scammer steals the funds that were invested.

4. Pump & Dump

Pump & dump scheme is a scam in which the scammers artificially inflate the value of an asset in the market. Once the price peaks, they sell off their share causing the plummet of its market value.

How To Spot Crypto Market Scams Easily

Man Reporting A Crypto Scam

Crypto scams are one of the top things that you need to be aware of if you’re looking to safeguard your capital. Spotting a crypto scam is relatively easy if you know what you’re looking for. Here, we will look into how you can do so.

1. Whitepaper

Before a crypto project is launched, a document will be published about it showcasing the details and roadmap associated with the project. This document is called a white paper. You should carefully go through this document and check if it describes the protocols,  associated blockchain, and formulas clearly, and properly explains the various functionalities of the network. If the document does not clearly state these things and somewhat feels like promotional material, then the project will most likely be a scam.

2. Identify Team

Whitepapers are excellent for knowing who all are behind the development of a crypto project as they mention the number of members and developers behind the crypto project. However, some open-source projects may not mention the names of the developers. Still, you may find a lot of information about these projects on forums and other platforms like GitHub. If you can’t find such information, then the project may potentially turn out to be a scam.

3. Self-Praising & Markey Scrutinization

Almost all legitimate crypto projects have a calm and humble beginning at first and may lack the money to host a big campaign or any advertisement. Additionally, they won’t be promoting themselves continuously. Instead, they will most likely be addressing various issues surrounding the platform. You might even see various announcements regarding their new updates and all. So, if you came across a project that talks more about money than its underlying project, it would most likely have the hands of a scammer behind it.

4. “Free” Items

Many cryptocurrency scams have been folding in the market where the scammers offer to drop coins in your wallet. They then ask users for their wallet address and other credentials, which they can utilize to steal your assets. So, beware of these scams and always keep in mind that nothing comes free, especially in the crypto world.

How To Report These Crypto Scams

Reporting a crypto scam is one of the most helpful things that you can do as it prevents others from falling into these traps. There is also a chance that the authorities can take down the scammers behind these traps. If you are a victim of these scams and lose your assets, then there is a chance that you might recover them. So without the wastage of any time, let’s look into how you can report crypto scams to the authorities.

1. Evidence Collection

Try to gather as much evidence and other relevant information about the fraudulent activity that you encountered. This might be communications, transaction records, screenshots, advertisements, or even website links.

2. Contact Authority

Choose an authority and contact them. You can do so by using the crypto scam hotline or by visiting their official sites. If it is associated with a particular exchange, then you can make a report on that exchange.

3. Provide Evidence

Provide the evidence you gathered and submit a report detailing the time and place you spotted the scam, and all the details you noticed about their fraudulent activity. In addition, if you spot anything that helps identify the fraud behind this, provide it all to the authorities.

4. Follow Up

In most cases, the investigation will proceed without you getting any further updates. So don’t expect them to message you back regularly. If you want to know more about the investigation, follow up.

Top Agencies To Report Crypto Scams

If you spot a crypto scam and are wondering where you can report it, keep in mind that there are a number of government agencies to do so. Here is a list that showcases the top agencies that you can easily report the scam.

  • Securities & Exchange Commission (SEC): The Securities & Exchange Commission( SEC ) is an organization of the US Federal Government that aims to protect investors, prevent any market-associated illicit activities, and facilitate capital formations. You can easily file a complaint here and the SEC will take care of the rest.
  • Commodity Future Trading Commission (CFTC): The CTFC is responsible for the regulation of the US market and its associated commodities, which includes digital assets. They also employ a whistleblower reward scheme for the disclosure of scams or fraudulent activity.
  • Internet Crime Complaint Center (IC3): IC3 is an agency that is operating under the FBI that specializes in cyber crimes. It allows the FBI to investigate various reports and even to freeze funds.
  • Federal Trade Commission (FTC): The FTC is responsible for protecting US citizens from any illicit and fraudulent business-related activities. This includes crypto scams as well. You can file your complaint here and the FTC will open an investigation.

While spotting a crypto scam, it is vital to report it as this could potentially help a lot of budding investors and traders of the market, just like you once were.

Final Remarks

Cryptocurrency scams in most cases can cause irreversible damage, especially to your portfolio. This is mainly because of the blockchain technology. Also, once you’re scammed, there is a chance that you may not be able to retrieve the lost assets. But, you can take precautions against these scams and ensure that others don’t fall into these traps by reporting them to the appropriate authorities. Lastly, remember to always be vigilant and try not to get involved in any suspicious activity surrounding the crypto market. That way, you can avoid scammers and can always stay one step ahead of them.

Sandra Easton

Sandra Easton, based in Canada, is a distinguished author and educator known for her expertise in cryptocurrency. She has written the acclaimed Easy Crypto Series, which is globally available on Amazon, breaking down the complexities of crypto for everyday learners. Beyond crypto, Sandra’s skills extend to real estate investments, stock and forex trading, and more. Through her work, she is dedicated to equipping people with the tools and knowledge to navigate these dynamic industries effectively.

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