Crypto Scam Types

What is cryptocurrency?

Cryptocurrencies are a type of virtual currency with some properties of a traditional currency. They have no central authority. The word cryptocurrency was first coined in the mid-1990s by a term for internet-based currencies. Some popular cryptocurrencies include Bitcoin and Ethereum. Cryptocurrency is essentially digital money, which means it exists only in the digital world and can’t be used to purchase goods or services. To make a cryptocurrency transaction, the owner of a cryptocurrency needs to have a private key, or private online access code, to unlock the cryptocurrency.

Some think of cryptocurrency as a way to exchange money from person to person without using a bank or other third party. Bitcoin is the most well-known cryptocurrency.

How can you avoid scams?

Be sure to visit the company’s website regularly to review and find out how to verify information and investigate any claims. Before you invest any funds, you should do a lot of research on the company. Even before you’ve received your first coin or digital token, make sure you’ve thoroughly looked into its team and background, and that it meets your expectations. Don’t invest or give money to any company you haven’t checked thoroughly.

Sometimes scammers will want to try to mask their origin with a bitcoin or other cryptocurrency-related name. Other times, they’ll be less obvious. Stay away from any businesses that ask for your credit card number or debit card information via email, or send emails that appear to be phishing scams.

What are the common types of crypto scams?

1. ICO scams. Most blockchain startups plan to raise money by selling something called an “initial coin offering.” ICO stands for “initial coin offering.” ICOs are similar to IPOs (initial public offering) on a traditional stock exchange. To launch a crypto company, investors would typically buy newly-created digital currency units through an ICO. With an ICO, a startup gives away these digital currencies to the public and lets investors trade them for fiat currency like dollars or euros.

Unfortunately, not all ICOs are legitimate. Some scammers are trying to pump up the value of a new cryptocurrency so that they can later sell their digital currency at a huge profit.

The pyramid scheme scam

If you’re contacted by someone promising you a fortune in cryptocurrenc, if they start by cold-calling or e-mailing you, it’s likely that it’s a scam. Pyramid schemes promise a big payday but require an investment, and usually require participants to pay money to continue. An experienced scammer would know to start with a smaller investment and work up to bigger and bigger payouts over time. But for an unsophisticated scammer who has never run a pyramid scheme before, there is a huge risk involved.

The scammers may target users through social media, look for followers who seem likely to invest, or even hack into third-party sites, like, which lists all the cryptocurrencies that are currently on the market.

The Ponzi scheme scam

This type of scam promises higher returns to early investors by putting “seed money” into their company. Once you start, they start taking money from your “investment” and using it for something that has nothing to do with their product or services. A related type of scam occurs when someone promises to offer a “VIP” membership to a network or the ICO market with future payments, but the company doesn’t really have an idea how to make those payments.

The 0% coin scam

This is the most popular scam in the crypto world today, and it’s one that has been around for a while. A startup proposes to give you the opportunity to buy their cryptocurrency at a huge discount for 0% commission.

The “investment advisor” scam

For years, legitimate cryptocurrency companies have been targeted by scammers. Cryptocurrency markets are so new that even legitimate organizations haven’t figured out how to consistently make a profit from it. Since there aren’t any professional financial advisors offering professional advice on this new field, scammers are taking advantage of the lack of professional help in the space by making cold calls and pretending to be the legitimate industry experts, supposedly to teach you how to invest in cryptocurrency. These con artists often say they’re affiliated with well-known financial companies, but never disclose that this is a ruse.

The altcoin scam

The altcoin scam is in reference to so-called lesser-known altcoins.

The MLM or affiliate marketing scam

An MLM (multi-level marketing) scam works this way: the mastermind puts you under the impression you’re making thousands of dollars every week. You invest your own money in the MLM product, and then the “coaches”—other people looking to make a quick buck—recruit you to sell the product for them. Once you start making money, you’re required to pay a percentage of your earnings into a joint venture and are encouraged to recruit other people, along with paying the coaches.

After your initial investment, you’re encouraged to keep making money to keep your position in the MLM, which keeps you in the loop and ensures you never miss out on earnings.


If you’re interested in investing in crypto, make sure to find the right company to invest in first. Don’t fall for the first scam you come across.

This story originally appeared on Don’t Waste Your Money. Checkout Don’t Waste Your Money for other great tips and ideas to make the most out of life.