RISKS & SCAMS
How to Avoid Crypto Scams
The fastest way to lose your cryptocurrency is not through a bad trade, but through deception. Hackers and scammers don’t usually break blockchains themselves… instead, they exploit human error. In a system where transactions are irreversible, once your funds leave your wallet, there is no customer service line to call, no bank dispute to file, and no “undo” button. This makes scam awareness and risk management just as important as investment strategy.
For those of you that aren’t familiar with the best practices to safely & securely use your Crypto wallet, check out our “Best practices to safely & securely use your Crypto wallet” lesson here.
Here’s how to spot and avoid common scams in Crypto.
Phishing Attacks
These scams mimic the websites of exchanges, wallets, or decentralised applications, tricking people into entering sensitive information such as private keys or seed phrases. Often, they arrive via emails, fake Google ads, or direct messages on platforms like Telegram and X (Twitter). Once you type in your details, the scammer has complete access to your wallet.
The defence is simple but non-negotiable: never click unknown links, always use bookmarked URLs, and remember that no legitimate crypto platform will ever ask you for your seed phrase.
Pump-and-dump schemes
This is where a group of insiders hypes up a new or obscure token, often spreading promises of “guaranteed moon shots” in online communities. By the time unsuspecting buyers rush in, the insiders are already selling at inflated prices, leaving newcomers holding worthless bags.
The solution here lies in discipline and scepticism. Before buying into any asset, check its trading volume, liquidity, and whether the project has real fundamentals. If the only selling point is “we’re going to the moon,” avoid it at all costs. Keep in mind that this has essentially described the entire Memecoin market.
Fake Wallet Apps or Extensions
Fake wallet apps and browser extensions present yet another risk. Scammers often publish counterfeit versions of well-known wallets in app stores or as downloadable software. Once installed, these apps silently drain your funds or capture your seed phrase.
Protecting yourself comes down to diligence: only download wallets from official websites, and double-check that the app developer matches the legitimate team. Learn more about which crypto wallet is right for you here.
Romance & Trust-Based Scams
Scams are not always purely technical; many can be psychological. Romance scams prey on trust & emotions. A scammer builds a relationship over weeks or months, gradually convincing the victim to invest in a shared opportunity. Once the victim deposits funds, the scammer disappears. These are especially insidious because they target vulnerability rather than greed. Whilst you might think this scam is an obvious one to pick up on, take a moment to look at your own current social media engagement behaviour. Do you find yourself ever commenting on someone’s post, or replying in agreement to someone’s opinion? These accounts might be operated by those very scammers who have now built a positive rapport with you through simply agreeing with your content.
The rule here is to separate your personal life from your financial one. If someone you meet online pressures you to share investments, it is almost certainly a scam. Fortunately these types of scams are already very well known outside of the cryptocurrency world, and are typically very recognisable to the average person. It’s important to keep a look out for the older generations that may be easily deceived.
Rug Pulls & Exploits
These occur when developers launch a token or decentralised finance project, attract liquidity, and then vanish overnight with investor funds. In some cases, the exploit comes from within the project code itself, malicious backdoors written into smart contracts that allow developers to drain liquidity pools at will. Maybe you’ve heard the term ‘honeypot’ before with a Memecoin project. That’s when you can buy tokens of a Memecoin, but can’t sell them back. A classic rug pull setup.
To avoid these traps, research is critical. Look into whether the development team is anonymous or publicly recognised, whether smart contracts have undergone security audits, and whether the project has long-term credibility beyond social media hype. Never invest in projects you have no knowledge about.
Now that you know everything about how to avoid Crypto scams, it’s time to move on to our next lesson topic, “How to Manage Trading Risks”.
