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”.
Frequently Asked Questions
What are the most common crypto scams in Australia?
The most common crypto scams in Australia include investment scams (fake platforms promising guaranteed returns), romance scams (building emotional relationships to solicit crypto), phishing (fake websites or emails impersonating exchanges), rug pulls (projects abandoned after raising funds), fake giveaways (impersonating celebrities to collect crypto), and SIM swap attacks. The ACCC's Scamwatch regularly reports crypto scams as one of the highest-loss categories in Australia.
How can I tell if a crypto investment opportunity is a scam?
Key red flags include: guaranteed or unrealistically high returns with no risk, pressure to invest quickly, inability to withdraw funds easily, anonymous team members, unverifiable claims about partnerships or technology, requests to send crypto first before receiving anything, and platforms not registered with ASIC or AUSTRAC. Legitimate investment opportunities do not guarantee returns, do not pressure you to act immediately, and always allow you to withdraw your funds.
What is a pig butchering scam?
A pig butchering scam (also called sha zhu pan) is a long-running romance or investment scam where fraudsters build trust over weeks or months through social media or dating apps before introducing a cryptocurrency investment opportunity. Victims are shown fake profits on a fraudulent platform and encouraged to deposit more and more money. When they try to withdraw, they are told to pay fees or taxes. The scammer disappears once the victim runs out of money. These scams have cost Australians tens of millions of dollars.
How do I protect myself from crypto phishing attacks?
To avoid phishing: always type exchange URLs directly rather than clicking links in emails; check the URL carefully for subtle misspellings; enable two-factor authentication (preferably hardware-based, not SMS); never enter your seed phrase online under any circumstances; use a password manager that will not autofill on fake domains; and be suspicious of any unsolicited message claiming your account is at risk or that you need to verify something urgently.
Can I get my crypto back if I've been scammed?
Recovery of funds sent to a scammer is extremely rare. Blockchain transactions are irreversible. Some jurisdictions have successfully prosecuted scammers and returned partial funds, but this is the exception. Be especially wary of 'crypto recovery' services that promise to retrieve stolen funds for an upfront fee: these are almost always secondary scams targeting people who have already been victimised. Report the scam to the ACCC's Scamwatch, your bank, and local police.
What should I do if I think I'm being scammed?
Stop all communication with the suspected scammer immediately. Do not send any more money, even if they threaten consequences. Screenshot all evidence: conversation logs, transaction records, and any profiles or websites. Contact your bank if fiat has been sent. Report to ACCC Scamwatch at scamwatch.gov.au, AUSTRAC if a crypto business is involved, and to the Australian Cyber Security Centre (ACSC) at cyber.gov.au. Acting quickly gives the best chance of limiting further damage.
How do I verify a crypto exchange is legitimate in Australia?
Legitimate Australian crypto exchanges must be registered with AUSTRAC as digital currency exchange providers. You can verify registration on the AUSTRAC website. Exchanges offering financial advice or managed investment schemes may also need an Australian Financial Services Licence (AFSL) from ASIC. Check ASIC's Connect register for any claims of being a licensed financial services provider. Also look for the exchange's physical address, Australian business number (ABN), and publicly verifiable team members.
What is the safest way to store crypto to avoid being scammed?
The safest storage is a hardware wallet kept offline. Scammers cannot steal crypto from a hardware wallet unless they have physical access to it and your PIN. Never store large amounts on exchanges, which are online targets for hacks. Never share your seed phrase with anyone for any reason. Use separate wallets for DeFi interaction and long-term storage. Enable all available security features (2FA, withdrawal whitelisting) on any exchange you use. The phrase 'not your keys, not your crypto' holds: self-custody is the highest form of security.
WRITTEN & REVIEWED BY Chris Shepley
UPDATED: AUGUST 2026
Choose your next topic from our Cryptopedia
