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5 Common Cryptocurrency Scams to Avoid

profileJoel Koh

As the authors of the book Crime and Human Nature: The Definitive Study of the Causes of Crime would argue, crime is one unchanging aspect of human nature.

Source: Peep Show

Regardless of the medium, humans will find ways to hurt each other and unfortunately, criminals have ‘upgraded’ and have been using cryptocurrency as a means to carry out their crimes.

Singapore is no exception as recently, there has been an uptick in crimes related to cryptocurrency investments.

According to a report from The Straits Times, the Singapore Police shared that they were 393 reports of cheating, fraud or other crimes related to investments in cryptocurrencies in 2020.

Comparatively, only 125 and 15 reports were made in 2019 and 2018 respectively. Also, about S$29 million was reported lost to such cases between 2018 and 2020.

To put this into context, there were 21,653 crimes reported in 2020. This means that cryptocurrency investment-related crimes made up about 1 per cent of all crimes reported last year.

Although the percentage may seem small, it is still significant and should have risen this year with the growing adoption of cryptocurrencies.

So if you are interested to invest in cryptocurrencies and do not want to be a victim of a cryptocurrency investment-related crime, here are some potential scams you need to be aware of.


TL;DR: 5 Common Cryptocurrency Scams and to Avoid

As the cryptocurrency industry is still in its infancy and quite complex, investing in cryptocurrency has become a hunting ground for scammers to con new investors.

To protect yourself here are some tips:

  • When something sounds too good to be true it probably is. Any investments that promise unusually high and guaranteed returns are most likely to be a scam as good investing takes time.
  • Always do extensive research and due diligence before investing.
  • Do not invest in anything outside of your circle of competence.
  • Only use reputable cryptocurrency exchanges.
  • Gain a deep understanding of the potential risks and rewards of your investments.

1. Social Media Cryptocurrency Scams

Undoubtedly, social media has become a powerful and influential force in our society. 

But like all tools, it can be used as a force for good or evil.

It comes as no surprise that hackers have been using social media to target holders of cryptocurrency.

These hackers are using fake social media profiles and have hacked popular social media profiles to con people of their cryptocurrency.

On top of the cryptocurrency investment scams happening in Singapore, we are seeing cryptocurrency scams happening elsewhere as well.

A May 2021 report from the U.S. Federal Trade Commission (FTC) highlighted the growing problem of cryptocurrency investment scams.

From October 2020 to March 2021, there were 7,000 cryptocurrency investment scams reported. Collectively, the victims of these scams reported losses of about US$80 million (S$105.6 million)!

Source: U.S. FTC

This is a staggering 1,000 per cent increase in the amount lost by victims compared to the same time period in 2019 – 2020.

These scammers have also claimed about 12 times as many victims.

Most notably about 50 per cent of the victims who reported cryptocurrency scams stated that the cybercriminals used social media to contact them.

Here are some of the popular methods these scammers employ:

  • Lure users to shady websites with the promise of a lucrative cryptocurrency investment opportunity.
  • Organised fake cryptocurrency giveaways that promised the users a chance to multiply their cryptocurrency holdings.
  • Attract users to click on links posted to social media that will automatically download malware-laden apps. There have also been instances of these scammers asking you to take fake surveys.
  • Create fake social media profiles and hack the social media accounts of famous individuals to scam people into transferring cryptocurrency to their wallets.

Arguably, the most high profile scam happened last year in July 2020 when cybercriminals hacked into the official Twitter accounts of famous companies and high-profile individuals to scam people of their cryptocurrency.

Companies like Apple Inc (NASDAQ: AAPL), Uber were affected. Whereas famous figures like Bill Gates, Warren Buffett, and Elon Musk  were victims of Twitter account hacks.

Elon Musk in particular is a favourite amongst cybercriminals as he often tweets about cryptocurrencies.

In the last six months, the FTC reported that victims collectively sent a little over US$2 million (S$2.64 million) to scammers.

Another hunting ground for these scammers is YouTube.

In July 2020, Steve Wozniak the co-founder of Apple sued Google for allowing scammers to use videos where he was talking about BItcoin in cryptocurrency giveaway scam videos.

2. Cryptocurrency Ponzi Schemes

Traditionally, a Ponzi scheme refers to an investment scam named after Charles Ponzi; an American who conned thousands of people to invest in a fake postage stamp scheme in the 1920s.

Source: Wikimedia Commons

Here is how the scheme works.

Investors are lured to invest in the scheme with promises of unusually high returns with little or no risk.

Instead of generating profers, the scammers look for new investors to invest in the scam and pay the older investors with the money that the new investors invested.

The investors who receive the payouts would often recommend their friends to invest in the scheme or put in more money themselves.

The scheme collapses on itself when it becomes more and more difficult to lure new investors, or when some investors want to withdraw their money or the scammer escapes with the money.

Typically, Ponzi scheme scammers leverage the latest innovation, technology, product or growth industry (i.e. cryptocurrency) to tempt investors to invest with the promise of unusually high returns.

Prospective investors tend to let their guard down when assessing this type of investment opportunity as they see something as disruptive or innovative.

Online cryptocurrency trading platform Torque is one such example of a cryptocurrency Ponzi scheme that also fit the definition of a pyramid scheme.

The platform is run by Singaporean entrepreneur Bernard Ong. Torque’s 14,000 plus clients who reside in Singapore and over 120 countries are claiming to have lost millions of dollars worth of cryptocurrencies they invested in the platform.

Source: Torque | The Straits Times

Alarm bells were raised three days before Chinese New Year when Torque claimed that one of its employees had gone rouge and made many unauthorised trades that resulted in heavy losses for the company’s trading accounts.

Torque’s investors were told by Mr Ong that they could get their balances back once the investigation was concluded.

But, Mr Ong then applied to the British Virgin Islands (BVI) to close the company.

The application was granted and insolvency specialist firm Borrelli Walsh was appointed to liquidate the firm.

Borrelli Walsh examined Torque’s records and estimated that creditor claims amounted to about US$325 million (S$436 million) as of 2 Mar 2021.

Whereas the cryptocurrency assets held by liquidators was only worth about US$9.1 million (S$12 million) as of 14 Mar 2021.

In an interview with The Straits Times, a Torque investor said he invested as he was drawn by Torque’s promised returns which ranged from 0.15 and 0.45 per cent per day. This amounts to an annual interest rate (non-compounded) of 55 and 165.15 per cent a year.

Another investor who wanted to be known as Mr Lim said he invested about US$350,000 (S$470,000) in cryptocurrency with Torque and claimed he was receiving interest of about US$2,000 (S$2,642) every day.

When something is too good to be true, it probably is.

3. Fake Coin Offerings

According to CoinMarketCap, there are about 5,436 cryptocurrencies in existence and new blockchain project and their cryptocurrency tokens being minted every day.

You will have to be hyper-vigilant when evaluating these new coins as even the more legit coins have ridiculous names like Dogecoin and OMG.

This means that it will be difficult to spot fraudulent cryptocurrencies and their blockchain projects..

A high profile example of a fraudulent coin would be the ‘My Big Coins’ created by the company of the same name.

My Big Coin (MBC) was started back in 2013 by CEO John Roche. Like many blockchain businesses, the company set out to implement blockchain technology for the gaming and cannabis industries.

Subsequently, the company announced that they would back each individual MBC coin with gold.

Source: Crunchbase

Unfortunately, the house of cards collapsed when the U.S. Government arrested Randall Crater the founder of My Big Coin and MBC crypto in 2019.

The arrest revealed that MBC coin was a fraudulent cryptocurrency and the coin was not backed by gold.

Also, here are some common red flags to help you evaluate if a cryptocurrency is a fraud:

Plagiarized investor documents and/or whitepapers.

Promises of unusually high and guaranteed returns.

Countdown clock to pressure you to get in on the deal.

Fake management teams.

4. Fake Cryptocurrency Exchanges

Like stock exchanges, cryptocurrency exchanges are a vital part of the cryptocurrency ecosystem as they allow people to buy and sell cryptocurrencies.

However, many of the exchanges are typically not regulated and are prone to scams.

These scammers have levelled up and created fake cryptocurrency exchanges and even manipulate trading volumes on those big exchanges to entice potential investors and scam them of their funds.

Some telltale signs of a fake exchange include an unsecured website, harassment of users, freezing of cryptocurrency withdrawals or in some cases the founder may run away with your investments.

To ensure that you do not fall prey to such schemes, you should stick to the bigger and more reputable cryptocurrency exchanges.

P.S. Check out our comparison of the reputable cryptocurrency exchanges if you are interested in investing in cryptocurrencies.

The most infamous case of this would be the fake cryptocurrency exchange called BitKRX.

Back in 2017, South Korean authorities uncovered this scam. The scammers behind the exchange managed to convince the public that it was the biggest cryptocurrency exchange in the country and created an image of legitimacy as it was named after the Korea Exchange (KRX): the sole securities operator in South Korea.

With their marketing they were able to entice investors to invest their money into BitKRX as people thought BitKRX was associated with the KRX.

But unfortunately for the investors who bought Bitcoin on KRX, they discovered that their cryptocurrency disappeared into thin air when they tried to access their holdings.

5. Pump And Dump Schemes

Pump and dump schemes are not new as they have been perpetuated as long as the stock market has been in existence.

Although these schemes are not new, the lack of regulation in the cryptocurrency markets has made them more susceptible to this abusive market practice.

Here’s how they work when it comes to cryptocurrencies.

The mechanics of this scheme are simple.

An individual or group would buy up most of the circulating supply of a small cryptocurrency or coin with a small market capitalisation and low liquidity. This would drive up the price.

The next step would be to promote and pump up the coin with a publicity campaign.

Some methods of promotion include promoting the cryptocurrency apps like Discord, Slack or Telegram to pump the coin and drive up demand.

The schemers would also engage cryptocurrency influencers on social media platforms like TikTok or YouTube to hype up the coin.

Not to mention that the schemers would also create fake news stories like reports of fake celebrity endorsements.

This will often result in the coin going up in value temporarily as a result of this promotion.

Next, the people who are pumping the coin will ‘dump’ the coin and sell without warning.

Source: Polygant

Be very wary of such schemes as more often than not, you are being manipulated by the pumpers of the coin who will sell when the coin reaches their pre-determined price.

Generally, the smaller altcoins are more susceptible to pump and dump schemes due to their smaller market caps and low liquidity which makes it easier to move the price of the coin.

It has been identified as a problem that plagues crypto that needs to be resolved.

Here are some tips on how to avoid them.

If you are looking to buy smaller cryptocurrencies that have a small market capitalisation and are not broadly traded, you need to be very proficient and do your own due diligence on the coin.

Take everything you read with a pinch of salt as every publication you read has an agenda.

You will also need to gain a deep understanding of what the blockchain project is about and what it does before even considering buying the coin.

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About Joel Koh
History student turned writer at Seedly. Before you ask, not a teacher. My time as a history student has equipped me with the skills to evaluate the impact societal development has on financial and nonfinancial events.
You can contribute your thoughts like Joel Koh here.

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