Thursday , March 30 2023

How To ‘Scam Proof’ Your Cryptocurrency Holdings

Financial scams are nothing new but the need to protect yourself from them has taken on a greater urgency in the cryptocurrency era. Cryptocurrency offers liquidity, some degree of anonymity and immutability in processing transactions. Unfortunately, the qualities that make them so appealing to users and investors also make them a prime target for scammers. In particular, scammers target cryptocurrency users due to their immutability. If a scam artist gets your credit card number and makes a few unauthorized charges you can just call the issuing bank and it becomes ‘their problem’. Many banks will credit your account immediately as they deal with the situation and in most cases they’ll act in favor of their customer. If you’re on the wrong side of a cryptocurrency scam there’s no ‘issuing bank’ to call and in most cases the transaction can’t be reversed.

Fortunately, most cryptocurrency scams are just updated versions of con games that have been around for decades. Technology has, in some cases, made them easier to perpetrate but by following some time tested principles you can protect yourself against scammers. One important ethos can’t be overemphasized: if something sounds ‘too good to be true’ it probably is. At the very least, it is deserving of a higher degree of due diligence. Since it helps to understand the type of scams you need to be aware of we’ll run through a couple of the most common ones:


Conceptually speaking, ‘phishing’ is one of the oldest scams in the book but the rapid growth of the Internet and consumer technology gave it a new lease on life. A phishing scam is one in which the perpetrator impersonates an individual or company to extract assets or data from a victim. Most phishing scams go for the data instead of a direct payment of funds. People aren’t as protective of personal information as they should be and for the scammer getting the right data is often more lucrative.

There are too many different implementations of phishing scams to count. In the Internet era, a preferred method is to send a potential victim a link to a fake website via email or instant messenger. The victim is usually given a story that there’s a problem with an account that needs to be taken care of immediately via the phony link. A variation on this theme has a scammer impersonating a customer support agent via telephone, email, or messenger. The prevalence of phishing scams is why it is essential to verify the identity of any customer service or tech support member. One good way is to go to a company’s official website and access support from there. Never ‘click on a support link’ or give information to an unsolicited contact from ‘customer service’. Most importantly, even when dealing with official company agents never give your private keys or other sensitive information to anyone. Legitimate companies won’t even ask for this type of information.


A few years ago I was amazed to learn of the existence of a scam called ‘cash flipping’. You see frequently on Instagram where scammers prey on the financially ignorant, complete with photos of big wads of bills that purportedly represent the proceeds of a cash flipping deal. The cash flipper offers access to ‘individual investors’ who can get involved by sending a certain amount of money with the promise of an outlandish return on investment. The more that is ‘invested’, the higher the return. One major ‘tell’ is that cash flippers usually request payment via some non-traditional method like Amazon gift cards or prepaid credit card reload information.

This type of scam has become extremely popular in the cryptocurrency era. Phony Bitcoin ‘investment advisors’ work a high tech version of the ‘cash flipping’ angle promising a huge ROI in return for sending them a smaller amount. The easiest way to avoid this type of scam is to not send ‘investment capital’ to strangers via informal channels like Facebook, Instagram or instant messaging. A legitimate investment company will have a secure method for transferring funds through a variety of methods including bank wire or ETF. No honest business will limit you to one type of transfer method and particularly one that is immutable and untraceable.


The nature and methodology of scams will continue to evolve and mutate but by following some simple guidelines you can protect yourself from all of them. Never give out your personal keys or recovery information to anyone. Don’t respond directly to unsolicited customer service inquiries. Go directly to the company’s website and check into the situation there. If the problem is legitimate, it can be dealt with that way. In general, be aware that impostors exist and that necessitates a higher degree of vigilance in verifying that you’re dealing with a legitimate company or representative.

The best advice to avoid investment or giveaway scams is the same thing that your grandfather likely told your dad—if it sounds too good to be true it probably is. Never send ‘investment money’ through informal channels and never let greed overpower your common sense. Legitimate investments will never ask you to send funds up front—they’ll want you to be clear on the risk and opportunities before you ‘buy in’ as much for their legal protection as for your financial protection.

About James Murphy

Writer and creator covering the transformative effect of technology on everything it touches. The revolution will be decentralized.
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