Common Scams and How to Avoid Them

Bitcoin's permissionlessness is a feature. Anyone can use it without asking permission. Unfortunately, that includes scammers.

The crypto space is infested with fraud. People lose millions daily to schemes that could easily be avoided. Let's make sure you're not one of them.

The Golden Rule

If someone promises guaranteed returns, they're lying.

No one can guarantee bitcoin returns. Bitcoin's price is volatile and unpredictable. Anyone claiming otherwise is running a scam.

This applies to:

• "Investment opportunities" promising fixed percentages
• "Trading bots" that guarantee profits
• "Staking" or "yield" on bitcoin (Bitcoin doesn't have native staking)
• Anything involving giving your bitcoin to someone else for returns

Scam Type 1: Phishing

How it works:
You receive an email, message, or see an ad that looks like it's from a legitimate service (exchange, wallet, etc.). You click a link, enter your credentials or seed phrase, and the scammer takes everything.

Examples:

• "Your Coinbase account has been compromised, click here to secure it"
• "Update your wallet by entering your seed phrase"
• Fake wallet apps that look like the real thing

How to avoid:

• Never click links in emails about your crypto
• Go directly to official websites by typing the URL
• Never enter your seed phrase anywhere except your own wallet software
• Verify app authenticity before downloading

Scam Type 2: Giveaway Scams

How it works:
"Send 0.1 BTC and receive 0.2 BTC back!" Often impersonating celebrities or companies.

This is always a scam. No one is giving away free bitcoin. Not Elon Musk. Not Coinbase. Not anyone.

How to avoid:

• Never send bitcoin expecting to receive more back
• Ignore any "giveaway" requiring you to send first
• Report fake accounts impersonating public figures

Scam Type 3: Ponzi/Pyramid Schemes

How it works:
You invest, receive returns from new investors' money, recruit others who do the same. Eventually, the scheme collapses and most people lose everything.

Red flags:

• Referral bonuses for recruiting
• Returns that don't make sense (10%/month, etc.)
• Pressure to invest more or recruit
• Vague about how returns are actually generated

How to avoid:

• Ask: where do the returns come from?
• If the answer is "new investors," it's a Ponzi
• No legitimate investment requires recruitment

Scam Type 4: Fake Exchanges/Services

How it works:
You deposit bitcoin on what looks like a legitimate exchange or lending platform. You see impressive returns on screen. When you try to withdraw, the money isn't there.

Famous examples:

• Fake exchanges that show fake balances
• "Lending" platforms that never had your money
• Services that "trade for you" and just steal the deposit

How to avoid:

• Use well-known, regulated exchanges
• Research extensively before depositing
• Test withdrawals with small amounts first
• If you can't withdraw, the "balance" isn't real

Scam Type 5: Romance/Social Engineering

How it works:
Someone builds a relationship with you (romantic, friendship, mentorship). They introduce you to a "great investment opportunity." You send money. They disappear.

This is increasingly common and targets people across all demographics. It's sometimes called "pig butchering"—fattening up the victim before the slaughter.

How to avoid:

• Be extremely skeptical of online relationships that turn to investment advice
• Never send crypto based on relationship pressure
• Verify any investment independently
• If you've never met them in person, be extra cautious

Scam Type 6: Impersonation

How it works:
Scammers pose as customer support, government officials, or other authority figures. They create urgency and demand you send bitcoin or share credentials.

Examples:

• "IRS" demanding bitcoin payment for back taxes
• "Exchange support" asking for your credentials
• "Tech support" needing access to fix your computer

How to avoid:

• Legitimate services don't initiate contact asking for credentials
• Government doesn't accept bitcoin for payments
• Never give remote access to your computer
• Call official numbers to verify (not numbers the scammer provides)

Scam Type 7: Rug Pulls (Altcoins)

How it works:
A new token launches with hype. Price pumps. Creators sell their holdings or drain the liquidity pool. Price crashes to zero.

This is extremely common in altcoins, DeFi, and NFT projects.

How to avoid:

• Focus on Bitcoin (no rug pull possible—there's no team to rug)
• If gambling on altcoins, assume you'll lose everything
• Anonymous founders = high rug pull risk

The "I'll Never Fall for That" Problem

Everyone thinks they're too smart to get scammed. Yet billions are lost annually.

Scammers are sophisticated. They exploit:

• Greed (promise of returns)
• Fear (urgency, threats)
• Trust (impersonation, relationships)
• Confusion (technical complexity)

Stay humble. Stay skeptical. Verify everything.

Recovery Scams

Lost crypto to a scam? Scammers know this and run "recovery" scams:

• "We can retrieve your stolen bitcoin for a fee"
• "Law firm" that can help for upfront payment

These are also scams. Once bitcoin is sent, it cannot be recovered without the cooperation of the recipient. No service can magically retrieve it.