10 Crypto Scams to Watch For and How to Avoid Them

Cryptocurrency investing opens up new possibilities but also attracts scams and sophisticated fraudsters. Because much of the crypto sector remains largely unregulated, it can be hard to tell legitimate opportunities from fraudulent schemes.

In 2024, Canadians lost more than $310 million to investment scams, and the Canadian Anti-Fraud Centre (CAFC) told MoneySense that “well over 50%” of reported losses involved cryptocurrency. Crypto investments are the most commonly reported investment scam to the CAFC. Since fewer than 5% of scams are typically reported, the real total is likely much higher.

Scammers often find victims on social media

Many crypto scams begin on social media and overlap with other fraud types. Fraudsters cast a wide net on platforms where people share personal information and financial tips. An analysis by TradingPlatforms of FTC data found that nearly a third of social media crypto fraud happens on Instagram and about one-quarter on Facebook.

Some scams start as romance scams. Once a fraudster gains a victim’s trust and affection, they may pitch a fake investment or ask for crypto to cover a fabricated expense such as medical bills.

Jeff Horncastle, client and communications outreach officer at the CAFC, says crypto frauds often evolve from relationship scams. Scammers build trust, coach victims on how to buy and transfer crypto, and initially let victims withdraw small “profits” to appear legitimate. Once victims invest larger sums, withdrawals are blocked and the fraudster disappears.

10 types of crypto scams

Scams in the crypto world take many forms and grow more sophisticated as investors become more informed. Protect yourself by knowing where your money is going, learning the crypto advertising rules in Canada, and using only licensed, reputable crypto service providers. For a starting point, see MoneySense’s list of the top crypto platforms in Canada. Below are 10 common scams to watch for.

1. Pump-and-dump (rug pull)

In a pump-and-dump or rug-pull scheme, promoters hype a coin to drive up demand and price, then sell their holdings at a peak. The sudden sell-off triggers panic, other investors dump their coins, and the price collapses. Promoters walk away with large gains while smaller investors suffer steep losses.

A well-known example is the Squid Game token, which launched in October 2021 tied to the Netflix show’s name without authorization. Developers sold when the token briefly surged, reportedly collecting about $3.3 million (U.S.), and the token’s value quickly collapsed.

Pump-and-dump schemes predate crypto—Jordan Belfort’s 1990s stock scams, portrayed in The Wolf of Wall Street, are a classic example—but crypto channels make them easier to spread quickly.

2. Giveaway or 2-for-1 scam

Giveaway scams lure people with promises of free crypto: “Send 1 token and get 2 back.” These scams are especially effective during bull markets when fear of missing out (FOMO) can cloud judgment. Never send crypto to an unknown wallet in expectation of doubled returns.

3. Phishing scams

Phishing attacks use fake emails, social media messages, or websites to trick users into revealing login credentials, seed phrases, or payment details. Scammers often imitate banks, exchanges, or wallet providers and ask victims to click links to “verify” accounts or accept “updates.” Those credentials are then used to access and empty victims’ accounts.

4. Airdrop scam

Legitimate airdrops are marketing tools that distribute new tokens or NFTs to users who complete tasks like sharing posts or registering accounts. Scammers mimic this to lure people to fake sites that ask for private keys or seed phrases in order to “claim” the airdrop. Providing that information hands control of your wallet to criminals.

Be cautious of initial coin offerings (ICOs) as well: many are fraudulent. Red flags include little or no team information, missing or fabricated whitepapers, and fake celebrity endorsements. Recently, some ICO scams used AI-generated images and fake social accounts to exploit large public events.

5. Service provider support scams

Fraudsters impersonate customer support for exchanges, wallets, or dApps on platforms like Discord or Telegram. They create convincing profiles and tell victims to share passwords, private keys, or grant remote access to their devices. Legitimate providers never ask for passwords or private keys through unofficial channels.

6. Crypto Ponzi schemes: mining or staking pool scams

Ponzi-style crypto scams pose as mining or staking pools that promise steady rewards. Scammers recruit participants and initially pay small returns from new investors’ funds to create an illusion of legitimacy. As more people invest and the scheme relies on fresh contributions, payouts stop and investors lose their money.

Staking involves locking up coins to support a blockchain and earn rewards. Always verify pool operators’ credentials and public track records before committing funds. If returns look unrealistically high or operators pressure you to reinvest, consider it a warning sign.

7. “Pig butchering” (romance scam)

In “pig butchering” scams, fraudsters cultivate online relationships to gain trust, then encourage victims to invest in fake crypto opportunities. Scammers may instruct victims to buy crypto on a legitimate exchange and transfer it to a wallet the scammer controls. Victims may receive small withdrawals at first, then find their funds inaccessible when they try to pull out larger amounts.

8. Investment recovery pitch scams

Scammers prey on people who have already lost money. They promise to recover lost funds for a fee, then demand payment up front or ask for remote access to the victim’s computer and accounts. This often results in further losses rather than recovery.

9. Celebrity impersonation

Fraudsters exploit celebrity names and faces—sometimes using deepfakes—to lend credibility to fake crypto projects. They also create fake “influencer” accounts with bought followers to promote coins or services. Don’t assume a project is legitimate just because a celebrity appears to endorse it; verify endorsements through trusted, official channels.

10. Blackmail scams

In blackmail scams, attackers claim to have compromising information such as browsing histories, passwords, or embarrassing recordings and demand crypto payments to avoid exposure. These threats are often baseless; do not respond. Instead, report the incident to authorities and the CAFC.

How to protect yourself from crypto scams

Scams are common in the crypto space, but you can reduce your risk by following these precautions:

1. Be skeptical: Treat unsolicited investment offers with caution. Even experienced traders can be targeted.
2. Verify links: Don’t click links without checking the URL. Use link-expansion or URL-decoding tools if needed.
3. Never send crypto to unknown wallets: Only transfer funds to verified wallets you control or trust.
4. Use official support channels: Contact companies through verified websites or official apps—not through unverified social messages.
5. Research providers: Choose platforms and staking services with transparent teams, clear documentation, and a public track record.
6. Protect your credentials: Never share passwords, private keys, or seed phrases with anyone.
7. Ignore blackmail: Do not respond to extortion attempts; report them to the CAFC and local authorities.

How to report a scam

If you suspect you’ve been targeted by a crypto scam, contact your bank immediately to stop any transfers, then report the incident to local police and the CAFC online or by phone. Reporting helps authorities investigate and improves public awareness of fraud trends.

Beware the risks of crypto investing

Crypto can offer growth opportunities, but it is highly volatile. Before buying, staking, or holding any digital asset, consider how it fits your investment plan, risk tolerance, and long-term goals. Do your own research and carefully review any provider’s terms, disclosures, and reputation before committing funds.

Read more about fraud and scams:

• How to protect yourself from identity fraud in Canada
• You’ve discovered someone stole your identity—what to do next
• How to protect your email account from scams and fraud
• How to help protect seniors from scams
• Phishing scams targeting young Canadians (and how to avoid them)