Crypto Scams and How to Spot Them

A payment on a blockchain is generally irreversible. There is no bank to call and nobody who can pull back coins sent to a scammer, and in the UK the FSCS does not cover crypto. That is why crypto attracts fraud, and why Crypto for Beginners: What You Need to Know puts irreversible transfers near the top of its list of risks. Your protection has to come before you act. Fortunately, nearly every crypto scam is a variation on a few patterns.

Fake support and famous names

A common opening move is a message you did not ask for. You post about a stuck withdrawal on social media, and within minutes a support agent replies or messages you directly. They sound helpful and use the exchange's logo. Sooner or later they ask you to verify your wallet, which means typing your seed phrase into a form, or they send a link to sync your account.

Real support does not work like that. No legitimate exchange, wallet maker or support team will ever ask for your seed phrase, the 12 or 24 words that give whoever holds them control of your coins. Crypto Wallets and Self-Custody Explained covers how to store yours. If you need help, open the exchange's app or site yourself and use the support route inside it.

Impersonation also works at scale. Scammers copy the accounts of celebrities, coin founders and exchanges, often with a near-identical name, and run giveaways: send 1 coin to this address and 2 come back, for a limited time only. Send 0.1 BTC and you have lost 0.1 BTC, and the promised 0.2 never arrives. The excited replies from winners underneath are usually the scammer's own accounts.

Fake websites and wallet drainers

Phishing sites copy the login page of a real exchange or wallet down to the colours. They reach you through emails, messages and paid search ads that sit above the real result. Enter your password and two-factor code and the scammer logs in as you. Enter a seed phrase and they empty the wallet.

The fix is dull and it works. Bookmark the sites you use and open them only from the bookmark or the official app. Never log in from a sponsored search result, and check the address bar for swapped or extra characters before you type anything.

Wallet drainers do not need your phrase. You connect a self-custody wallet to a site offering a free token, and it asks you to sign something. That request may be an approval, which gives a program permission to move a token out of your wallet, sometimes in unlimited amounts, or a transaction that sends your coins straight out. Once you sign an approval, the drainer can move what you approved without asking again. Treat every signature request as a payment and reject any you cannot read. For trying new apps, keep a separate wallet with a small balance, so a mistake costs little.

Fake platforms that build trust first

Some of the costliest scams are slow. They often start with a wrong-number message or a match on a dating app. The stranger is patient and friendly, and after weeks of chat mentions a crypto platform that has made them a lot of money. They help you sign up, and the site shows your deposit growing.

The numbers on that screen are invented. Say you deposit £1,000 and the dashboard shows 2% a day. After 30 days it displays £1,811, because 1.02 multiplied by itself 30 times is 1.811. A small withdrawal may even go through, to build trust. Then you try to take out the full amount and are told to pay a 20% tax or release fee first: £362 on the displayed £1,811. Pay it and another fee appears. The money was gone the day you sent it, and the only real numbers are the amounts you keep sending.

Guaranteed-yield schemes use the same trick without the romance. Check the arithmetic on a promise of 1% a day: 1.01 multiplied by itself 365 times is about 37.8, a gain of roughly 3,678% in a year. Nothing pays that, and a guaranteed high return is the clearest warning sign in this lesson, because prices move and nobody can promise a yield on top of them. Even a real lender can fail: Celsius, a crypto lender that promised high yields, froze withdrawals and went bankrupt in 2022.

Pump and dumps and rug pulls

New tokens bring their own scams. In a pump and dump, a group buys a small token cheaply, promotes it hard in chat groups and on social media, and sells into the buying it creates. The price collapses once they are out, and late buyers hold the loss.

A rug pull goes further. The people behind a new token sell their supply or pull the liquidity, the pool of funds that makes trading possible, and the token becomes close to worthless overnight. Some tokens are built so that you can buy but never sell. Warning signs include a token only days or weeks old, anonymous developers, most of the supply sitting in a few wallets and pressure to buy before a countdown ends. If a token's main selling point is how fast it is rising, assume you are the exit for someone who bought earlier.

If you have been scammed

1. Stop sending money. Ignore any fee, tax or deposit that is supposed to release your funds.
2. Report it straight away to the exchange you sent from, with the transaction ID and the receiving address. If the coins land on an exchange, it can sometimes freeze them.
3. In the UK, report it to Report Fraud at reportfraud.police.uk, the national service that replaced Action Fraud. In Scotland, call Police Scotland on 101. Tell your bank too if the money left your bank account or card.
4. Secure what is left. Change your passwords, reset two-factor authentication and move any coins from a wallet whose phrase you typed anywhere into a new wallet.
5. Expect a second approach. Recovery scams target people who have already lost money, posing as lawyers, investigators or officials, and ask for a fee to get it back. Treat any offer to recover your crypto for a fee as another scam.

Rules that stop nearly all of these

• Your seed phrase stays offline. No person, form or website ever gets it.
• Nobody who contacts you first is support. Start every conversation yourself, from the official app or a bookmark.
• Sending crypto to receive crypto is always a scam. That covers giveaways, release fees and recovery fees.
• Guaranteed returns do not exist. Prices move, so yields cannot be promised.
• Read before you sign. Reject any wallet request you do not understand, and test new apps from a wallet that holds little.
• Check who you are dealing with. In the UK, crypto firms must be registered with the FCA for anti-money-laundering purposes, and you can check the FCA register. Registration is not a guarantee that a firm is safe, as Crypto Exchanges and Fees Explained sets out.

Screenshots of profits prove nothing either. A record worth trusting is published before the outcome is known. The desk commits every call to a public, hash-chained ledger before the issue is sent, and that is the standard to hold anyone to who claims to make money trading.

Key takeaways

• Crypto transfers are generally irreversible, so the only reliable protection is spotting a scam before you send or sign.
• No legitimate exchange, wallet maker or support team will ever ask for your seed phrase.
• Fake profits on a screen, guaranteed yields and fees to release your money are the signs of a fake platform.
• If you are scammed, report it to the exchange and to Report Fraud, and never pay anyone to get it back.