As cryptocurrency becomes more integrated into our financial system, the rise of crypto scams and crypto fraud has become a significant concern. Financial institutions and consumers alike must be vigilant in navigating this evolving landscape safely. The Federal Trade Commission (FTC) has outlined some of the top crypto scams to watch out for, highlighting the importance of recognizing cryptocurrency AML red flags.
Despite not being universally adopted, the use of cryptocurrency has surged, leading to an alarming increase in crypto fraud. The Federal Bureau of Investigation (FBI) has noted that cryptocurrency is fast becoming a favorite for scammers, not just in the murky realms of the dark web but in everyday transactions.
Investment scams: Investment scams come with "get rich quick" and "no risk" promises, often initiated through social media or online dating apps. In these scams, crypto can be the investment offered or the payment method. The invested crypto goes straight into the scammer's wallet.
Romance scams: Romance scams prey on relationships and have both an investment and payment angle. After gaining trust, the perpetrator pretends to have wealth and casually offers investment tips to get their scheme rolling. Once a rapport is established, the victim is asked to send crypto to the scammer.
Business, government, or job impersonation scams: In a business, government, or job impersonation scheme, the perpetrator presents themselves as a trusted online source, such as Amazon, FedEx, or a user’s bank, and convinces users to send them funds by buying crypto. The crypto offered by the scammer is fraudulent.
Rug pull scams: So-called rug pull scams are when investment scammers propose a new crypto opportunity or nonfungible token (NFT) that requires funding. After the project initiators receive payment, they disappear, leaving their investors no avenue to get money back.
Phishing scams: Phishing scams use emails with malicious links to gather personal details, such as users’ crypto wallet key information. If they obtain enough information, the scammer can gain unfettered access to victims’ crypto. This type of fraud can also be perpetrated via text message in a method known as “smishing.”
Social media scams: The FTC 
Ponzi schemes: Ponzi schemes via cryptocurrencies work the same way they do with traditional payment methods. Scammers collect funds from new investors in order to pay the older investors, creating no legitimate investment opportunity and leaving investors with no recourse.
Upgrade scams: Crypto platforms are a form of software that, at times, requires upgrades. Consumers are accustomed to upgrades as part of innovative technology. They can easily be scammed into giving up their private keys as part of an "upgrade" that turns out to be fraudulent.
SIM-Swap scams: SIM-swap scams occur when someone obtains a copy of your cellphone's SIM card to access your phone data. With a user’s data in hand, scammers can the steal two-step authentication codes required to open their crypto wallet, allowing the scammer access to account funds and information.
Fake crypto exchanges and crypto wallets: Inexperienced crypto users may be lured into investing in a new high-value cryptocurrency exchange opportunity or a "cheap" Bitcoin that doesn't exist. Scammers advertise the investment at a price under market value, and the victim is unaware that the exchange is fake until their investment is lost. A fake crypto wallet is a malware scam that infects a computer and eventually steals the user's private key.
