REAL CLEAR CRYPTO: The Anatomy of a Common Crypto Scam – Unveiling the Tactics & Ways to Stay Safe


By Zachary Profeta | Sarson Funds, Portfolio Manager

The cryptocurrency landscape is a double-edged sword. On one side, it offers incredible opportunities for investment and financial growth. On the other, it’s a fertile ground for scams that exploit the uninformed and hopeful. As crypto industry professionals, we often receive calls from individuals who have fallen victim to scams involving fake exchanges and false promises. This article aims to dissect one such scam in detail and offer advice on how to protect yourself.

The Classic Scam Scenario: A Deep Dive

The Initial Outreach

The scam often starts on social media platforms like Facebook or messaging apps like Telegram. Scammers reach out to potential victims, posing as cryptocurrency experts or investors. They initiate conversations, share some “insider tips,” and gradually build a relationship with you. Over time, they gain your trust, making it easier to manipulate you later.

The Illusion of Expertise and Profit

Once they’ve built a rapport, the scammer introduces you to a “foolproof” trading strategy that promises high returns. They direct you to an exchange platform that appears legitimate but is, in fact, a well-designed fake. You invest your money, and within a few weeks, your account shows incredible growth, often as high as 300%.

The Withdrawal Hurdles and Fabricated Fees

When you decide it’s time to enjoy your profits and attempt a withdrawal, the scam takes a darker turn. You’re informed that your account has been flagged for money laundering and that you must pay a $10,000 “verification fee” to clear your name. Fearing legal repercussions, you pay the fee.

Next, you’re told you owe another $10,000 in taxes on your gains. Again, you pay, thinking this will finally allow you to access your money. But the fees don’t stop; they keep coming, each one more inventive than the last, designed to milk you for every penny.

The Red Flags and Realities

  • No Legitimate Exchange Charges Verification Fees: Real exchanges use Know Your Customer (KYC) and Anti-Money Laundering (AML) protocols to verify your identity. They will never ask you to pay a fee for this verification.
  • You Are Responsible for Your Taxes: Legitimate exchanges do not collect taxes on your behalf. You are responsible for reporting any taxable events to the appropriate authorities.
  • Unsolicited Offers: Be extremely cautious of unsolicited offers, especially those that promise guaranteed or high returns.

How to Protect Yourself

  • Verify the Exchange
    Always use well-known and reputable exchanges. Conduct thorough research, read reviews, and check for proper security measures like SSL certificates.
  • Be Skeptical of Unsolicited Offers
    If someone approaches you with an unsolicited offer, especially on social media, be skeptical. Verify their credentials and seek second opinions.
  • Consult with a Crypto Professional Like Sarson Funds
    Before making any significant investments, consult with a crypto professional like Sarson Funds, who can provide expert advice tailored to your specific needs.
  • Enable Two-Factor Authentication (2FA)
    Always enable 2FA on your accounts to add an extra layer of security.
  • Keep Personal Information Private
    Never share sensitive personal or financial information online, especially with people you’ve never met in person.

What to Do If You’ve Been Scammed

If you find yourself a victim of such a scam, take the following steps immediately:

  • Cease All Communication
    Do not interact with the scammers. Do not send more money under any circumstances.
  • File Reports
    File reports with your local police, the FBI’s Internet Crime Complaint Center, the Federal Trade Commission, and the Securities and Exchange Commission. Maintain all documentation and screenshots related to your interactions with the scammers.
  • Contact Financial Institutions
    Report the scam to your state’s Department of Financial Institutions and any other relevant agencies.
  • Consult with Sarson Funds
    We can help you understand the path your funds took through the blockchain and share these addresses with law enforcement to try and flag them.
  • Avoid Recovery Scams
    Be wary of services that claim to recover funds lost to crypto scams. These are often scams themselves.

The cryptocurrency landscape is fraught with both opportunities and pitfalls. By staying informed, skeptical, and vigilant, you can protect yourself. Due diligence is your best defense against scams.

Disclosures: Not investment advice. Talk with your financial advisor before making any investment decisions or have them contact Sarson Funds directly at [email protected]