5 Cryptocurrency Scams to Watch Out For

“Pig butchering” is a long-game, relationship-based cryptocurrency scam. They typically begin with a stranger (the scam artist) contacting the victim out of the blue via text message or social media and try to establish a dialogue. Over the course of days, weeks or even months, the fraudster may send messages about personal, non-investment-related topics and try to foster trust. Eventually, the “pigs,” or targets, are “butchered” by the scammer, who manipulates them into making phony investments using cryptocurrency and disappears with the funds.³

Always thoroughly vet investment opportunities involving cryptocurrency before acting. Don’t respond to or click on links in unsolicited messages from an unknown contact, and never share personal financial information with someone you haven’t met in person. Carefully research any organizations or individuals involved, and check consumer protection sites about potential scams associated with these entities. You may also want to consult with your Morgan Stanley Financial Advisor before investing. Any investment opportunity that requires cryptocurrency as the form of payment or that demands immediate action warrants caution. 

Many investment scams have similar lures, such as the ability to make an extraordinary amount of money quickly with little-to-no risk. Some encourage individuals to recruit other investors into an investment program — similar to a pyramid scheme — with the promise of higher returns based on the number of people brought into the program.

Victims have also reported being targeted by fraudsters pretending to be investment managers who promised to grow their assets if the funds were sent as cryptocurrency. Sometimes scammers attract interest by falsely proclaiming that a celebrity or a well-known billionaire has endorsed an investment opportunity, and they’ll anonymously use chat rooms to drive speculation about this possibility.

Cybercriminals may claim to have sensitive materials about you — perhaps involving passwords, account information or private photos — and threaten to expose them unless you send a cryptocurrency payment. 

In many cases, fraudsters are simply trying to scare you and don’t have any of this information. But even if they do, making a cryptocurrency payment may not resolve the matter. Always report the extortion attempt to the Federal Bureau of Investigation.

Phony websites focusing on cryptocurrency — whether they purport to be for an investment opportunity, or perhaps a digital currency exchange or digital wallet provider — are quite common. So, it’s best to only deal with well-established organizations related to cryptocurrency. Again, do your research first before sending any money.

Also, type the URL of an organization’s site directly into your browser instead of relying on search results which may lead you to a phishing site that mimics the authentic site. Cybercriminals create these phishing sites with the goal of capturing your digital currency payments or sensitive personal information, such as your log-in credentials.

These schemes often use social media posts to promote fake giveaways from actual companies or celebrities by either using forged screenshots or hacking into their accounts. In this scenario, you’re typically encouraged to send cryptocurrency to the provided digital address with a promised return of double the amount (or even more).

The giveaway is usually promoted as a limited time offer to create a sense of urgency because fraudsters don’t want to give you time to think or ask others about the opportunity. To legitimatize the giveaway, scammers may leave comments from phony social media accounts claiming to have received money.

These scams work well because it can be extremely difficult to retrieve cryptocurrency after it’s been sent, so victims have little recourse.