Hello everyone, Kate from LUMI Wallet back in touch here, and I wanted to continue on the topic of types of cryptocurrency scams. Today, we are seeing a huge growth in the number of cryptocurrencies. Every week a new project is released, new tokens are created. As a result, we see unprecedented growth in the capitalization of projects that already have thousands of followers. For example, in April last year, the trading volume on crypto exchanges was $100 billion, and in April 2021 – $1.58 trillion.

On the other hand, very different sentiments can be observed in the stock market. In April 2021, trading on the US stock market decreased by 27% as compared to the previous month. The main reason is the loss of confidence in traditional financial institutions due to the non-stop operation of the printing press.

The increased interest in new financial technologies also led to the growth of cryptocurrency crimes. Do you agree that the success of some projects is no less surprising than the success of already-established multi-million dollar companies?

By the end of April 2021, the number of major thefts, hacks, and scams with cryptocurrencies amounted to $432 million. While this number may seem small compared to previous years,  deeper analysis revealed a new worrying trend: DeFi-related hacks now account for more than 60% of total hacks and thefts. This is up from just 25% in 2020; in 2019, DeFi hacks were virtually non-existent.

Part 2. Types of cryptocurrency scams: Universal security tips.

Part 2. Types of cryptocurrency scams: Universal security tips.

The Financial Action Task Force (FATF) recognizes virtual asset transactions that are between either a Virtual Asset Service Provider (VASP), an illicit or high-risk service provider, or peer-to-peer. 

When looking at the proportion of bitcoin transactions, analysts found that only 1.2% of transactions were between a VASP and a risky entity in 2020, 6% of transactions were between two VASPs (between exchanges), 32% were between a VASP and a private wallet, and 61% of transactions were P2P. About 1.2% were associated with high-risk organizations:

* Gambling sites
* Mixers
* Darknet services
* Ransomware
* Malware
* High-risk exchanges

In addition, in 2020, no more than 0.11% were used for money laundering.

Part 2. Types of cryptocurrency scams: Universal security tips.

Now we do not break away but smoothly move on to the main topic of this article.

  1. Fraud on social networks is the most common method of fraudulent activity. You’ve probably seen posts on Twitter, Facebook, where you are invited to participate in a giveaway from a company, blogger, or just a public person. Initially, you are asked to send a small amount, and in return, you are promised an increase in profit up to 10x. Of course, this is very tempting, and you will be lucky if you lose a small part of your assets. If you are sure that this giveaway is real, take a close look at the profiles, and you will notice noticeable differences between them. In reality, it will turn out that the post on Twitter or the profile on Facebook is fake.

    Even if Binance or any other organization decides to hold this event, the real representatives of the company will never ask you to make the first transfer of funds.
  1. Blackmail emails are a well-known method used by fraudsters, in which victims are threatened with the disclosure of confidential information if they do not receive a “ransom”. Blackmail is when scammers either find or falsify personal information about you and use it to force you to send them cryptocurrency.
  2. Pyramid schemes or Ponzi schemes. These are common types of scams that affect people’s emotions. A Ponzi scheme is an investment scam that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, rather than engaging in any legitimate investment activity, the fraudulent actors focus on attracting new money to make promised payments to earlier investors as well as to divert some of these “invested” funds for personal use. As with many frauds, Ponzi scheme organizers often use the latest innovation, technology, product or growth industry to entice investors and give their scheme the promise of high returns. Potential investors are often less skeptical of an investment opportunity when assessing something novel, new or “cutting-edge.” 
  1. Phishing. This is a fraudster posing as a person or company to gain access to the victim’s data. This can happen in various ways: via phone, email, fake websites, or instant messengers. Scams with messaging apps are prevalent in the cryptocurrency environment. There is no specific set of rules that scammers adhere to when trying to access your personal information. You may receive an email notifying you that there has been a problem with your account on the exchange, which requires you to click on the link to resolve the issue. This link will redirect you to a fake website created by analogy with the original one, which in turn will prompt you to log in. Thus, an attacker will steal your credentials and possibly your cryptocurrencies.
  1. Fraud involving or imitating real famous personalities or projects. In this type, scammers create fake websites or social media accounts of famous characters. By assuming a well-known name, scammers can create a giveaway, ICO, or other companies to attract investment.


Of course, these types of fraud do not end there. Every day, new and more sophisticated ways of cheating and stealing on the Internet are born. Let the methods change, but the essence remains. It is worth following simple tips to avoid meeting with scammers:

1. Double-check the URLs, social media accounts, or better yet, type them yourself manually. Some social media platforms have authenticity indicators, such as blue checkboxes on Twitter and Facebook.

2. To work with crypto assets, you need to use separate accounts, for example, email and phone number, different from the main ones.

3. Two-factor authentication will help you provide additional account protection, as well as create a high-quality password.

4. Choose your login credentials carefully, keep track of the sites you visit online and who you share your information with.

5. Be careful to take part in the giveaway. Never participate in sweepstakes where you need to send money first. Under the terms of the fair shares, you will not be required to pay.

6. Always study the cryptocurrency you are buying. If the value of a cryptocurrency depends on the emergence of new investors or participants at a high rate, then most likely you have discovered a Ponzi scheme or a pyramid scheme.

And we are constantly ready to repeat to you, that you should never, under any circumstances, share your mnemonic with third parties. Always be careful and vigilant, do not let the scammers deceive you. Take care of yourself. The Lumi team is always with you.

Stay safe and follow Lumi Wallet on Twitter, Telegram, Facebook, TikTok, or Reddit for more crypto knowledge and news. You can also connect with us on LinkedIn.