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Crypto Scam Resurgence Through AI and Social Media

Home Crypto Scam Resurgence Through AI and Social Media
By: Antonio Smith / June 19, 2024

Crypto Scam Resurgence Through AI and Social Media

  • The crypto industry remains plagued by scam projects, rug pulls, and pump-and-dump schemes that defraud investors and detract credibility from honest projects.
  • Between 2019 and 2024, investors have lost over $20B in crypto scams, primarily due to rug pulls (like OneCoin and Thodex’s combined $6.6B scam).
  • The most worrying development is the rise in social engineering manipulation tactics, like AI and social media.
  • Scammers use chatbots like ChatGPT to write whitepapers and imitate the website’s language style, making the project appear more credible – no more grammar mistakes to easily spot fakes. 
  • Social media further boosts crypto scams through bots and people who don’t verify a project’s authenticity before sharing it.
  • Let’s discuss why this is happening and how to spot fake projects.
  • Greed & FOMO Make It Easier for Scams to Thrive
  • Crypto greed is at an all-time high. Crypto presales are one of the most common targets of scams due to their novelty, lack of community awareness, and FOMO.
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  • Here’s one example:

    • www.basedawgz.com – authentic presale website
    • www.basedawngz.com – fake presale website (notice the extra ‘n’)
  • The websites look identical except for the presale widget, making it virtually impossible to tell which one’s fake. That’s how sophisticated scammers are getting. The fake website shows over $380K raised, though it could be a fake number to cause FOMO.
  • Comparison of the original Base Dawgz website and a fake one
  • Many presales have scam copycats running around, tricking people into sending them money. The worst thing is that you’re unlikely to get your money back due to the anonymity of crypto transactions.
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  • Impersonation is another common tactic used by crypto scammers.
  • Jakob-Moritz Eberl, a social scientist at the University of Vienna, became a victim of the now-defunct FlexyStakes and InfinityStakeChain crypto projects.
  • His picture had been used for a fictitious crypto project developer alongside other presumably fake individuals.
  • Jakob-Moritz Eberl’s headshot used on FlexyStakes’ websiteSource: Bloomberg
  • Both crypto companies claimed they raised $12M from investors and manufactured bogus partnerships with Binance, Polygon, Fantom, Avalanche, and dydx.
  • All they want to do is get you to come to the website, connect your wallet to use the thing, and they steal all your funds.​ […] We see so many fake projects that fundraise and they’ll put out fake press releases. I see it almost on a daily basis.PitchBook Analyst Robert Le
  • How to Spot a Fake Crypto Project – What to Look For
  • Crypto scams have several things in common:
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    • Outlandish promises of high returns (like ‘You can make 100x in three months’)
    • Withholding important details (like when you can claim your tokens)
    • Developer team keeps a large token allocation (over 10–20%)
    • Lack of transparency about important project details (like listing time)
    • Claims of celebrity support and endorsements
    • ‘No trading experience needed’ because it’s all automatic or incredibly straightforward
    • Guaranteed returns require investing more money
    • Poorly designed website or a copycat of a legitimate platform
    • FOMO marketing and pressure to buy quickly
    • Giveaway scams promising you double the tokens you send

     

  • The Department of Financial Protection & Innovation (DFPI) hosts a crypto scam tracker with recent scams.
  • These include fraudulent trading platforms (most common), pig butchering scams, and imposter scams.

  • A method often used by scammers is pretending to be a veteran trader or analyst who wants to help you make money in exchange for a fee.

  • A rule of thumb is, ‘If it looks too good to be true, it’s probably a scam.’ It’s difficult to ignore an opportunity to 100x your investment, but that’s exactly why you should.

  • Crypto scams rely almost entirely on psychological pressure points (like Cialdini’s principles) to manipulate you into ignoring the red flags and giving in to your greed.

  • Social media also contributes to the spread of crypto scams. People don’t research a project thoroughly before sharing it, and suddenly it’s gone viral.
  • This leads to crypto trading bots executing trades, artificially boosting the token’s price, making it more popular and fueling the hype. 
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  • Although not a red flag per se, exaggerated virality around a crypto project should make you start asking questions. Watch out for unreasonably positive price predictions and FOMO-based social media presence.

  • Are Crypto Scams Here to Stay?

  • While multiple trackers (like the DFPI’s tracker) educate people on crypto scams, the industry is still rife with them.
  • The best advice we can give is to DYOR: Never fall for profit guarantees and always remain skeptical of overly optimistic investment proposals. Pay special attention to crypto presales and make sure the presale website is legitimate and not a scam copycat.

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