Crypto Investment Scams: How to Protect Yourself (and Your Money)

Cryptocurrency has gained massive popularity as an investment, but with this rise comes an increase in scams designed to exploit eager investors. Fraudsters use deceptive tactics to steal money or personal information, often promising high returns with little to no risk. Let’s explore some common crypto investment scams and how you can protect yourself and your financial assets.

Beware of Common Crypto Scams

While cryptocurrency is an attractive investment option, traditional investment strategies are still the most trusted way to build wealth. The belief that crypto can increase your value rapidly is precisely why so many people fall victim to crypto related scams.

Ponzi & Pyramid Schemes

These schemes promise guaranteed profits by recruiting new investors rather than through legitimate crypto trading or investments. Early investors may receive payouts funded by new victims, but the scheme eventually collapses, leaving most investors at a loss.

Red Flags:

• Promises of guaranteed or unusually high returns.
• Referral-based rewards for recruiting new investors.
• Vague or secretive investment strategies.

Fake Investment Platforms

Fraudsters create professional-looking websites that mimic legitimate crypto exchanges or investment firms. Victims deposit funds, but when they try to withdraw, they either face delays, extra fees, or are locked out completely.

Red Flags:

• Websites that lack proper licensing or regulatory approval.
• Poor customer service or unresponsive support.
• No ability to withdraw funds after depositing.

Rug Pulls & Exit Scams

Developers create new cryptocurrencies or decentralized finance (DeFi) projects, attract investors, and then suddenly abandon the project, withdrawing all liquidity and disappearing with investors’ funds.

Red Flags:

• New projects with anonymous or unverified developers.
• No clear roadmap or whitepaper.
• Lack of security audits or third-party verification.

How to Protect Yourself from Scams

The most obvious way to avoid scams is to have a financial plan already in place. This will make you less likely to make risky financial decisions, and ensure you have multiple investments and savings in case you suffer a loss. Opening a savings account is a great option if you have short term savings goals or are just getting started with investments. Being able to see exactly where your money is going is a critical step in building wealth.

• Do Your Research – Before investing in any crypto project, check the legitimacy of the company, founders, and past user experiences. Look for regulatory approvals and reviews from independent sources.
• Verify Websites & Platforms – Always use official websites for exchanges and investment platforms. Double-check URLs to avoid phishing scams that look like real sites.
• Be Skeptical of High Returns – If an investment opportunity sounds too good to be true, it probably is. Crypto markets are volatile, and no one can guarantee high returns. But a high yield checking account guarantees small returns on your balance without the risk.
• Secure Your Wallets & Private Keys – Never share your private keys, passwords, or seed phrases with anyone. Use hardware wallets or trusted software wallets with multi-factor authentication.
• Beware of Unsolicited Offers – If someone reaches out to you with a crypto investment opportunity, be extremely cautious. Legitimate investment firms don’t cold-call or message people on social media.
• Use Reputable Exchanges & Services – Stick to well-known cryptocurrency exchanges that follow regulations and have security measures in place.
• Monitor Transactions & Accounts – Regularly review your crypto holdings and enable alerts for any suspicious activity in your accounts.
• Report Suspected Scams – If you come across a crypto scam, report it to relevant authorities such as the Federal Trade Commission (FTC), Securities and Exchange Commission (SEC), or cryptocurrency exchanges.

Safely Investing in Cryptocurrency

While cryptocurrency can seem like an exciting investment opportunity, the risk of scams is real. Staying informed and cautious can help you avoid falling victim to fraud. Always do your due diligence, trust only verified sources, and never invest money you can’t afford to lose.

Kearny Bank is committed to doing everything we can to protect our clients from being victimized. We monitor for unusual cryptocurrency activity and may follow up if we detect something out of the ordinary. If you believe you may be involved in a scam, please contact your local branch office as soon as possible.

For more insights on protecting yourself from scams and financial planning, visit our blog. You can also check out the Kearny Bank Security Center or reach out to your local branch office for more information.

Written By Ken Helmrich / SVP | BSA/OFAC Officer

About Ken:

Ken Helmrich is a Senior Vice President and Kearny Bank’s BSA/OFAC Officer. Ken is responsible for managing the Bank’s BSA/AML and OFAC compliance program including client due diligence, enhanced due diligence for higher risk clients, transaction monitoring, case investigation, and BSA reporting.

Ken has nearly 20 years of banking experience, and has been with Kearny Bank since 2020. He holds a bachelor’s degree from Fordham University and is a member of the Association of Certified Anti-Money Laundering Specialists as well as the Association of Certified Financial Crime Specialists.