Crypto Scam Red Flags

Crypto fraud remains a growing area of criminal activity, representing around 66% of all investment fraud in the UK last year, according to the City of London Police. The anonymity of cryptocurrency makes it easier for fraudsters to persuade individuals to invest through fraudulent trading platforms, regardless of their experience with digital assets or online investment.

At JMW, our cryptocurrency litigation and asset recovery team has seen a sharp increase in enquiries from people who believe they have experienced a crypto scam. These cases vary in complexity and scale, but the underlying patterns are often the same - investors are targeted through false promises, fabricated data and fake trading environments.

In this article, we outline how cryptocurrency scams work, the common red flags to look out for, and what actions to take if you believe you have been defrauded.

What Makes Cryptocurrency Fraud So Effective?

Cryptocurrency operates within a decentralised and largely unregulated environment, which presents opportunities for legitimate innovation as well as exploitation. Transactions can be conducted anonymously and across borders within seconds, making it easier for fraudsters to disguise their identity and harder for victims to trace stolen funds.

Scammers use a combination of social engineering, technological sophistication and psychological manipulation to create an illusion of credibility. Many operate through fake websites or cloned investment platforms that mimic legitimate exchanges. These use signals like professional-seeming branding, fabricated trading dashboards and customer support channels to reinforce the appearance of authenticity.

In some cases, fraudsters build trust over time through dating apps, social media or cold calls. The evolving nature of the cryptocurrency industry, combined with limited public understanding of blockchain technology and a lack of consistent regulation, means scams can operate at scale and adapt at speed. Even experienced investors can be caught out by platforms that appear legitimate, use complex technical language or claim to offer insider access to “exclusive” investment opportunities.

Common Types of Cryptocurrency Scams

Rug pull scams

In a rug pull, fraudsters launch a new token or project and heavily promote it online to attract investment. Once sufficient funds are committed, they withdraw the liquidity and abandon the project, leaving investors with worthless assets.

Fake investment platforms and exchanges

These scams use professional-looking websites and fabricated trading interfaces to simulate real investment activity. Victims are encouraged to transfer funds or cryptocurrency to a shared wallet controlled by the fraudsters. In many cases, deepfake videos or celebrity endorsements are used to legitimise the platform.

Romance and pig butchering scams

These scams combine emotional manipulation with financial deception. Those targeted are often contacted via dating apps or social media, often over several weeks or months, until they are persuaded to invest in a fraudulent crypto platform. Once funds are transferred, the contact ends and the money is unrecoverable.

Wallet and exchange hacks

Public blockchain data allows fraudsters to identify wallets containing valuable assets. Using phishing, malware or psychological manipulation, they steal private keys or gain access to hot wallets, transferring cryptocurrency into their own accounts.

Crypto recovery scams

After a successful scam, a new set of fraudsters may approach victims claiming to be recovery specialists or law enforcement investigators. They charge fees to “recover” lost funds, only to disappear once paid.

Key Red Flags to Watch For

The following are common warning signs to look out for and should raise immediate concern if encountered:

• Unregulated or newly launched exchanges: platforms without transparent ownership, physical addresses or regulation by recognised authorities.
• Unrealistic returns: claims of guaranteed profits or low-risk, high-reward investments.
• Pressure to act quickly: urgent deadlines or fabricated tax obligations to encourage immediate payment.
• Requests for additional payments: demands for payment in respect of unexpected fees
• Shared or unknown wallet addresses: requests to transfer assets to addresses not personally controlled by the investor.
• Requests for personal or banking information: including bank account details, ID documents or social security numbers.
• Requests to send funds to access an existing investment: this may involve being told to transfer money through specific blockchains or alternative payment channels before withdrawals can be made.

These fraudsters are smart and sophisticated. Even experienced investors can be deceived by well-presented scams that appear legitimate at first glance.

How People Are Targeted

Crypto scams frequently start with social contact rather than direct investment marketing. Scammers approach people through social media platforms, dating apps or via cold calls, slowly building rapport before introducing the idea of cryptocurrency investment.

Once trust is established, they guide their target to fraudulent exchanges or ask them to transfer traditional currency into crypto, claiming to offer insider knowledge or reduced transaction fees. Over time, they request more funds or prevent withdrawals, citing false technical or regulatory reasons.

These scams exploit human trust as much as technical knowledge, often using personal connection and misinformation to encourage quick decisions without due diligence.

What To Do If You Suspect a Crypto Scam

If you suspect you have been targeted or have transferred funds to a fraudulent platform:

• Stop making further payments or transfers immediately.
• Collect and preserve evidence, including emails, wallet addresses and transaction IDs.
• Avoid contacting any third-party offering to recover stolen crypto.
• Act fast. The sooner you pursue action to recover your money, the more likely the chance our specialist cryptocurrency litigation team can help return your funds.

At JMW, our cryptocurrency fraud solicitors act in complex and high-value cryptocurrency fraud cases. We have obtained Bankers Trust and Norwich Pharmacal Orders against exchanges to identify fraudsters, and have secured worldwide freezing orders where assets are at risk of dissipation. We work alongside forensic experts and counsel to trace, monitor and recover digital assets held both within and outside the jurisdiction of England and Wales.

Our lawyers have acted in cases involving Bitcoin, Ether, stablecoins and NFTs, representing clients who have lost substantial investments through fraudulent trading platforms or cybercrime.