Crypto scams are some of the most troublesome form of scam in the crypto industry. Several cases have been recorded with victims losing nominal figures to victims losing life altering amounts to the scummy scammers.

FTC estimates that more than 46000 consumers lost more than $1B between January 2021 and March 2022. That’s a staggering number of people and a huge amount of money going to scammers.

With the introduction of more digital assets such as altcoins and meme coins, crypto scams have soared in multiple number which coincide with the rise of digital currencies, 

Exploiting the umbrella of anonymity granted by the blockchain, and the decentralized nature of blockchain, these scammers have caused untold chaos and pain and suffering to their victims. Investigating these scams is therefore important to protect users and maintain trust in the crypto ecosystem, since trust is what makes the industry thrive. 

This article outlines steps, tools, and strategies used to identify, combat and stop the crypto scammers who have ravaged the blockchain community.

Types of Cryptocurrency Scams

To effectively fight these scams, it is important to first know how these crypto scams manifest. Crypto scams usually come in various forms which includes phishing, Ponzi schemes, fake ICOs, and rug pulls. Phishing is using a fake, similar website to entice a user to surrender his/her sensitive information like email, username or password, which then the scammer uses to access the real website and deprive the user of his/her assets. 

Ponzi schemes usually involve investments where new entrants pay off earlier entrants until the whole things collapses eventually. Fake ICOs simply means where fraudsters initiate a fake ICO (Initial Coin Offering) to entice users to invest in the project before rugging them. 

Lastly, Rug pulls which are perhaps the most common scam involve where the developer makes away with the development fund without telling the users which causes the users to lose all of their investment.

Scammers often use a mix of social engineering, fake websites and fake exchanges, and wallets to deceive their target victims before pouncing on them. Understanding their tactics is the first step in recognizing and preventing crypto fraud before it occurs.

How to Investigate a Crypto Scammer

To help combat these scammers, it is important to know how to investigate them. Firstly, you begin by collecting transaction IDs, wallet addresses, and communication details from the scam. This would help you construct the first mental picture that would aid you in your further investigations.

After collecting such information, you can then use blockchain explorers to track transactions and identify suspicious patterns and see where funds have been moved to or where the funds are. It is at these stage where you can identify if the funds have been withdrawn, sent to a mixer or even invested in other projects.

Advanced tools like OnChain Industries can analyze fund flows and uncover linked addresses in this case. You can use the tool to track the suspect wallet and check their activities and other linked accounts that may be hidden from the public. Use the tool carefully because it may be excellent to fully comprehend it.

Lastly, after your thorough research and investigations, you can report the scammers to the relevant authorities and crypto platforms or take actionable action against them if you are a law enforcement officer. You can also alert and engage with the relevant crypto community for additional support and help where needed.

Tools and Resources for Investigating Scammers

To succeed in netting a scammer, you would need top of the game tools, resources and skills. This is because most scammer are quite clever, and therefore it means that you would spend a lot more effort to nail them.

Blockchain explorers like Etherscan and Blockchain.com are your first go to when you want to track wallet activity. This helps you track which wallet was used to receive the stolen funds and also how the funds are moving in the blockchain. Also, it can help you determine the final destination of the assets, which may help you further.

Top Platforms such as OnChain Industries offer advanced analytics to trace funds and identify scam networks, especially within Web3 ecosystem. The platforms boast an impressive support of 77 modules, with the most famous ones all being represented. You can either use them directly or just use their API.

Finally, after narrowing down and identifying the scammers, it is imperative to let others know so that they don’t fall to such scammer again. This is where scam reporting websites like CryptoScamDB and online communities like Reddit crypto subreddits can provide valuable information and raise awareness to a large audience.

Challenges and Preventive Measures

Investigating crypto scammers is a hard and challenging job due to the anonymity of blockchain transactions and cross-border jurisdictional issues that make it harder to take actions even when you identify the culprits. Some of the scammers are so good at protecting their online persona, which means that you have to spend more energy and time to beat them in their own game. Some scammers are state sponsored which means they have a whole country backing them, which complicates the whole thing all together.

Scammers often use mixers like Tornado Cash or privacy focused coins like Monero to obscure the fund trails, and a lack of rigorous expertise can hinder or end investigations. However, collaboration with experts and tools like OnChain Industries is the key to overcoming these obstacles and continuing in your pursuit of the scammers.

To avoid the common crypto scams, users should educate themselves on common tactics like phishing and fake ICOs and how to use the internet safely. Users should also always verify websites and projects before investing in them, using secure wallets is also another method that can help users avoid scammers. Lastly, enabling two-factor authentication on your crypto apps and websites to prevent unauthorized access is a good step that all users should implement. Not sharing your private keys or seed phrases, and staying vigilant, is also a good measure to combat these scammers.

Final thoughts

Investigating crypto scammers requires a combination of tools, skills, community collaboration, and hypervigilance. Scammers try to beat established security systems, and therefore it is important to always stay ahead of them. 

Platforms like OnChain Industries plays a huge role in this instance by helping to trace and map scams with ease, while preventive measures help users avoid falling victim to scammers by encouraging them to follow the best security practices. Combating crypto fraud is a collective effort that benefits the entire ecosystem and everyone, from investigators to hobbyist, is welcome to keep the community safe.