What Is a Cryptocurrency Scam and How to Avoid It

Cryptocurrency scams work by building trust before asking for money, promising guaranteed returns, an urgent opportunity, or a blocked withdrawal that needs "just one more payment" to release, and no legitimate investment can actually guarantee a profit.

• A blocked withdrawal is the scam, not a real fee. If a platform asks for taxes, verification charges, or fees before releasing your funds, this is a classic pressure tactic, paying it almost always leads to another demand, not your money back.
• Recovery scams target people twice. Anyone contacting you claiming they can recover cryptocurrency you've already lost, for an upfront fee, is very likely the same kind of fraud striking again.
• A crypto scam doesn't cancel a separate loan obligation. If the fraud affected funds you'd earmarked for an EMI, your repayment obligation still stands independently, report the scam and check your loan account separately.
• Verification has to happen before you pay, not after. Once cryptocurrency is transferred, it typically can't be reversed, so verify any platform, adviser, or opportunity independently before committing funds, not once something already feels wrong.

A cryptocurrency scam uses deception to obtain cryptocurrency, money, account access, or personal information from a victim. Scammers may impersonate investment firms, financial professionals, cryptocurrency platforms, government officials or people known to the victim.

The approach can vary, but a scam commonly follows this pattern:

1. Initial contact: The scammer approaches the victim through a social media platform, messaging service, email, website or phone call.
2. Trust building: The scammer presents a false investment opportunity, trading service, or financial offer.
3. Payment request: The scammer asks the victim to transfer cryptocurrency or money, or provide account information.
4. Additional demands: The scammer may request more money by claiming that taxes, withdrawal charges or verification payments are required.
5. Loss or account compromise: The victim may lose funds or provide information that allows further unauthorised activity.

A legitimate investment opportunity cannot guarantee profits. Treat requests involving urgency, secrecy or guaranteed returns as warning signs.

What are the common types of cryptocurrency scams?

Cryptocurrency scams can take different forms, but most rely on impersonation, false promises, manipulation or requests for irreversible payments. Recognising the approach can help you stop before transferring money or sharing sensitive information.

The specific scam may combine more than one technique. Even a request that appears genuine should be verified through an independently obtained official contact channel.

What should you do if you suspect a cryptocurrency scam?

Stop communicating with the suspected scammer and avoid making further payments when you identify signs of fraud. Acting quickly can help limit further loss and preserve evidence for reporting.

Take these steps:

1. Stop the transaction: Do not transfer additional cryptocurrency or money.
2. Secure your accounts: Change compromised passwords and enable available security controls.
3. Protect your wallet: If wallet credentials or recovery information have been exposed, follow the wallet provider's official security guidance.
4. Contact the relevant financial institution: If money was transferred from your bank account or card, report the transaction through the institution's official channel.
5. Report cyber financial fraud: In India, report financial cyber fraud immediately by calling 1930 or through the National Cyber Crime Reporting Portal.
6. Preserve evidence: Keep transaction IDs, wallet addresses, screenshots, messages, email headers, website addresses, and payment records.
7. Report the scam account or website: The National Cyber Crime Reporting Portal also lets you report suspicious website URLs, phone numbers, email IDs, social media URLs, and other identifiers.

Do not pay someone who contacts you claiming they can recover your cryptocurrency for an advance fee. A second payment may result in another loss.

If a suspected scam involves a Bajaj Finance loan account or repayment transaction, use an official Bajaj Finance service channel to raise a relevant request. You should still file a separate fraud report with your bank and the appropriate cybercrime authorities, where applicable.

Where the relevant option is available, follow these steps through the Bajaj Finance App or My Account portal:

1. Sign in using your registered mobile number and OTP.
2. Open My Relations and select the relevant loan.
3. Go to Help & Support.
4. Select Raise Request.
5. Choose the relevant payment, transaction, or account-related category.
6. Enter the requested details and provide supporting documents, if required.
7. Save the request reference number for future communication.

Use only official service channels when reporting a financial issue. Do not share account credentials, OTPs, or payment information with anyone who contacts you claiming they can resolve the fraud.

How can you protect yourself from cryptocurrency scams?

Independently verifying investment opportunities and protecting wallet and banking credentials are key steps to reduce cryptocurrency scam risks. Avoid making financial decisions based solely on messages, social media recommendations, or claims of guaranteed returns.

Use these precautions:

• Verify the identity and credentials of anyone offering investment advice.
• Access a platform through an independently verified official website or application.
• Never share private keys, wallet recovery phrases, passwords, or OTPs.
• Do not transfer cryptocurrency to an address supplied through an unsolicited message without verification.
• Be cautious of guaranteed returns or pressure to invest immediately.
• Check the withdrawal process before committing funds.
• Avoid downloading applications from unknown sources.
• Do not grant remote access to your device to an unknown person.
• Keep records of cryptocurrency transactions and account activity.
• Contact your bank through official channels if an unauthorised payment has occurred.

RBI has previously cautioned users about the financial, operational, legal, customer protection and security risks associated with virtual currencies.

If a cryptocurrency scam has affected a loan repayment or another financial transaction, check the relevant account through official channels and address any separate repayment obligation, rather than assuming the fraud automatically cancels it.

What are the legal consequences of cryptocurrency scams in India?

A cryptocurrency scam can lead to criminal action under laws covering cheating, identity theft, computer-related offences and forgery, depending on how the fraud was carried out. Under the Information Technology Act, 2000, Sections 66, 66C and 66D may apply to certain computer-related offences, identity theft and cheating by personation. The Bharatiya Nyaya Sanhita, 2023 may also apply where the conduct amounts to offences such as cheating or forgery.

If you have lost money in a cryptocurrency scam, report the incident promptly to the appropriate authorities and preserve transaction records, wallet details, payment information, messages and other evidence. Provide these records during the investigation and seek independent legal advice if required. Reporting the scam does not guarantee recovery of the lost amount. Recovery and further legal action depend on the evidence, circumstances and steps taken by the relevant authorities.