Module 2: Wallets, Custody, and Security
Common Scams, Part 2: Investment and Social Engineering
Chapter 11 of 14 · about 7 minutes
11.1 The friendly stranger
Node received a message from an unknown number. "Hi, is this Alex? We were supposed to meet for the conference." Node replied that it was a wrong number. The stranger apologised warmly, and they chatted briefly. Over the next few weeks, the conversation continued: friendly, personal, interested in Node's life.
Eventually, the new friend mentioned they'd been making steady profits trading crypto with help from a relative who worked in finance. They sent screenshots. They offered to show Node how. They never pushed. They just waited for Node to ask.
Node told Hash about it, half curious.
"I'll tell you exactly how this ends," said Hash. "And then I want you to block that number."
Unlike the previous chapter, the scams here don't steal your keys. They persuade you to send money yourself. Because you authorise the transfers, there's usually no way to reverse them.
11.2 Relationship investment scams
What Node experienced is the opening of a relationship investment scam, often called pig butchering: the scammer "fattens up" the victim with trust before taking everything. These scams are run at industrial scale by organised groups, and they've cost victims billions of dollars worldwide. Some of the people sending the messages are themselves trafficking victims forced to work in scam compounds.
The pattern usually follows the same stages.
| Stage | What happens |
|---|---|
| Contact | A "wrong number" message, dating app match, social media connection, or professional networking message |
| Trust | Weeks or months of friendly or romantic conversation, often with no mention of money |
| Introduction | They mention their trading success and offer to help, or let you ask |
| The platform | They guide you to a trading website or app that looks professional |
| Early wins | Your balance grows quickly. A small withdrawal is allowed, to prove it's real |
| Bigger deposits | You're encouraged to invest more, sometimes with time-limited opportunities |
| The trap | When you try to withdraw, you're told to pay a tax, fee, or penalty first |
| The end | You pay, then more fees appear, until you stop paying. Then the platform and the friend disappear |
11.3 How the numbers work
Here's how this typically plays out, using the platform from Node's story.
| Step | Node's action | Platform balance shown | Money actually lost |
|---|---|---|---|
| 1 | Deposits $1,000 | $1,000 | $1,000 |
| 2 | Two weeks later | $1,800 | $1,000 |
| 3 | Withdraws $100 successfully | $1,700 | $900 |
| 4 | Deposits $10,000 for a "special opportunity" | $19,000 after a month | $10,900 |
| 5 | Tries to withdraw, told to pay a 20% "tax" first | $19,000 | $10,900 |
| 6 | Pays $3,800 | "Account under review" | $14,700 |
The balance on the screen was never real. It was a number in a database controlled by the scammers. The only real money was the money Node sent, and the small withdrawal was the cheapest investment the scammers made.
"So the profits are fake from day one," said Node quietly.
"From day one," said Hash.
11.4 Fake platforms and apps
Fake trading platforms aren't only used in relationship scams. They also appear in ads, social media posts, and messaging groups. Signs include a platform you can't find on app stores or reputable review sites, or one only accessible through a link someone sent you. Others are returns that are consistently high with no losing periods, deposit instructions asking you to send crypto to a wallet address, and fees, taxes, or "account upgrades" required before you can withdraw.
A legitimate exchange never requires you to pay a tax to the exchange before withdrawing your own money.
11.5 Too-good-to-be-true yields
High-yield schemes promise fixed daily or monthly returns: "Earn 1% per day," "guaranteed 20% monthly." Many are Ponzi schemes, paying early investors with money from later investors until new deposits slow and the scheme collapses.
Remember the warning from Module 1, Chapter 15: if you can't identify where the return comes from, you may be the source of it. Real yields in crypto exist, from lending, staking, and providing liquidity, and they come with risks and fluctuations. Fixed, guaranteed, unusually high returns are a red flag.
11.6 Rug pulls and honeypots
Module 1, Chapter 8 introduced rug pulls, where a token's creators remove liquidity and leave buyers with tokens they can't sell. Related scams include:
Honeypot tokens, whose smart contracts allow buying but block or heavily tax selling. The price chart looks great because nobody can sell.
Soft rugs, where the team gradually sells its holdings or abandons the project after raising money.
Fake presales, where people send funds to participate in an upcoming token launch that never happens.
Before buying a new token, check whether others have successfully sold it, how much of the supply the team controls, whether liquidity is locked, and whether the project has a real, verifiable team and history. Token-checking tools can flag some honeypot features, though not all.
11.7 Pump and dump groups and signal sellers
Some groups on messaging apps and social media promise insider "calls" on tokens about to rise. In a pump and dump, organisers buy a token cheaply, promote it to their members, and sell into the buying they've created. Members who buy late are left holding the losses.
Similarly, paid signal groups and copy-trading services often advertise selective winning trades while hiding losses. Some are run by people who profit from your trades, your subscription fees, or referral commissions, not from their own trading.
11.8 Impersonating authority
Some scams target people who aren't crypto users at all. Callers impersonate the police, tax authorities, banks, or tech support, claiming there's a problem with the victim's account and that funds must be moved to a "safe wallet," sometimes through a crypto ATM. Older people are frequent targets.
Hash's rule: no real government agency, bank, or police force will ever ask you to move money into crypto to protect it. If someone you know receives such a call, the most helpful thing you can do is make sure they've heard this rule before it happens.
11.9 Recovery scams
After losing money, many victims are contacted by people offering to recover it, for an upfront fee. They may claim to be lawyers, investigators, hackers, or even law enforcement. Some are the same scammers, targeting the victim a second time.
Anyone who promises to recover stolen crypto in exchange for an upfront fee is almost certainly a scammer. Legitimate help comes through law enforcement reports and, sometimes, the exchanges where stolen funds end up, as Chapter 14 explains.
11.10 Why smart people fall for these
Node was quiet for a while. "I like to think I'd never fall for that platform scam. But those messages were nice. I enjoyed talking to them."
"That's exactly why it works," said Hash. "These scams don't target intelligence. They target loneliness, hope, trust, and the fear of missing out. Anyone can be vulnerable to those, especially during a hard time in their life."
The best protection is a few firm rules, decided in advance:
- Never take investment advice from someone you've only met online.
- Never use a trading platform recommended by a stranger.
- Never pay a fee to withdraw your own money.
- Talk to someone you trust before sending money in an unfamiliar situation.
11.11 Try it yourself
Search for your country's official consumer protection or financial regulator's list of warnings about fraudulent investment platforms. Many regulators publish these lists. Bookmark it, and get into the habit of checking any platform someone recommends.
Then share the "never move money into crypto to protect it" rule with one family member who doesn't use crypto.
Key takeaways from this chapter
- Investment and social engineering scams persuade you to send money yourself, so transfers usually can't be reversed.
- Relationship investment scams build trust over weeks, then use fake platforms showing fake profits.
- Being asked to pay taxes or fees before withdrawing is a defining sign of a fake platform.
- Fixed, guaranteed, high returns are a red flag for Ponzi schemes.
- Rug pulls, honeypots, fake presales, pump and dump groups, and dishonest signal sellers target speculative buyers.
- No real authority will ask you to move money into crypto to protect it.
- Anyone promising to recover stolen funds for an upfront fee is almost certainly a scammer.
- These scams exploit emotions, not intelligence. Firm rules, decided in advance, protect you best.