Web3 Scams

The UKey hardware wallet is designed to protect your assets, but there are certain risks that even UKey cannot prevent. In this section, we’ll cover some of the most common scam tactics in Web3 and explain what you should watch for as you navigate this space.

In Web3, anyone can create a project and start selling tokens. There are no business background checks, no regulatory authorities, and no universal code of conduct for crypto projects.

More importantly, blockchain transactions are irreversible, and there is no central authority to reverse mistakes. If you make the wrong decision, there is usually no way to recover your crypto. Once it is lost, it is lost. That is why it is so important to understand the different types of scams in Web3 and learn how to identify them before becoming a victim.

A pump-and-dump scheme is nothing new—it has existed for as long as trading itself.

When a product or business idea is being “pitched,” it means someone is promoting it for their own benefit. For example, they may tell you that a project is “a once-in-a-lifetime opportunity” or say that you need to “buy now before it’s too late,” making it sound like an exceptional investment. In reality, it may not be a good opportunity at all, and the only person likely to profit from your investment is the scammer.

In the open world of cryptocurrency, anyone can launch a project and ask for investment, which is why fake projects are so common.

Promoting a cryptocurrency can take different forms.

In both cases, the goal is the same: to generate hype so that unsuspecting people will invest.

Even a small amount of hype can have a significant effect. The more people buy in, the greater the demand for the token, the higher the price climbs, and the more valuable the project appears to become.

Cryptocurrency scams are not always easy to recognize. You may not hear someone directly say, “This token is amazing—invest everything now.” Instead, the warning signs are often more subtle.

Not all influencers are found on Instagram. In crypto, influential figures—including celebrities—may publicly support a project.

However, celebrities are not always transparent. They may be paid to promote the project, or they may have their own financial interest in it. In either case, their recommendation is not neutral and is unlikely to be made in your best interest.

What’s the lesson? Always ask why. If a public figure suddenly begins promoting a cryptocurrency despite having shown no previous interest in the market, there is a good chance they are doing it for their own benefit—not yours.

It is natural for the team behind a cryptocurrency project to want it to succeed, especially if they hold a large stake in it. For that reason, they are likely to market it aggressively to attract attention and investment.

But keep in mind that the team has a direct financial interest in the project’s success, so their claims are unlikely to be completely objective.

What’s the lesson? Do your own research. If the team claims the project will deliver major value, compare those claims against the roadmap, whitepaper, and independent sources such as Etherscan.

Another common scam in the crypto world is the rugpull.

The term describes exactly what happens: someone pulls the rug out from under investors. In cryptocurrency, a rugpull usually involves a fake project selling tokens or NFTs while promising a strong future.

As more people buy into the project, demand increases, token prices rise, and the project’s apparent value grows. The problem is that the project was never genuine to begin with, and its creators know that when they take investors’ money.

After you and other investors put money into the project, demand and token prices rise. At that point, the creator or founder sells their own holdings, taking advantage of the inflated value created by public interest and buying activity.

The project creators never intended to stay and deliver on their promises. Once they sell their holdings, they disappear. Investors are then left holding tokens from a project that has effectively collapsed.

A well-known example is the so-called SushiSwap (SUSHI) exit scam. The project experienced a sharp rise in price, and its anonymous founder, Chef Nomi, quickly cashed out $14 million. As a result, the price of SUSHI dropped from above $9 to just over $1 in less than a week. After strong backlash from the community, Chef Nomi later returned the funds. Many rugpulls end in this kind of chaos.

In short, the openness of Web3 makes it an environment where almost anyone can make almost any claim. Even if your private keys are fully protected by UKey, you still need to carefully evaluate every project before getting involved.

Before allowing anyone to convince you to invest in a project—no matter how enthusiastic they sound—make sure you do the following: