Crypto Scams Related to Multi-Signature Wallets

Introduction

Security in cryptocurrency trading is as important as it is evasive. There are multiple ways to deprive you of your funds if you do not take appropriate measures. The securest step you can take to save your assets from scams is to resort to hardware wallets, the physical presence of which is required to withdraw any crypto. Generally, there is only one custodian of a wallet whose signatures, or keys, are required to access the funds inside. However, there is another type of security that can add an extra layer of safety: multi-signature wallet.

What is a Multisig Wallet?

In normal wallets, there is only one person responsible for sending or receiving funds. But this is not feasible if a large company decides to hold cryptocurrency in the reserves. The funds can be compromised if one person is entrusted with the keys, or even if a group is provided with the seed phrase. In both cases, there can be breach of trust any time. The solution is the multi-signature wallet. To get access to the wallet, more than one person is required to be present. If a thief intends to steal the funds, it is not possible to do it with the help of one key.

How to Operate a Multisig Wallet?

There are many options to set up a multi-signature wallet, and it depends upon the needs and requirements of the owners. Sometimes, 2 keys are set up and both are required. Similarly, the options like 2 of 3, 3 of 3, 3 of 4, etc. can be used. These choices not only provide security but also ensure flexibility. Therefore, multisig wallets are a great option for teams and corporations.

Use in Scams

One might wonder how scammers can steal from multisig wallets. There are several ways of scams related to multisig wallets. The most common of them all is the case in which you come across a person asking for help of some type, also providing the keys to their wallet. You laugh at their ingenuousness and come to think that you have got the control of their wallet. This is, in fact, a bait-wallet trap.

Bait-Wallet Trap

You open the wallet and find a handsome amount of $USDT or $BTC, etc. When you try to transfer them to your wallet, you find out that there are not enough Tron to pay the gas fees. You transfer the required gas fee from your wallet to theirs. But in the end, you discover that their wallet is a multisig wallet whose other key is owned by the scammer. You have been tricked to feed their wallet via the gas fee. It is essential to avoid acting on any comment that pretends to reveal the private key or seed phrase on any public platform.

This kind of fraud involves minor loss to your funds as you only send as much crypto to the scammer’s wallet as was required to pay the gas fees, though the scammer would have stolen a significant amount if they had trapped more victims. Unfortunately, this is not the only kind of scam that can happen through or with a multisig wallet. A more elaborate kind of fraud involves targeting the wallet directly and causing a far bigger loss.

Scammers as the Co-Signatory of Your Wallet

Some multisig scams go beyond bait wallets and instead focus on tricking users into altering their own wallet settings. In these cases, the scammer convinces a victim to convert their normal wallet into a multisig wallet, often under the pretense of adding extra “security” or enabling access to special features. As part of the setup, the victim is told to add the scammer’s address as a co-signer, which quietly gives the scammer shared or even majority control.

Once this step is taken, the victim loses real ownership. If the wallet is configured to require all signatures for a transaction, the funds are effectively trapped, since the scammer can simply withhold their approval. In other setups, where a majority of signatures are enough, the scammer may already control more than one key and can use this advantage to move funds out of the wallet entirely.

On networks like Tron, this often plays out through “Owner Permission” changes, where adding the scammer’s address places them on equal footing with the original owner. Victims might still see their assets in the wallet, but every attempt to move them requires the scammer’s consent. In other situations, scammers create fake investment pools or airdrop schemes that require users to add their addresses as co-owners. With control secured, the scammers either freeze the funds indefinitely or sweep them away.

Unlike simple gas-fee traps, these elaborate scams can directly drain a user’s own wallet. The key danger is that the victim willingly hands over co-signing rights without realizing it, unknowingly giving the scammer the ability to block or steal their funds.

How to Avoid Multisig Wallet Scams

1. To avoid bait-wallet traps, check the wallet address on TronScan Blockchain explorer, and see whether the wallet is a multisig wallet or not. The wallet address to bait victims has usually very limited functionality. The scammer behind the scene is the actual controller.

2. Never share your seed phrase and private keys with anyone and keep them in a secure location. Remember that no company will ever ask you about your private keys.

3. Do not use any third-party wallet app. Always use the software provided by the official website of your wallet.

4. A smart habit for multisig users is to regularly check who can access their wallet. Most wallets allow you to review permissions through the settings. If you notice any unknown signatories, remove them right away. It’s also wise to revoke access for DeFi apps you no longer use.

5. Just like any other application or account, make sure that your wallet also has two factor authentication (2FA) turned on.

6. Never consider yourself so smart that you cannot be deceived. Despite all your knowledge, scammers keep innovating their modus operandi. So, stay informed of what is going on in the market, and act accordingly.

Conclusion

Summarily, multi-signature wallets are a great way to secure your assets, but they can be used by scammers to steal funds, too. You may fall victim to bait-wallet trap and send them funds as a transaction fee. A scammer may pretend to be from customer care and drive you to add them as a co-signatory of your wallet, freezing or later on take away all your assets. Therefore, you must be cautious and alert regarding your money in any digital wallet.