Neeraj Khandelwal Warns About Seed Phrase Trap in Viral Crypto Scam

Cryptocurrency users often face new threats as scammers evolve their tactics. Neeraj Khandelwal, co-founder of CoinDCX and Okto, exposed a social media scam. The scam trending on YouTube and Reddit has raised major concerns among crypto traders. It revolves around seed phrase sharing and targets curious users through social engineering. Scammers pretend to be crypto beginners, sharing seed phrases in public forums, luring others into a financial trap. Here’s how the scam works and how to stay safe and spot scams effectively.

The Setup: Fake Wallet with Shared Seed Phrase

Neeraj Khandelwal explained this social media scam in a detailed version. Scammers create a fake wallet with visible funds. They post a 12-word seed phrase publicly on social platforms. They act clueless, pretending to be beginners needing help. When someone imports this seed phrase into their wallet app, a tempting amount of USDT or other cryptocurrencies appears. However, the wallet lacks native tokens like ETH (Ethereum) or TRX (TRON), required for gas or transaction fees. This missing detail forms the bait. The user sees funds but can’t move them without adding gas tokens. It appears as an easy opportunity, just add a little gas, and the crypto becomes accessible.

Luring and Trapping the Crypto Users

Greed becomes the trigger in the scam. The setup relies on a natural human flaw, greed. Many feel tempted to deposit small amounts of native tokens to pay transaction fees, assuming beginners have abandoned the wallet. Scammers rely on the assumption that the deposit will unlock the hidden crypto inside. What seems like a minor risk for a large reward ends in immediate loss. Once the gas tokens are added, the trap gets triggered, and funds disappear in seconds.

The victim imports the wallet, which is still actively controlled by the scammer. The moment native tokens are sent, bots controlled by scammers transfer them out instantly. No time is left to attempt a withdrawal. In more complex cases, the scam uses multi-signature wallets. Even if a victim owns the seed phrase, moving funds still requires approval from another key. The scammer holds this second key and blocks all transfers. Every deposited token ends up locked or stolen.

Warning Signs and Red Flags

Scams follow patterns that can be spotted early. Seed phrases are confidential, no real crypto user shares their recovery phrase in public. The offers look too good to be true, if it’s suspiciously easy or rewarding, it’s likely a trap. Unusual crypto help requests, real beginners ask basic questions, not share private keys. Empty wallets with high token values. If the wallet holds no gas tokens but displays major balances, it’s a bait wallet.

Stay Safe and Spot Scams

Awareness is the best defence against crypto scams. Never use a wallet seed phrase shared by someone else. Always create personal wallets from scratch. Protect private keys at all costs. Never share seed phrases or recovery phrases with anyone, regardless of their claim. Beware of social engineering. Scammers often target users on Reddit, Discord, Telegram, and YouTube comments. Avoid sending funds to unknown wallets. No matter how promising the return looks, do not fund wallets you don’t fully control.

Social media remains the weakest link for many crypto companies and users. Always double-check profiles and seek verified sources for crypto news and support. Security in crypto starts with user awareness and common sense.