As the public's interest in cryptocurrency investment has grown, so has the number of cryptocurrency scams and bitcoin frauds.
In the first ten months of 2021, over £162 million was lost to crypto fraud as investors' "fear of losing out" on this hot new industry attracted crooks big and small.
Is it safe to invest in cryptocurrencies?
As with every popular investment, there are always crooks attempting to benefit on investors' enthusiasm to gain and their lack of competence.
Cryptocurrencies, notably bitcoin, have delivered returns that forex investors can only dream of. However, this naturally draws scammers who are eager to capitalize on the high investment returns combined with people's lack of information.
Cryptocurrency is mathematically secure. Transactions involving digital currencies are stored in blocks that are linked together in a chain. Once a block has been added to the end of the chain, it cannot be removed or undone.
All of the computers that secure the network share a golden copy of the correct transaction ledger. They are compensated in a blockchain's internal currency, such as bitcoin or ether, for keeping it secure and up to date.
Clearly, there are risks and dangers for the uninitiated.
The most common cryptocurrency scams and how to avoid them
The greatest method to protect yourself, like with any investing choice, is to check for red signals. The following is a list of the most common forms of cryptocurrency investment scams:
- Never accept anything at face value.
- Maintain your curiosity and double-check everything.
- Before engaging in any financial transaction, always do your own research.
Warning!if anything seems to be too good to be true, it generally is!!
Investing/'Quick Rich' Scams
Investment or 'Get Rich Quick' scams have been around for a long time and aren't exclusive to the cryptocurrency market. Scammers, on the other hand, use bitcoin to take advantage of the secrecy of wallets and the irreversibility of transactions.
Scams come in a variety of ways. One of the most popular includes a fraudster claiming to represent a given platform and reaching out to individuals in crypto forums through social media or instant messaging (e.g., a crypto exchange, crypto mining enterprise, or new coin project).
Scammers may also employ realistic-looking websites to catch as many naive visitors as possible, and they often alter search engine optimization (SEO) results and/or advertising for their platforms.
Typically, fraudsters ask consumers to invest money with unrealistic and apparently 'guaranteed' returns. Some consumers may invest due to FOMO ('Fear of Missing Out.')
Steps to Avoid 'Quick Rich' Scams:
- Before investing your money, do your own research utilizing reliable sources.
- If an investment seems too good to be true, it most often is.
- Check that the website you are viewing is authentic and that the URL has not been tampered with in order to seem legitimate.
- Take note of the final section of the URL. investfly.co's URL, for example, is 'https://investfly.co,' but a plausible scam URL may be 'https://investfly.co-premium.somescammerdomain.com.'
Scams Based on Phishing
This is another fraud that has existed since the beginning of the Internet and has now been adapted to crypto.
In this scam, a user is 'phished' after being approached by a supposedly credible platform or one of its staff in a manner that seems highly convincing to the untrained eye, whether the victim is an existing member of the platform or not.
Email, SMS, instant messaging applications, social media, and even phone conversations may all be used to perpetrate phishing. Phishing fraudsters often develop sophisticated clones of the profiles, websites, and emails of the organization they seek to impersonate, making it difficult for people to detect such outreach as a fake. Phishing attacks are designed to persuade users to click a link and/or enter their credentials to get access to their accounts and finances.
Phishing messages and phone calls may contain offers such as a new promotion; however, they may also attempt to scare users into clicking a link or providing sensitive information by claiming that their account has been compromised and that they must reset their credentials, secure their account, or transfer their funds immediately.
Phishing Attempts Examples:
- Phishing phone calls that ask for money or sensitive information, such as login passwords or bank information
- Phishing URLs that ask the user to input their wallet private key/secret recovery phrase in order to connect their wallet, validate/activate their wallet, qualify for a free airdrop, or resolve a technical problem.
- Phishing emails requiring you to reactivate your account quickly or risk losing your cash.
- Emails promising unrealistic returns on a new deal, promotion, product, or service are phishing.
- Messages on instant messaging applications or social media from people claiming to work for a cryptocurrency service, project, or platform, ostensibly to help the user with a problem.
- If you are the victim of a phishing effort, you should notify the relevant platform via its proper methods (e.g., customer support).
Measures to Help Avoid Phishing Scams:
- Reputable platforms, such as Crypto, use anti-phishing codes, which are phrases you may add to interactions between you and the platform. If the email does not include the such phrase, consider it is not real.
- Enter your credentials ONLY in the official applications and/or websites, and use your browser rather than the URL you got to access the website.
- If someone contacts you through an instant messaging app, social media, or even phone, presume they are not a real representative of the platform and do not supply them with any sensitive information, passwords, or personally identifying information (PII) (personally identifiable information)
Technical Support scams
When money is involved, we typically prefer to defer to someone who knows more than we do. This is where the crypto technical support fraud comes in.
The FBI issued a warning in 2018 about fraudsters acting as cryptocurrency exchange support employees, earning victims' confidence, and then stealing their digital currency deposits.
In this situation, the fraudster wants you to reveal your private key, which unlocks your bitcoin digital wallet. This enables them to steal the cryptocurrency by forwarding it to another wallet.
The best secure crypto wallet is debatable. MetaMask, a software wallet with five million monthly active users, is immensely popular, It is constantly online and is often available as a browser extension for Google Chrome or Mozilla Firefox, or as a mobile app. Others swear by hardware (offline) wallets such as the industry leaders Trezor Model One and Ledger Nano.
Coinbase scams
Coinbase is one of the most well-known bitcoin trading platforms in the world. In April 2021, the exchange went public on the Nasdaq stock market in the United States. However, because of its popularity, it has been utilized in SMS and email marketing.
These sorts of scam attempt to persuade the prospective victim to click on a dubious link. Visiting that dubious website allows crooks to install malware or other computer nasties on their target's smartphone or PC to harvest their data or steal other sensitive information.
It’s a low-technique scam, but effective.
Scams involving remittances/withdrawals
In these scams, the fraudster will claim that they are unable to withdraw or remit cash and will beg the victim's aid in exchange for a portion of the funds.
This fraud may come in a variety of ways. For example, the fraudster may seek assistance with withdrawing real cash (USDC/USDT tokens, for example) from a wallet held by the scammer, who would even provide the victim access to the wallet, stating they are experiencing withdrawal issues.
The unknowing victim will then transfer cryptocurrency to the wallet in the hopes of obtaining monies from it. They have no idea that the fraudster has used a bot to monitor the wallet and withdraw any monies deposited to it quicker than any human could.
Alternatively, they may claim to be in a crypto-hostile nation and ask for assistance in purchasing cryptocurrency on behalf of the person in exchange for cash. In this situation, the victim purchases the cryptocurrency and sends it, only to have the remittance they got clawed back (due to the use of fake cards/accounts) or never get one at all.
Warning!Avoid any 'under the table' transactions, no matter how simple or profitable they seem, since you may lose money or violate relevant laws in your country!
Scam giveaways
We all like obtaining something for free. And it is for this reason that giveaways are one of the most effective techniques of theft in bitcoin scams.
In one typical scam, victims are persuaded they can double their cryptocurrency if they transfer it to a celebrity — who, of course, is a phony. The US Federal Trade Commission informed Reuters in May 2021 that $2 million (£1.45 million) had been wired to Elon Musk impersonators in only six months.
Telegram and Twitter are notorious for hosting known fraudsters who offer money in the form of "airdrops" — free coins delivered to your bitcoin wallet.
The kicker is that victims are frequently compelled to give sensitive personal information or are cheated out of their own cryptocurrency.
Last Thoughts
Scammers develop with cryptocurrency, scammers also continue to develop their own scams so stay vigilant and use only secure and trustworthy platforms, which use strong security measures such as multi-factor authentication and anti-phishing codes. Avoid investing in unfamiliar platforms without doing your own investigation.