Scammers are constantly seeking for new ways to steal your money, and the recent explosive growth of cryptocurrencies has made fraud more common. According to a report by blockchain intelligence company Chainalysis, thieves stole $14 billion worth of cryptocurrency in 2021, setting a new record for cryptocurrency crime. It’s crucial to be aware of the risks if you’re interested in cryptocurrencies. Continue reading to learn more about typical cryptocurrency scams, how to recognise them, and how to prevent them.
Scams using cryptocurrency investments
Cryptocurrency scams come in a variety of forms. Among the most typical are:
In order to deceive their victims, scammers may develop phoney cryptocurrency trading websites or imitations of legitimate cryptocurrency wallets. These phoney websites frequently have domain names that are somewhat similar to those of the real websites they are meant to imitate. It can be challenging to distinguish them from authentic websites since they resemble them so closely. One of two things happens when a webpage is fake cryptocurrency:
- As with phishing pages, all the information you provide, including your crypto wallet’s password, recovery phrase, and other financial credentials, is obtained by fraudsters.
Taking theft as an example: You might be able to withdraw a little sum of money at first through the website. You might increase your investment in the site as your current investments appear to be doing well. However, the site either closes down or rejects your request when you later wish to withdraw your money.
Online wallet information is a common target of cryptocurrency phishing scams. Private keys for crypto wallets, which are needed to access the wallet’s funds, are the target of scammers. They operate in a similar way to previous phishing scams and are associated with the fictitious websites mentioned above. To entice recipients to a specifically designed website where they are asked to provide private key information, they send an email. The cryptocurrency in those wallets is then stolen by the hackers once they know this information.
Through an email blast or social media sites like Twitter, Facebook, or Telegram, con artists will hype up a certain coin or token. Tradesmen hurry to purchase the coins because they don’t want to miss out, which raises the cost. After successfully driving up the price, the con artists liquidate their shares, which leads to a crash as the asset’s value rapidly drops. This can occur in a matter of minutes.
Scammers frequently use bogus apps that can be downloaded from Google Play and the Apple App Store to deceive cryptocurrency investors. These bogus apps are swiftly identified and taken down, but that doesn’t mean they aren’t having an effect on many bottom lines. Numerous people have downloaded phoney cryptocurrency applications.
fake endorsements by celebrities
To entice potential targets, cryptocurrency scammers occasionally adopt celebrity, corporate, or influencer personas or make claims about endorsements from these individuals. This occasionally entails marketing fake cryptocurrency to unsophisticated investors. Sophisticated websites and pamphlets that purport to have celebrity endorsements from well-known figures like Elon Musk are sometimes used in these scams.
In what is known as a giveaway scam, the con artists here claim to equal or multiply the cryptocurrency handed to them. Clever messaging from what frequently appears to be a legitimate social media account can engender a sense of legitimacy and urgency. People may send money rapidly in the hopes of receiving an immediate return because this opportunity is supposedly a “once in a lifetime” chance.
extortion and blackmail schemes
Blackmail is another another technique scammers employ. They send emails threatening to reveal the user’s history of visiting adult websites unless the recipient shares their private keys or transfers money to the scammer.
Fraudulent cloud mining
Cloud mining refers to businesses that let you rent mining equipment they run in return for a set charge and a percentage of the profits you will allegedly make. Theoretically, this enables anyone to mine remotely without investing in costly mining hardware. In contrast, a lot of cloud mining businesses are frauds or, at best, unproductive, causing you to lose money or make less than expected.
Initial coin offerings that are fake (ICOs)
Initial coin offerings, or ICOs, are a mechanism for budding cryptocurrency businesses to solicit funding from potential customers. Customers are frequently given the option to send active cryptocurrencies like bitcoin or another well-known cryptocurrency in exchange for a discount on the new crypto coins. Many initial coin offerings (ICOs) have proven to be fraudulent, with criminals going to elaborate efforts to defraud investors. Examples include hiring up bogus offices and producing upscale marketing materials.
How to recognize bitcoin frauds
So, how can one recognise a cryptocurrency scam? Among the red flags to watch out for are:
Guaranteed returns: Because investments can go up as well as down, no financial investment can guarantee future returns. Any cryptocurrency offering that makes a guarantee that you will profit is a warning sign.
A weak or nonexistent whitepaper: A whitepaper is one of the most important components of an initial coin offering, so every cryptocurrency should have one. The cryptocurrency’s design and operation should be covered in the whitepaper. Be cautious if the whitepaper doesn’t make sense or, worse yet, doesn’t exist.
excessive marketing: Every company advertises themselves. But investing heavily in marketing, like as internet advertising, paid influencers, offline promotion, and so on, is one way that cryptocurrency scammers draw people in. This is intended to reach as many people as possible in the quickest amount of time and to quickly raise money. Consider stopping and doing more study if you think a crypto offering’s marketing is pushy or makes grandiose claims without any evidence.
Unidentified team members It should be possible to identify the primary individuals behind the majority of investment businesses. This typically entails accessible bios of the investment’s managers as well as a vibrant social media presence. Be wary if you can’t identify the owner of a coin.
How to avoid being duped by cryptocurrency scams
Cryptocurrency frauds are common and often very well done. The following actions can be taken to safeguard yourself:
A wallet with private keys is required to invest in cryptocurrencies, so keep it secure. It’s quite likely a fraud if a company requests your keys so you can take part in an investment opportunity. Secure the keys to your wallet.
Keep an eye on your wallet app: When sending money for the first time, send a little amount to verify the app’s validity. If you observe strange behaviour while updating your wallet app, stop updating and delete the app.
Just invest in items you are familiar with. It is important to take a break and conduct additional study if you are unsure of how a specific cryptocurrency operates before deciding whether or not to invest.
Take your time: Scammers frequently employ high-pressure techniques to persuade you to spend your money right away, such as by making bonuses or discounts if you do so immediately. Before making any purchases, take your time and do some independent research.
Social media advertisements should be avoided since cryptocurrency scammers frequently utilise it to advertise their fraudulent schemes. They may utilise unlicensed pictures of famous people or prominent entrepreneurs to give the impression of credibility, or they may make promises of freebies or free money. When you see cryptocurrency prospects touted on social media, keep a healthy dose of scepticism in mind and conduct your research.
Avoid cold calls: It’s certainly a fraud if someone reaches you unexpectedly to sell you a cryptocurrency investment opportunity. Never give anyone who contacts you in this way your personal information or money.
Only download programmes from legitimate stores: Although phoney apps may end up in the Apple App Store or Google Play Store, these are the only places where you should ever download apps.
Do your homework; the most widely used cryptocurrencies are not con artists. However, if you’ve never heard of a specific cryptocurrency, do some research on it. Check to see if there’s a whitepaper you can read, learn who controls it and how it functions, and check for real reviews and endorsements. To check for scams, find an accurate and reliable list of bogus cryptocurrencies.
Is it too good to be true: Businesses that guarantee returns or claim to make you wealthy overnight are probably scams. Be cautious if something sounds too good to be true.
Last but not least, never use money you can’t afford to lose on an investing opportunity. Understanding the risks is crucial because cryptocurrency is speculative and volatile even if you aren’t being scammed.
How to react if you are a victim of a cryptocurrency scam
If you’ve already made a payment or given out personal information, it’s critical to take swift action to avoid being a victim of a bitcoin scam.
If any of the following apply to you:
- using a debit or credit card to make a payment.
- made a bank transfer payment.
- shared identifying information about yourself.
The information that cryptocurrency scammers have obtained is frequently sold to other crooks. Therefore, it’s imperative to update your usernames and passwords on all of your accounts in order to stop additional harm. You can report a social media crypto scam to the appropriate social media network if you become a victim of one. You can report frauds to the appropriate government agency in your area, such as the Federal Trade Commission in the US, depending on where you live. There are counterparts in other nations.