No matter how much technology advances, hackers and con artists will continue to operate as they always have. Even while investing in cryptocurrencies is a novel and exciting possibility, it is subject to bitcoin frauds.
Cryptocurrency is similar to cash in that it is always available from your own digital wallet, but unlike cash, it is not insured by banks or another government agency. Without these extra safeguards, fraudsters can enter and exit without being seen, leaving you with nothing.
Having broad understanding and using protection services will help you better safeguard your cryptocurrency. In this tutorial, we go through what cryptocurrency scams are and explain in detail how to spot and stay away from them.
How Do Crypto Scams Work?
Scammers target crypto assets rather than cash, credit cards, or other forms of equal payment in crypto scams, which are similar to other financial frauds. Cryptocurrencies, such as Bitcoin or Ether, are kept in actual or virtual wallets, which can potentially be the subject of a hoax by a bad actor.
Scams target cryptocurrency particularly since it is:
Decentralized
Cryptocurrency scams frequently go unnoticed and unreported in the absence of a single entity committed to monitoring and detecting questionable activities.
Irreversible
Cryptographic transactions cannot be undone thanks to blockchain technology, which locks up money and makes it impossible to get it back.
Anonymous
Users may buy, sell, trade, swindle, and utilize wallet addresses and identities to do all of these things reasonably anonymously.
Cryptocurrency scams have been increasingly common in recent years since the technology is still relatively new and frequently misunderstood.
Types of Cryptocurrency Fraud
There are several different kinds of cryptocurrency scams, and each one aims to somehow get access to a user’s crypto. These frauds cover a wide range, from preying on a user’s humanistic instincts to merely accessing their digital money.
Despite the fact that there are many various kinds of cryptocurrency scams, they can all generally be divided into one of two groups:
- Access scams – try to get a hold of a digital wallet’s secret keys
- Manipulation scams – effort to persuade a user to send cryptocurrency to a fraudster directly
Scammers may attempt to acquire both crypto money and access codes, and many frauds fall into both of these categories.
Social Engineering Scams
Manipulation and access scam
Scams that use social engineering techniques aim to get access to private and sensitive data. These con artists prey on people’s humanity and natural tendency to trust, tricking them into disclosing personal information to someone or something they believe to be trustworthy.
Similar to whaling, social engineering fraudsters may pose as influential employees of a company. These scams can take days, weeks, months or even years, and will demand payment through cryptocurrency.
Imposter Scams
Manipulation and access scam
Before communicating with anybody who cold contacts you on behalf of a company, influencer, government official, or celebrity, be sure they are who they say they are. In order to get you to send them money or take part in a phony giveaway, imposter fraudsters will take on the personas of powerful, high-ranking people.
Even if you believe the impostor may be genuine, never divulge access codes or cryptographic credentials to anybody. Anyone who requests bitcoin as payment should be viewed with suspicion.
Phishing Scams
Access scam
Phishing schemes target users’ cryptocurrencies and access to their digital wallets in particular. Malicious URLs will be used by unscrupulous actors to steal a user’s private key, much as in a typical phishing scheme. These links, which may be sent by email, SMS, social media, or other avenues, will direct users to a perilous landing page. After clicking, a user will be asked for details that will allow them to access their cryptocurrency wallets.
Blackmail Scams
Manipulation and access scam
When attempting to con someone, some con artists would say they have personal information, pictures, or other forms of blackmail on the victim. Scammers sometimes offer a trade: secret keys to access their digital wallet in exchange for embarrassing information. These frauds fall under the category of extortion attempts and need to be reported right once.
Investment Scams
Manipulation scam
Choosing to put money into products, NFTs, markets, or other investment possibilities is a gamble, even if the money is put into bitcoin. In the world of investing, there are no guarantees, despite what con artists may attempt to tell you.
If a significant return on your investment is guaranteed, reconsider the investment you are making. You will often lose all of your investment in these kinds of schemes, and you won’t get anything back.
Cloud Mining Scams
Manipulation scam
Although cloud mining is not always a fraud, con artists have been known to exploit it to gain cryptocurrency payments. Bad actors and mining platforms might persuade merchants and investors to put money into a project that never yields the profits it promises – at a controllable or false hash rate.
Rug Pull Scams
Manipulation scam
It’s never good to have the rug pulled out from under you, but it can be extremely upsetting and devastating if it takes your money or cryptocurrency with it. In a rug pull scheme, con artists persuade investors to put shares into a fund for a new product, currency, or opportunity before the con artist drains the liquidity and vanishes.
Any coins or other objects that investors may have received are probably fraudulent or useless. If the project was ever actually real in the first place, investors lose the money and capital they spent, are unable to profit from the goods they got, and the initiative is abandoned.
Employment Scams
Manipulation and access scam
Crypto fraudsters frequently pretend to be employers or recruiters in order to con job seekers out of cryptocurrency. On fake employment forums online, recruiters and employers may ask for cryptocurrency in return for job training, or fake job listings may link to dangerous landing pages.
These tricks can also be used in reverse. In order to access crypto farms, scammers have sometimes applied for remote jobs while lying about their name and place of origin.
Initial Coin Offering Scams
Manipulation scam
Initial coin offerings (IOCs) are frequently released by new cryptocurrency businesses to attract capital and public awareness of their new offerings. IOC frauds entice consumers to swap actual, useable currencies, like Bitcoin, with the business in return for a discount on a new kind of money. IOC scammers will go to tremendous measures to persuade investors that their firm is legitimate before selling the money and vanish, just like rug pull scammers do.
How to Spot Cryptocurrency Fraud
It’s critical to understand how to distinguish between legal businesses and fraudsters if you invest in cryptocurrency.
Scammers are the only ones who will:
- Demand cryptocurrency payment
- Profits and payments are assured
- Online dating and financial guidance combined
- Demand for crypto keys
- Send messages or emails pretending to be someone, a company, or a government agency
- Extortion using actual or fictitious explicit material
You can fall victim to a cryptocurrency scam if you observe any of these techniques or if you get unwanted investing advice or cryptocurrencies.
In addition to these scam-specific characteristics, there are four other key fraud indicators.
White Papers – Cryptocurrencies with well-known white papers offer comprehensive information on their features and attributes. Such documentation are frequently absent in fake cryptocurrencies, and they frequently lack detail or an explanation of how the funds are used. To evaluate the caliber of new firms, it is essential to study the white papers of well-known cryptocurrencies. You should also exercise caution while making investments in or acquiring new cryptocurrencies.
Developers – Unless the project is open-source, white papers should list the developers and team members of a company. If they’re missing, there’s a chance that you’re being scammed out of cryptocurrencies.
Freebies – Be wary of freebie offers, especially those involving cryptocurrency currencies, since con artists may try to access your wallet or demand payment after sending money.
Marketing – Although cryptocurrencies are not normally a business that makes money, scammers frequently target them for financial gain. Real currencies should have understated marketing and be built for blockchain functionality. Companies that oversell their products or promote financing for cutting-edge technologies might be frauds.
The Most Common Scam Tactics
Although there are many different kinds of cryptocurrency scams, many con artists utilize the same or very similar techniques to con customers.
Typical scam techniques include:
Guarantees – Assurances of substantial rewards
Out-of-the-blue contact – Unknown individuals may randomly contact you via text, email, or social media sites.
Celebrities – Bogus celebrity impersonated with problems or freebies
Freebies – Assurances of free money, coins, or other goods
Lack of detail – Ambiguous descriptions of a money or institution
Business impersonation – Imposters who pose as business partners, executives, or other business-focused people
Employment opportunities – False job postings, workers, or employers
These strategies can be both risky and effective. Even when these strategies are used, you still need to know how to spot crypto frauds in order to keep yourself and your possessions safe.
How to Stay Away from Cryptocurrency Scams
To prevent cryptocurrency frauds, there are certain crucial steps you may take. Sending cash or contacting somebody in any way is not advised. Additionally:
- Maintain confidentiality of private keys.
- Don’t respond to unwanted emails from people you don’t know.
- Avoid clicking on strange links
- Keep your cryptocurrency and bank accounts separate
- Before deciding to invest in or associate with any companies, do your research on them.
- Recognize HTTPS in the address of a cryptocurrency exchange or wallet.
- Check correspondence, white papers, and marketing materials for typos and grammar mistakes.
- Invest gradually rather than everything at once.
- Avoid jailbreaking mobile devices
- Before committing to transmit or exchange cryptocurrency with any love partners, see them in person (and even then, act with caution!).
- If a message or investment officer states that your money are locked, get in touch with the agency right away.
- Look into positions and hiring firms that specialize in cryptocurrencies.
- Never take up offers of freebies or money.
- Be wary of overzealous marketing.
