Ways to avoid cryptocurrency scams

According to a report by blockchain data firm Chainalysis, crime in the crypto space reached record levels in 2021, with scammers stealing $14 billion worth of cryptocurrency. Those interested in crypto need to be aware of the risks.

CRYPTOCURRENCY INVESTMENT FRAUD

There are many types of crypto scams. Some of the most common examples are:

Fake websites

Scammers sometimes create fake cryptocurrency trading platforms or counterfeit versions of official crypto wallets to trick unsuspecting victims. These fake websites are often similar to the sites they are trying to imitate but have slightly different domain names. They look very similar to legitimate sites, which makes it difficult to distinguish the difference. Fake crypto sites generally work in two ways:

As phishing pages: All data you enter, such as your crypto wallet password, recovery phrase, and other financial information, falls into the hands of scammers.

For theft: Initially, the site may allow you to withdraw a small amount of money. As your investments perform well, you may deposit more money into the site. However, when you later want to withdraw your money, the site either shuts down or rejects the request.

Phishing scams

Crypto phishing scams often target information related to online wallets. Scammers target the crypto wallet private keys necessary to access funds within the wallet. Their methods are similar to other phishing attempts and are associated with the fake websites described above. They send an email asking recipients to enter their private key information to lure them to a specially created website. Once hackers obtain this information, they steal the cryptocurrency in the relevant wallets.

Pump and dump schemes

This involves the promotion of a specific coin or token by scammers via an email chain or through social media platforms such as Twitter, Facebook, or Telegram. Those who do not want to miss the opportunity rush to buy the coin, driving up its price. Once the scammers succeed in inflating the price, they sell their assets, which causes a crash as the value of the asset drops sharply. This can happen in a matter of minutes.

Fake apps

Another common method scammers use to trick cryptocurrency investors is fake apps that can be downloaded from Google Play and the Apple App Store. Although these fake apps are quickly found and removed, they impact profitability. Thousands of people have downloaded fake cryptocurrency apps.

Fake celebrity endorsements

Crypto scammers sometimes pretend to have received endorsements from celebrities, businessmen, or influencers, or solicit such endorsements to attract potential targets. Sometimes they can even sell non-existent cryptocurrencies to novice investors. These scams can be sophisticated, including flashy websites and brochures that appear to have been endorsed by famous names like Elon Musk.

Giveaway scams

In this method, known as a giveaway scam, scammers promise to send back the cryptocurrency sent to them in the same amount or doubled. A clever message, often taken from a real-looking social media account, can make people think what is written is legitimate and can create a sense of urgency. This so-called “once-in-a-lifetime” opportunity can lead people to transfer their money quickly in the hope of making an instant return.

Blackmail and extortion scams

Another method used by scammers is blackmail. They send emails claiming to have a record of adult websites visited by the user and threaten to expose them unless the users share their private keys or send cryptocurrency to the scammer.

Cloud mining scams

Cloud mining refers to companies that allow you to rent the mining hardware they operate in exchange for a fixed fee and a share of the supposed income you will earn. In theory, it allows people to mine remotely without buying expensive mining hardware. However, many cloud mining companies are fraudulent or, at best, ineffective, as you end up losing money or earning less than promised.

Fraudulent initial coin offerings (ICOs)

An initial coin offering (ICO) is a method that allows startup crypto companies to raise money from future users. Typically, customers are promised discounts on new cryptocurrencies in exchange for sending active cryptocurrencies like Bitcoin or another popular cryptocurrency. Several ICOs have turned out to be fraudulent, with criminals going to great lengths to deceive investors, such as renting fake offices and creating high-end marketing materials.

DETECTING CRYPTOCURRENCY SCAMS

So, how do you detect a crypto scam? Here are the red flags to watch out for:

Promises of guaranteed returns: No financial investment can guarantee future returns because investments can have ups and downs. Any crypto offer that promises you will definitely make money is a red flag.

Insufficient or non-existent whitepaper: Every cryptocurrency should have a whitepaper, as it is one of the most critical aspects of an initial coin offering. The whitepaper should explain how the cryptocurrency is designed and how it will work. If the whitepaper does not make sense or, worse, does not exist, proceed with caution.

Excessive marketing: All businesses advertise themselves. One way crypto scammers attract people's attention is through heavy marketing in the form of online advertising, paid influencers, offline promotion, etc. Their goal is to reach as many people as possible in the shortest time to make quick money. If you think the marketing of a crypto offer is inadequate or has unsubstantiated claims, stop and do some more research.

Anonymous team members: In most investment companies, you should be able to find the key people behind the business. Usually, this can be ensured by easily accessible biographies of the people running the investment and their active presence on social media. If you cannot find out who is running a cryptocurrency, it is best to be cautious.

Free money: Whether it is cash or cryptocurrency, investment opportunities that promise free money are likely fraudulent.

PROTECTING YOURSELF FROM CRYPTOCURRENCY SCAMS

Most crypto scammers are sophisticated and persuasive. Here are the precautions you can take to protect yourself:

Protect your wallet: To invest in cryptocurrency, you need a wallet with private keys. If a firm asks you to share your keys to participate in an investment opportunity, it is highly likely to be a scam. Do not share your wallet keys with anyone.

Be careful with your wallet app: If you are making a transfer for the first time, send only a small amount of money to verify the legitimacy of the crypto wallet app. If you detect suspicious behavior while updating your wallet app, terminate the update and uninstall the app.

Only invest in things you understand: If you do not fully understand how a particular cryptocurrency works, it is best to stop and do more research before deciding whether to invest.

Do not rush: Scammers often use high-pressure tactics to get you to invest your money quickly (e.g., promising bonuses or discounts if you join immediately). Take your time to conduct your own research before making any investment.

Be careful with social media ads: Crypto scammers often use social media to promote their fraudulent schemes. They may use pictures of celebrities or high-profile businessmen without permission to add legitimacy to their schemes, or promise giveaways or free cash. When you see crypto opportunities promoted on social media, approach them with skepticism and perform due diligence.

Ignore marketing calls: If someone contacts you out of the blue to sell you a crypto investment opportunity, it is likely a scam. Do not give your personal information or transfer money to people who contact you in this way.

Only download apps from official platforms: Although fake apps can even make it into the Google Play Store or Apple App Store, it is safer to download apps from these platforms than anywhere else.

Do your research: The most popular cryptocurrencies are not fraudulent. However, if you have not heard of a particular cryptocurrency before, research it; see if there is a whitepaper you can read, find out who runs the crypto and how, and look for real reviews and user opinions. Look for an up-to-date and reliable list of fake cryptocurrencies to examine scams.

Is it too good to be true?: Companies that promise guaranteed returns or will make you rich overnight are likely scammers. If something looks too good to be true, be cautious.

Finally, as with any investment opportunity, never invest money you cannot afford to lose. Even if you have not been scammed, cryptocurrency is volatile and speculative, so it is very important to be aware of the risks.

WHAT TO DO IF YOU BECOME A VICTIM OF A CRYPTO SCAM

Becoming a victim of a cryptocurrency scam can have a devastating effect, and if you have made a payment or provided personal information, acting quickly is of great importance.

Contact your bank immediately in the following cases:

Making a payment with a bank or credit card.

Making a payment via bank transfer.

Sharing your personal information.

Crypto scammers often sell the information they obtain to other criminals. Therefore, you need to change all your usernames and passwords to avoid further damage. If you have been exposed to a social media crypto scam, you can report it to the relevant social media platform. Depending on where you live, you can report the scammers to the relevant authority in your jurisdiction (e.g., the Federal Trade Commission for the US). You can apply to similar institutions in other countries.

News Source: 12punto