The global acceptance of cryptocurrencies is evident. More individuals are jumping on the bitcoin bandwagon for various reasons, with numerous investors raking in incredible gains every day. With the rise of popularity and value of cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin has grown, users have become more vulnerable to fraud.
To begin with, assets and transactions are provided and controlled by users. They might fall prey to fraudsters and become victims of scams if there is no authority to oversee the operation of bitcoin channels.
What Attracts Scammers to Cryptocurrencies?
- It’s unregulated: One of the critical tenets of cryptocurrencies is that they are decentralized, meaning that it is not regulated by any government or anyone, so criminals can easily enter it with little to no regulation.
- They’re complicated: The technology underpinning cryptocurrencies is sophisticated, making it very difficult for the typical individual to understand or appreciate the hazards.
- Crypto is private: Those who don’t want the government or major banks peering over their shoulders prefer cryptocurrency transactions because they are private, with public-key cryptography masking an individual’s true identity.
- Storage is uncertain: Putting away cryptocurrency in hot wallets or at an exchange may be an unsafe recommendation since there’s a long history of both being hacked and it being troublesome to follow or recuperate stolen coins. You need to have a reliable and secure wallet, like cex.io wallet for example.
- Irreversible transactions: Cryptocurrency transactions cannot be reversed so once you fail for a scam your fund are most likely gone forever.
What are the Most Common Crypto Scams?
- Ponzi schemes – This is a form of a financial scam in which victims are duped into investing in a non-existent firm or a “get rich quick plan” that serves no purpose other than to line the fraudster’s pockets.
- Pump and dump – Scammers use fake information to induce investors to acquire shares in unknown cryptocurrency startups, or also known as crypto pump and dump schemes. The share price rises significantly, and the fraudster sells his shares, profiting handsomely, leaving the victim worthless equities.
- Fake exchanges – Fraudsters send e-mails or messages on social media claiming to have access to virtual money kept on cryptocurrency exchanges. The only snag is that the user is generally required to pay a modest charge upfront in order for them to withdraw the money. Their money is lost forever because the exchange does not exist.
- Impostor apps – Cybercriminals create fake cryptocurrency applications and distribute them through app stores. If you install one, it might steal your personal and financial information and infect your device with malware. Others may try to deceive consumers into paying for things that aren’t available or steal login information for your wallet.
- Phishing/impersonation – the most popular method of deceiving people is phishing. Phishing schemes are typical in the cryptocurrency business and often target information about online wallets. Scammers are particularly interested in crypto wallet private keys, which leads to access to the wallet’s funds. They send messages via e-mail directing the victim to suspicious websites to provide information about the private key. Once the hackers obtain this information, they will be able to steal the cryptocurrencies stored in the wallets.
- Imposter and Giveaway Scams – Scammers impersonate renowned celebrities, businesses, and bitcoin influencers as they move down the sphere of influence. Many scammers promise to match or multiply the cryptocurrency donated to them in what is known as a giveaway scam to entice potential victims. Well-crafted messaging from what appears to be a legitimate social media account can establish a sense of legitimacy and urgency. This fictitious “once-in-a-lifetime” chance can tempt consumers to send money immediately with the expectation of receiving a quick payout. For example, there were claims of more than $2 million in cryptocurrencies being sent to Elon Musk impersonators in the six months leading up to March 31, 2021.
How to Avoid Being a Victim?
Incredulity is the most effective method against fraud. Regrettably, we live in an age where not everything that we read on the internet is truthful. And a lot of information is specifically designed to deceive and injure us. To prevent being conned, keep the following tips in mind:
- Never give your personal information to a company that you have not verified personally, that contacts you by e-mail, text, or social media without your permission. It might even look to be a verified company, but it could be a hacker who has taken control of their e-mail or social media account. Check with them independently using a different form of communication.
- If something looks too good to be true, treat any investment schemes with a dose of caution.
- Advice is to turn on two-factor authentication for all of your cryptocurrency accounts.
- Any investment ‘offer’ that needs an upfront payment should be dismissed.
- Never download apps from unauthorized app stores.
- Install anti-malware software on your personal computer and mobile device from a trusted source.
As the crypto ecosystem increases in size and complexity, scammers will undoubtedly target it. If you understand fraudsters’ common methods to steal your information, you can spot a crypto-related scam early on and avoid it.