- Statistics reveal $575 million of crypto fraud losses reported to the FTC related to investment opportunities in 2021.
- Cryptocurrency investment scams get pulled off by the pump-and-dump schemes, with promises such as “make lots of money” with “zero risk.”
- Phishing scams target your digital wallets.
- If it sounds too good to be true, it most certainly is, and this is exactly what you should consider before participating in a crypto giveaway.
- Always remember to stay cautious and research well before getting involved in anything crypto-related.
Cryptocurrency is on the rise and it seems to be everywhere at the moment. From news about how the latest cryptocurrency has skyrocketed in value, to various businesses around the world now accepting cryptocurrencies as a mode of payment – the era of digital currencies has emerged and it’s about time we start adopting it as well.
Many people have now started using cryptocurrency as a means to diversify their investment portfolios. According to statistics, as of mid-October 2022, the 24-hour average trading volume of all cryptocurrencies globally came to $35.7 billion. Earlier, in November 2021, the 24-hour average trading volume of all cryptocurrencies globally was $130 billion.
However, with all the fame comes the risk as well. As it goes with anything new and trending, it is necessary to do your own research as well. This also includes the lookout for scams. Statistics reveal $575 million of crypto fraud losses reported to the FTC related to investment opportunities in 2021. This implies the fact about how common scams have become in the world of cryptocurrency.
Common Types of Cryptocurrency Scams
In order to protect your crypto assets, it is necessary for you to spot the scams by knowing when and how you’re being targeted and the steps you can take if you find out that you are a suspect of a cryptocurrency scam.
Generally, there are two main categories of cryptocurrency scams:
- Initiatives attempting to obtain access to a target’s digital wallet or luring them into giving their credentials. Scammers try to get information that would provide them access to digital wallets or other confidential information such as security codes. In some cases, access to physical hardware is also possible.
- Transfer of cryptocurrency directly to a scammer because of impersonation, fraudulent investment, business opportunity hoax, or other malicious means.
Some common types of cryptocurrency scams include:
Investment Schemes
In this type of cryptocurrency scam, promises such as “make lots of money” with “zero risk” are being declared on social media or online dating apps and sites. In a nutshell, these scammers promise to grow your investment if you transfer your cryptocurrency to them.
Cryptocurrency investment scams get pulled off by the pump-and-dump schemes. This means that a fraudster will reach out to you and allure you to buy an ambiguous crypto at a “reduced price,” with promises that the value of this asset will skyrocket soon enough.
When you fall for the scam and actually buy the crypto, the price rises, and that is the point when the scammer dumps their holdings at the new higher valuation, causing the crypto price to drop majorly, severely affecting you or any other target with this crypto purchase.
How to avoid: Spotting an investment scheme is easy – look out for the big promises with zero risks and excessive profits. These schemes have begun to grow on social media and online dating sites, so you must be cautious about any random person contacting you out of the blue regarding your crypto assets.
Phishing Scam
This is the most common type of cryptocurrency scam. It has been reported that phishing scams are among the most common attacks on consumers. According to the FBI, more than 323,000 people fell victim to phishing scams in 2021. Collectively, $44.2 million was stolen.
Phishing scams target your digital wallets. More specifically, scammers are interested in obtaining your crypto keys, because they know whoever holds the key, holds all the crypto.
Phishing scammers lure you to click a link that they send anonymously via email that would lead to a fake website, where they can easily target you and steal your account details. This happens because the scammers can impersonate well-known companies such as Amazon, your bank, or a government agency, and may post links on social media.
This would encourage you to click on the given fake link, which then asks you to enter your private keys. Once that is given away, the hackers can easily steal your cryptocurrency.
How to avoid: In order to avoid phishing scams, you must never enter secure and confidential information from an email link. Make sure to always go directly to the site, no matter how legitimate the website or link appears.
Imposter and Giveaway Scams
The classic one. In this type of cryptocurrency scam, the scammer attempts to deceive a cryptocurrency investor by indicating that a major cryptocurrency exchange or a well-known celebrity is hosting a crypto giveaway.
The trap here is that in order for you to participate in the giveaway, you must first have to send a certain amount of cryptocurrency to a giveaway address that will make you verify your wallet address in order for you to receive your share of the giveaway.
Since cryptocurrency transactions are irreversible, once you have sent the money to the scammer’s address, there is no return from this point as you have already lost your cryptocurrency.
How to avoid: As the famous old saying goes, “If it sounds too good to be true, it most certainly is,” and this is exactly what you should consider before participating in a crypto giveaway. Most importantly, you must think twice before sending your funds to any random website.
Upgrade Scams
Since software is constantly being upgraded and cryptocurrency platforms are just a form of software, scammers take this as an opportunity to easily trick crypto holders into giving up their private keys as part of an “upgrade.”
The fact that upgrade scammers can blend in with legitimate migrations, such as the recent Ethereum merge, which made both Ethereum Foundation and Robinhood concerned enough to drop off a “high alert” warning for users with regards to upgrade scams.
How to avoid: Check before you click. Make sure to not open hyperlinks or attachments from unknown senders.
Rug Pulls
This is one of the most recent types of cryptocurrency scam that is on the rise. Just like the classic expression “pulling the rug out,” this scam involves a developer enticing crypto investors to a new project, and then later pulling out before the project is initiated. This leaves investors with a major loss.
How to avoid: Investors must look for established cryptocurrency projects in order to stay protected from rug pull scams. Make sure to verify the code of any new project you are getting involved in, along with the developers’ identities.
Key Points to Protect Yourself from Cryptocurrency Scams
Many cryptocurrency scams are convincing. But here are some steps that you can take to protect yourself:
- Protect your wallet – Never share your private keys or seed phrases with anyone.
- Keep an eye on your wallet app – Make sure you transfer a small amount of money the first time you are using an app, to confirm its legitimacy. When you are updating your wallet app and you notice suspicious behaviour, terminate the update and uninstall the app immediately.
- Be wary of social media adverts – Make sure you do your due diligence and maintain a healthy skepticism when you come across crypto opportunities via social media advertisements.
- Don’t respond to unsolicited contact – No matter who contacts you from any financial institution, the best thing would be to not respond. Make sure to look up for an official number of the institution and contact someone of authority.
- Look for HTTPS – HTTPS, instead of just HTTP, in a crypto exchange or wallet URL indicates that the site has secured and encrypted traffic.
The Bottom Line
As cryptocurrency continues to gain popularity, it will certainly remain a focal point for scammers. By understanding the common ways scammers try to steal information, you will be able to spot a scam and prevent yourself from falling prey. Always remember to stay cautious and research well before getting involved in anything crypto-related. Twitter | Facebook | Instagram | LinkedIn | Telegram | YouTube
