As you try to get rich in the digital gold rush, make sure you know how to identify the different schemes you want to separate you from your cryptocurrency.
It seems that the world has gone “crypto-crazy”. Cryptocurrencies such as bitcoin, Monero, Ethereum, and Dogecoin are scattered all over the internet. Its high value promises big gains for investors (before coin prices drop). And the “riches” to be made through mining for virtual money have echoes of the gold rush of the nineteenth century. Or at least, that’s what many will believe you, including a long list of scammers.
In fact, if you are interested in cryptocurrency today, it is very likely that you are in great danger due to fraud. This is the new Wild West – a lawless and unregulated world where bad actors often have the upper hand. But the normal fraud prevention rules apply here as well. Everything you read on the Internet should be carefully checked and the facts checked. Don’t believe the hype and you’ll stand a good chance of staying safe.
Why are cryptocurrency scams increasing?
Scammers are former masters of using current events and loud trends to deceive their victims. And they come as nothing more than the zeitgeist of cryptocurrencies. Media stories and social media posts are partly to blame, creating a feedback loop that only increases hysteria over virtual currencies. Results? Between October 2020 and May 2021, Americans lost an estimated $80 million (€71 million) in thousands of crypto-related frauds, according to the Federal Trade Commission. In the UK, the number is even higher: police claim victims lost more than 146 million pounds (172 million euros) in the first nine months of 2021.
Why are scams getting bigger? because:
- There are few, if any, regulations that govern the digital currency market for investors versus the traditional stock market
- The high interest by the media makes it a regular attraction for phishing and scams
- High cryptocurrency prices attract consumers who dream of getting rich quick
- Social media helps amplify real or imaginary buzz
- There is also the temptation to mine coins for money that scammers can use as a hook
What are the most common cryptocurrency scams?
If you have virtual money safely stored on a cryptocurrency exchange, you may be at risk from hackers. On numerous occasions, threat actors have managed to extract money from these companies, sometimes even stealing hundreds of millions. However, violating companies usually undertake to compensate their blameless customers. Unfortunately, there are no such assurances for victims of cryptocurrency fraud. Get caught in a scam and you might get out of your pocket for a lot of money.
It is helpful to understand what these scams look like. Here are some of the most common ones:
This is a type of investment fraud where victims are tricked into investing in a non-existent company or “get rich quick scheme”, which in fact does nothing but squander the fraudster’s pocket. Cryptocurrency is perfect for this because scammers are always coming up with new unidentified “cutting edge” technology to attract investors and generate more virtual profits. Forging data is easy when the currency is virtual anyway.
pumping and discharging
Scammers encourage investors to buy shares in unknown crypto companies, based on false information. Later the share price rises and the fraudster sells his shares, making a good profit and leaving the victim with worthless shares.
Fake celebrity endorsements
Scammers hijack celebrities’ social media accounts or create fake accounts, encouraging followers to invest in fake schemes like the ones mentioned above. In one scam, about $2 million was lost to scammers who even dropped Elon Musk’s name in a Bitcoin address in order to make the scam more trustworthy.
It looks like someone hacked into the Twitter account of the Indian Medical Association and is running a scam in the form of crypto giveaways posing as Elon Musk. Tweet embed#CryptoScam pic.twitter.com/fkCZHh1uOC
– Sidhartha Shukla (@sidcoins) January 2, 2022
Scammers send emails or post messages on social media promising access to virtual cash stored on cryptocurrency exchanges. The only catch is that the user usually has to pay a small fee first. The exchange does not exist and their money is lost forever.
Cybercriminals are impersonating legitimate cryptocurrency apps and uploading them to app stores. If you install one, it may steal your personal and financial data or plant malware on your device. Others may trick users into paying for services that don’t exist, or try to steal logins to your cryptocurrency wallet.
Fake press releases
Sometimes scammers manage to deceive journalists who republish fake information. This happened on two occasions when legitimate news websites wrote stories about popular retailers preparing to accept some cryptocurrency. The fake press releases on which these stories were based were part of pump-and-dump schemes designed to increase the value of the fraudsters’ shares in said coins.
Phishing / Impersonation
Phishing is one of the most common ways scammers operate. Emails, texts and social media messages are spoofed to appear to be from a legitimate and trusted source. Sometimes this “issuer” – for example, a credit card provider, a bank or a government official – asks to pay for something in cryptocurrency. They will try to rush you into action without thinking.
How can you avoid becoming a victim
The best weapon to fight fraud is skepticism. Unfortunately, we live in an age when not everything we read on the internet is true. Many of them are outright made to deceive and harm us. With this in mind, try the following to avoid being scammed:
- Never give out your personal data to an entity that makes unsolicited contact with you, via email, text message, social media etc., it may even appear to be your friend, but in fact it may be a hacker who has hijacked their email or social account. Check with them separately via another contact method
- If something is too good to be true, it usually is. Treat any investment schemes with a pinch of salt
- Turn on two-factor authentication for any cryptocurrency account you have
- Reject any investment “opportunity” that requires a down payment
- Never use unofficial app stores
- Download anti-malware software from a reputable provider to your PC and mobile devices
The world may have gone crazy with cryptocurrencies. But you don’t need to join. Keep calm and stay away from the noise.