The popularity of cryptocurrencies has attracted a large number of traders and investors. Scammers and fraudsters perceive this as an opportunity, too, and they are proliferating in the cryptocurrency market.
The rapid growth of cryptocurrencies in recent years has created several opportunities for fraud. The aim of scammers is to take your money in innovative and inventive ways. With $14 billion in cryptocurrency stolen by scammers in 2021, cryptocurrency crime reached a new peak. This information comes from a recent analysis released by Chainalysis, a blockchain data company. You should be aware of the risks if you’re interested in cryptocurrency. Learn more about common cryptocurrency scams and how to spot and avoid them by reading on.
Table of Contents
- How cryptocurrency frauds work
- 5 Common cryptocurrency frauds
- How to avoid cryptocurrency scams
How cryptocurrency frauds work
In a cryptocurrency scam, criminals steal money from victims who actively invest in or use the new digital currency for transactions.
It can be very challenging to get your lost money back from cryptocurrency scammers because the majority of crypto assets aren’t regulated or monitored by the government. This is also the cause of the increasing number of scammers that bravely enter the cryptocurrency industry and prey on the innocent without any fear. In the end, it is up to the end users to safeguard their assets.
Scams involving cryptocurrency mainly fall into the following categories:
- Obtaining accessibility to someone’s wallet: These include frauds when thieves steal the victim’s login information for their account or digital wallet. Scammers may attempt to gain physical access to hardware or try to gain access to confidential information like security codes or private keys.
- Directly transferring or stealing cryptocurrency: In these schemes, fraudsters use impersonation, fraudulent business opportunities, or other nefarious means to move cryptocurrency directly from their target’s wallet to their own wallet.
5 Common cryptocurrency frauds
Fake mobile apps
Scammers are increasingly using fake smartphone apps to deceive cryptocurrency users. These mobile apps are designed to deceive users into believing they are using the real mobile app so that criminals can steal their digital wallet information.
For instance, when phony software with a similar name and user experience appeared on Google Play, scammers targeted Poloniex, a well-known crypto-asset exchange app. The fraudulent program was reported by the company, but by the time it was finally removed, over 10,000 customers had already downloaded it and perhaps risked the security of their accounts.
Phishing scams regularly target the most popular crypto kept in the hot wallets of crypto traders or investors. Scammers want to steal private keys for crypto wallets, which are needed to access the wallet’s funds. Their method of operation is related to the previously described phony websites and is comparable to earlier phishing scams. Unaware crypto traders will receive emails from this scam asking for their confidential information and keys. With these details in hand, the con artists can now gain access to the trader’s funds and transfer them to their own accounts.
Unaware crypto traders will receive emails from this scam asking for their confidential information and keys. With these details in hand, the con artists can now gain access to the trader’s funds and transfer them to their own accounts.
Crypto users may be drawn to fraudulent websites that promote “huge” investment opportunities or cryptocurrency mining. Many of these websites have authentic-looking design elements that could persuade you that your investment will grow.
Although the investment may be simple, your prospects of recovering your profits are slim because con artists steal all the money and shut down the website as soon as they have amassed enough.
Scammers frequently imitate companies and build websites that closely resemble the actual ones in order to target unwary clients.
Scams involving cryptocurrency giveaways are widely publicized on Facebook, Twitter, YouTube, and other social media sites. These giveaways nearly always seem to come from well-known individuals inside the cryptocurrency world.
In the giveaways, scammers assert that by using skillfully worded communications and legitimate social media accounts, they may multiply or match the cryptocurrency provided to them. The majority of these gifts have a sense of urgency, are time-limited, and seem to be once-in-a-lifetime opportunities.
In 2021, just Elon Musk impersonators stole almost $2 million in cryptocurrency.
It might be challenging to distinguish scammers from real giveaways on social media because there have been so many good ones as well. This is precisely why you must conduct a thorough investigation and due diligence before interacting with them.
When clients are asked to contribute cryptocurrency for a product they are purchasing through an online marketplace, this is known as a “marketplace scam.”
To make it simpler for crypto enthusiasts to buy things, several eCommerce companies now accept cryptocurrency as a form of payment. The websites that promise to take cryptocurrency may not all be legitimate, though.
Scammers can create fake seller accounts or entire fraudulent websites to entice unwary buyers to make cryptocurrency purchases. After collecting orders, the scammers either completely shut down the website or start selling fake goods.
How to avoid cryptocurrency scams
You may take proactive measures to prevent falling victim to a cryptocurrency scams even though they may be on the rise. Here are some methods for avoiding cryptocurrency fraud:
Safeguarding your digital wallet
You’ll need a digital wallet and the private keys to access it in order to invest in cryptocurrencies like Bitcoin and conduct transactions. It is most obviously a fraud, and you should stay as far away from it as you can if a website or business requests that you disclose your private keys under any circumstances. Never give anyone access to your digital wallet’s secret keys.
Avoid responding to spam emails
If someone contacts you out of the blue with a “great” investment opportunity in cryptocurrency that just looks too good to be true, it probably is. Through strange links found in emails, never provide your personal information or log into your digital wallet as they are almost certainly scams.
If someone contacts you out of the blue with a “great” investment opportunity in cryptocurrency that just looks too good to be true, it probably is.
Do some research
Make sure to complete your research and resist the hurry if a business tries to persuade you to invest in a “limited-time” offer. There have also been instances where scammers have given discounts or bonuses to lure victims into making an immediate investment. Before investing any of your money, take some time to conduct a thorough study rather than jumping all in at once.
Scammers target cryptocurrency enthusiasts with adverts on social media and even Google search. Bad actors targeted consumers in 2021 by purchasing Google ad spots for fraudulent websites that looked like well-known cryptocurrency wallets, and the crooks were successful in stealing over $500k worth of cryptocurrency.
Protecting your business
It’s equally crucial to secure your company’s online presence to prevent cryptocurrency scammers from using it as a front to defraud customers or market fake goods. This can have a significant negative influence on your brand’s reputation and potentially your revenue.
You can use business impersonation elimination software that notifies you if your brand is being compromised in order to safeguard your company from bad actors. Online identity theft of any form can be avoided with the use of the program, which can automatically detect and eliminate any attempts at brand impersonation.
The information that cryptocurrency scammers get is usually sold to other criminals. It is essential to regularly change your usernames and passwords to prevent or reduce the hazards that your investment will face. If you fall victim to a social media crypto scam, you can report it to the relevant social media network. In accordance with where you reside, you may file a report.