Five crypto scams that you need to be aware of
Crypto scams cause losses of millions every year. Here are the most common scams that you need to be aware of alongside our top tips for keeping yourself safe.
Crypto scams are a very real threat with millions being lost every year. Scammers use increasingly sophisticated methods to steal funds. Governments have been warning their citizens to take the required precautions to protect themselves.
What is a crypto scam?
There are many crypto scams to watch out for and they commonly involve impersonation and persuading someone to send crypto funds to another address. One of the most high-profile scams occurred in 2020 on Twitter and involved hacking high profile accounts such as those of Joe Biden and Elon Musk. The hackers would then tweet to millions of followers a Bitcoin address and promise to give back double of that which was sent. Of course, the funds were never sent and it is estimated that more than $100,000 in funds were lost.
This is only one example of a scam, so let’s take a look at the most common types that you need to watch out for.
1. Fake crypto exchanges
With many new crypto platforms opening, it can be difficult to spot the difference between real and fake exchanges. Scammers will try to mislead users by creating fake exchanges which claim to sell popular crypto-assets such as Bitcoin and Ether. Usually, a user will deposit funds to these exchanges, but will not be able to withdraw. It is vital to check the reputation of a crypto exchange before depositing funds.
2. Fraudulent Investment Schemes
A popular method for scammers is promoting investment schemes that may make extraordinary promises such as fast gains with users often expecting to make double or even triple figures. These mouthwatering gains lure users in to take part in a fake investment scheme. Scammers may even return some funds under the guise of fake profit and ask users to deposit even more money. Once funds are deposited, it is almost impossible for a user to get them back.
These fake investment schemes are often promoted on fake news articles which often have the appearance of real publications. This can make it difficult to see the difference between legit investment opportunities and fraudulent ones. These promotions can also be found on social media platforms such as Facebook and Instagram.
Pump and dump scams are a similar con when users are lured into investing in a cryptocurrency only to see it fall sharply within days or weeks which results in the loss of the majority of funds.
3. Ponzi Schemes
Ponzi schemes are nothing new, they’ve been around for centuries. These classic schemes can be seen within the cryptocurrency space. Within a Ponzi, users are promised big gains if they are able to recruit their friends and family. There are a variety of projects which have collapsed due to the unsustainability of these schemes. A famous project was known as “Onecoin” and investors were told it may become bigger than Bitcoin. Losses of over $2 billion were reported due to this scam.
Always do in-depth research before investing in any project. Check independent review websites to ensure that it is a legitimate investment.
This next scam can take a variety of forms, but the premise remains the same. It involves fake accounts that are tailored to look like something else. This may be a high profile exchange or organisation. You may receive a fake email from someone claiming to be from a tax organisation offering refunds or a call out of the blue from a crypto exchange. Scammers are even able to ‘spoof’ phone numbers so it looks like the call is coming from a legit exchange.
Other scams will ask for Bitcoin or another cryptocurrency to be sent urgently or the individual will be fined or even given a prison sentence. It is important not to panic, and to always ensure the legitimacy of any communications that you receive. Never provide passwords through the phone or email.
Malware is malicious software that can lock you out of your computer and steal your data. It can be unintentionally downloaded from fraudulent links and malicious websites. Private information such as credit card information and crypto wallet details can be stolen.
With crypto, ransomware attacks are common, and this is where a scammer demands a Bitcoin payment to restore access to a PC. Even large organisations such as hospitals have been victims of these scams, with scammers often sending blackmail threats such as the release of private information. Generally, you should never pay a ransom in this situation and instead contact legal authorities. Paying a ransom does not lead to an unlock in most instances.
You can protect yourself against malware and ransomware by not clicking on malicious links, and always being vigilant of the websites you visit. You can also install anti-malware software that can detect and remove threats.
Although these scams can seem frightening, taking basic precautions goes a long way to ensuring your safety. A common-sense approach helps to ensure that you don’t fall victim to these scams. Protect your passwords and make sure they are different for every website you use. If an investment opportunity seems too good to be true, then that is likely to be the case. Always be cautious if you receive a suspicious email or call from a crypto exchange and reach out to support on their official website.