A Federal Trade Commission report for 2021 shows that approximately 46.000 individuals were victims of cryptocurrency scams. These frauds resulted in a total financial loss of $1 billion.
Cryptocurrencies are a popular method of diversifying investment portfolios and are becoming more widespread as organisations and individuals open up to them. Even so, they’re not scam-proof. If you’re interested in opening an account on a crypto exchange or owning any digital currency, you must be aware of the scams you may encounter.
From phishing to giveaway scams, understand and be wary of the common types of fraud in this industry (Note: every industry has its ups and downs; it’s up to every individual to manage their portfolio effectively).
You cannot reverse or halt payment if you send cryptocurrencies to a third party. Therefore, you must be confident in the legitimacy of the blockchain address you’re sending your Bitcoin, Ethereum, etc. to, and only send them to a company you trust. A not-to-forget rule of thumb is that if an offer sounds too good to be true, it likely is.
Scammers perpetuate giveaway scams through social media, as it’s one of the most effective means of spreading and collecting information. An example of a similar scam is a screenshot of forged correspondence from executives and companies promoting a giveaway with links to fraudulent web pages. Fake accounts reply, confirming the legitimacy of the hoax. The website then asks you to “verify” your address by transferring crypto to the scam giveaway.
How to deal with giveaway scams
Never send digital currencies to giveaways that seem so good they beg the question: “Is it a scam?“. Be wary of any social media gift and offer because pictures and videos are easy to fabricate, and don’t rely on screenshots in reply messages.
Conduct research using your favourite search engine and report any scam or phishing fraud you meet.
Impersonation and technical support scams
Scammers can impersonate companies in almost any industry, ranging from telecom to finance to retail. Setting up customer support phone lines is also a possibility. When you seek assistance, be wary of online scam phone numbers. Malevolent people behind them are experts in social engineering, with some deceiving and manipulating their victims to gain access to personal information that they may use fraudulently.
Here are three tips to avoid impersonation and technical support scams:
- Never share your passwords
- Never let support employees access your device remotely
- Hang up when outbound calls ask for personal, sensitive/confidential information.
Phishing is nothing new, but transactions are tricky and difficult to trace. These can take the form of requests for help or employment offers, usually via social media or random contact by email or phone. Proposals and recommendations might include a link to a legitimate-looking website or details about an “unmissable” investment opportunity.
After getting in touch with you, fraudsters may request a direct cryptographic transfer and block or stop talking to you when the payment is done. Others may also ask for your personal, private keys to encrypt and secure your crypto wallet when, in reality, they’re trying to access and steal your funds.
Note: You may find fake versions of online wallets or crypto exchanges under similar domain names. To avoid falling into traps, buy Bitcoin on a widely used, leading crypto exchange. Look at the trading volume; this is a hint that the app you’re using is among the largest and uses security tools to protect you and your assets.
Most users use Telegram for its ability to support large groups and channels and its user-friendly interface. Telegram scammers didn’t miss the chance to take advantage of this app, either, so they’ve been creating copycat channels or fake accounts to trick users into a false sense of security.
These fake accounts look like the original ones, with the same username, media, and pinned messages, and some even have a lot of user activity. The individuals behind them pose as crypto experts, guaranteeing a crypto ROI. At some point, you can recognise that their purpose is one of the following:
- To make users give up personal data to hack into their accounts
- To make users access suspicious links
- To gain access to users’ banking information
- To steal users’ personal information for identity theft.
Through Telegram, fraudsters also try to sell counterfeit products, whether by explicitly informing customers about the product they’re promoting or by impersonating brands and claiming the valuable products are original.
How to avoid cryptocurrency scams
No matter how sophisticated a cryptocurrency scam is, there are things to do to prevent fraud. From caution to using security protection and common-sense measures, here are some tips to help keep your money untouched by ill-intentioned hands:
- Protect your wallet. You need a crypto wallet to secure your digital currencies. If a company asks for your private key to allow you to participate in an investment opportunity, it’s likely a scam. For extra security, you can use security backup methods like a seed/recovery phrase.
- Avoid social media hype.Fraudsters frequently advertise fake crypto investment opportunities through social media, and some also use images of VIPs without their consent. Scammers would go to any lengths to make their company seem legitimate.
- Determine if it’s far-fetched.Cryptocurrency scammers sometimes offer unrealistically huge returns on your initial investment. Any firm that advertises get-rich-quick investing prospects is most certainly a scam.
- Ignore cold calls.You can be approached about a crypto investment opportunity out of the blue. Remember that it can likely be a scam, and don’t transfer money or share private information.
- Take time.If a company pressures you into investing ASAP or offers discounts and bonuses to make you invest immediately, take your time and do your research. It might be a trap.
In case you fall into a crypto trap, act quickly.
Now that you’re aware of common crypto scams and know how to manage them, it’s time you learnt what to do in case of a misfortunate mishap.
Report any fraud to officials as this helps you and the investigating processes, stopping scammers from making other victims.
If you have foolishly shared personal information or made a payment via bank transfer or debit/credit card, contact your bank immediately.
Last but not least, change your security passwords and details because some scammers retarget their victims, and you don’t want to be misled twice.