Tag: crypto scams

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Cryptocurrencies

5 Ways Investors Lost Cryptos in 2020

Without a doubt, 2020 is the year that the crypto community experienced significant growth. Cryptocurrencies regained much of their lost value and reached new heights, thanks to their growing adoption. 

Without a doubt, 2020 is the year that the crypto community experienced significant growth. Cryptocurrencies regained much of their lost value and reached new heights, thanks to their growing adoption. 

Without a doubt, 2020 is the year that the crypto community experienced significant growth. Cryptocurrencies regained much of their lost value and reached new heights, thanks to their growing adoption. 

The crypto industry continues to grow, and investors are laughing all the way to the bank. Along with all this good, there were a host of crypto scams that left investors with a bad taste in their mouths. But how did these crypto scams occur? 

Cryptocurrency losses due to hacks on the DeFi platforms, theft, and fraud amounted to $1.8 billion within the first ten months of 2020, up from $4.52 billion in the entire previous year. The 2019 DeFi volume figure was negligible, but it now appears the DeFi platforms are lucrative for bitcoin thieves. With up to $98 million in losses, DeFi hacks made up 21% of the total crypto fraud in 2020, which is quite significant. But why so many crypto scams?

The USD value in DeFi cryptos and other cryptocurrencies has grown exponentially, attracting the attention of scammers, money launderers, and DeFi protocol hackers. Everyone, including those that don’t want to put in the hard work, wants a piece of the Bitcoin profits.

Scammers use different methods to get a piece of the crypto cake, but according to a report by CipherTrace, Ponzi schemes and investment scams are two of the main ways that investors lost cryptos in 2020. 

Let’s have a detailed look at how crypto investors made losses in 2020, shall we?

1. Ponzi Schemes 

Ponzi schemes have emerged as one of the favorite vehicles for crypto frauds, and it seems they are not going anywhere. Usually, the schemes promise investors quick significant returns with little or no risk. 

The first few returns are made from recruits’ funds, serving as bait for more investment into the scheme. Most of the time, there is little or no business development in the background to support the pyramid of promised returns. Eventually, the schemes come tumbling down, and founders vanish into thin air with the investors’ money. 

The classic crypto giveaway scam moved to YouTube from Twitter in 2020. In one instance, a hacker hijacked tens of YouTube accounts to broadcast a crypto giveaway falsely promising to double your earnings within a short period. The Ponzi scheme was broadcast live on YouTube, posing as a message from Bill Gates, the Microsoft CEO. 

2. Exchange Hacks 

Centralized exchanges provide a platform for the buying and selling of cryptocurrency. They act as middlemen, with various currencies for trading in a partially regulated environment, and are a favorite of newcomers in the bitcoin industry.

Unfortunately, centralized bitcoin exchanges come with a variety of risks. For starters, the funds deposited are entirely on the platform owners’ hands, which is somewhat risky.

In September 2020, hackers made away with a large haul of cryptocurrency worth $275 million from KuCoin, a popular platform, becoming one of the largest hacks. The cybercriminals used various methods such as diversifying into multiple currencies and mixers to avoid leaving a trail. 

But the decentralized exchanges were not spared either.

Another high-profile bitcoin theft in 2020 involved the Cryptocurrency exchange Bisq where virtual currency worth $250,000 was lost. The hackers used a vulnerability introduced after a recent update to the network, allowing them to manipulate fallback addresses and send the funds to the wallets they controlled. 

Earlier in the year, IOTA Foundation had to temporarily suspend operations following a cyberattack targeting the IOTA wallet app. The organization took steps to freeze the entire system within 25 minutes of reports that cryptos were being stolen from users’ wallets. 

3. Social Media Crypto Scams

The #cryptocurrency tag on Twitter hosts who-is-who in the crypto industry, including tech engineers, investors, and programmers. But the social media platform is one of the several ways that crypto thieves used to scam people out of their hard-earned cash. 

Hackers took control of the social media giant back-end referred to as the “God Mode” by hacking Twitter employees to access high-value accounts. 

On July 15th, the verified accounts of famous personalities such as former President Barack Obama, Elon Musk, Bill Gates, and Kanye West were hacked and used in a fake crypto giveaway. The hackers promised $2000 worth of cryptocurrency for just $1000, hauling over $121k of stolen bitcoins in the process. 

4. Sim Swapping 

SIM swapping is a relatively new crypto scamming method which is also gaining a foothold. Scammers convince the mobile service provider to move a number to a new SIM card in a device they control to perpetrate crypto scams. 

The method has become too familiar, especially in the cryptocurrency and Bitcoin industry. Usually, the hackers hope to access the victims’ cryptocurrency wallet through SMS sent to their phone for two-factor authentication. 

If successful, scammers access your phone, cryptocurrency exchanges, bank accounts, and other sensitive personal information to wipe your crypto wallet dry. Recently, Harvard University Ph.D. students and professors highlighted the increased risk of SIM swaps in 2020 in a research paper. Incidentally, one of the authors fell victim to a SIM swap.

In one unfortunate incident, a man lost $24 million through SIM swapping as a part of the coordinated attack. It has emerged that the 2020 twitter hacker was part of the SIM swap syndicate. 

5. Trickery by the Phishing Websites and ICOs

2020 has had more than its fair share of phishing scams, and especially in the crypto industry. The main route is often through email, where the scammers guide people to particular websites to steal their credentials, which they use to access their wallets.

Just recently, scammers successfully tricked an astounding number of people into visiting a replicated version of the popular cryptocurrency Ripple (XRP) ledger to steal more than $280k. 

Meanwhile, fake ICOs or the initial coin offering occur frequently and are a significant risk for bitcoin investors. Like an initial public offering, the initial coin offering’s main objective is to raise funds for the startup. But how do fake ICOs work?

Usually, fraudsters hype the project with fake ICO details to convince the investors. They use their website to promise heaven and earth to the users and then instruct them to make deposits in provided wallets. Sometime after the deposit, it becomes more apparent to the Investor that they were scammed. 

One good example is Big Coin, which used a variety of masked campaigns. They hyped their fake cryptocurrency’s capabilities and technical progression to convince investors and steal $6 million. 

Conclusion 

With cryptocurrency, due diligence is of utmost importance before dipping headfirst into the industry. Bitcoin tends to attract attention, especially when transitioning into the bull market. Everybody wants a piece of it, and less experienced investors fail to spot the red flags, losing money in the process.

It is still a crypto jungle out there, with scammers and thieves using old tricks in the book such as Ponzi schemes, hacking, and phishing, as well as inventing new ways to shake you off of your hard-earned money. But if there’s anything that 2020 has taught us is that the internet space can be very profitable, but at the same time, very risky. Analysts are in consensus that only education can help reduce the risks of crypto scams. Take extra care when investing and accessing your cryptocurrency wallets, and the whole experience will be worth it. 

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Cryptocurrencies

Social Engineering and Cryptocurrencies

Where there is money, there will be swindlers attempting to obtain it through crooked means. And fraudsters now seem to be inevitably part and parcel of the crypto ecosystem – much to the chagrin of the community. These scammers lure or coerce users into sending funds to some setup wallets. And mark you – it’s […]

Where there is money, there will be swindlers attempting to obtain it through crooked means. And fraudsters now seem to be inevitably part and parcel of the crypto ecosystem – much to the chagrin of the community. These scammers lure or coerce users into sending funds to some setup wallets. And mark you – it’s […]

Where there is money, there will be swindlers attempting to obtain it through crooked means. And fraudsters now seem to be inevitably part and parcel of the crypto ecosystem – much to the chagrin of the community. These scammers lure or coerce users into sending funds to some setup wallets.

And mark you – it’s not just crypto newcomers that are vulnerable. Crypto experts and newbies alike have lost money to these scheming individuals. The tactics applied vary, but the common ones are known and will be the subject of this article. Read on to know how to spot them and avoid falling victim.

What is Social Engineering?

Social engineering can best be described as the hacking of the human mind. It is a technique mostly used by hackers to get information about computer users. But with the alluring nature of crypto, it was only a matter of time before the scam found its way in the industry. 

In a typical social engineering attack, the scammer will entice you to provide information that they can then use against you. Less experienced attackers can be easily spotted and stopped right in their tracks. But there is a breed of social engineers who can fool even the most sophisticated user. But make no mistake, both breeds are dangerous, and it’s worth learning how to identify them.

Common Tactics

Tactics used by social engineers are numerous, and they keep evolving as new crypto capabilities are developed. Some will directly target your wallet. Others will entice you to send them funds. Let’s take a look at how some of these scenarios play out.

#1. Phishing 

Phishing is a method of luring people to divulge information that should otherwise be secret. Phishing experts usually send a convincing email or instant message asking for this or that. The level of personalization of these messages will hardly raise an eyebrow. The scammers will address you by your full name, home address, and even tell you about a purchase you made recently. How they obtain all this information is beyond the scope of this article, but it involves the prior harvesting of your information either on social media or through hacking. 

Regardless of how they address you, the underlying message is usually something like, “please share your username/ account number/ password so that we can address an issue with your wallet.” In this kind of attack, the scammer usually targets to get full access to your wallet. It’s one of the most dangerous attacks. 

Another common phishing scenario involves asking you to send funds to the scammer’s wallet. A convincing personal message will be drafted, asking you to complete a purchase or make a payment for one of your subscriptions. Again, it might be difficult to tell that there’s something suspicious with the request because the message will be very personal. This attack is not catastrophic, but you can still lose substantial amounts. 

Some scammers have learned that fear is valuable merchandise, and they will wield it over their victims without scruples. You may get a message telling you that your private photos are in their hands and are about to go public. Usually, they’ll tell you the only way to prevent this is to send a certain amount of crypto to their wallet. 

Whether they would actually be having the said photos may not matter at that time. The fact remains it is one of the most powerful social engineering tactics that can be used against you.

#2. SIM Swapping

SIM swaps have become notoriously common in the recent past. Users have lost access to their phone numbers, online accounts linked to their phones, and of course, crypto wallets too. All this thanks to SIM swaps. 

Without delving deep into the mechanics of a SIM swap, scammers request your SIM provider to replace your line by faking your identity. Combined with phishing, a successful SIM swap can give a scammer full access to your crypto wallet. This is particularly true for wallets that use your phone number for multi-factor authentication. What happens after the scammer gets full access to your wallet is a fearful sequence of events. You could potentially all your funds, and the scammer might decide to use that info to manipulate you in the future. 

#3. Crowdfunding Scams

Cryptocurrencies have made crowdfunding easier than ever before. If you have a noble cause, say, raising funds to stop climate change, you can easily get people from around the world to contribute to your cause. All you need to do is create a convincing online campaign, set up a crypto collection account, and wait for the donations to trickle in. Such was the case for the young Maejor Page, who lured sympathizers of the Black Lives Matter movement and then squandered their donations.

This kind of social engineering is not particularly dangerous. But still, the thought that you might have been scammed into contributing to someone’s personal expenses can be disturbing. 

#4. Fake Investment Schemes

Ponzi and pyramid schemes have existed for not less than a century. Nevertheless, people still fall for these tricks a hundred years after their invention. While the ventures traditionally ran on fiat money, scammers have quickly adapted them for cryptocurrencies. 

An Initial Coin Offering (ICO) is one of the fake crypto investments you might find yourself entangled in. An ICO is a strategy used by startups to raise funds by creating their brand of tokens and selling them to prospective investors. 

It’s not to say that ICOs are fraudulent, but some are simply not going nowhere. But still, the startups behind them will continue to market their idea to potential victims. In the end, the startup collapses, and investors are left with useless tokens that they can’t redeem anywhere. 

How to Protect Yourself

Don’t be greedy – Greed can usually undermine reason, making people think they can earn easy money. When you come across a crypto investment that you find interesting, do your due diligence before committing your money.

  • Be alert – Being alert is arguably the most effective defense against social engineering. Being alert makes it substantially difficult for scammers to entice or coerce you with offers or scare tactics.
  • If planning to invest in an ICO, evaluate whether the startup’s business idea is sensible/feasible. This doesn’t mean a sound business idea cannot be used to bait victims, but it’s just that it is less likely to be used for such purposes.
  • Follow the security guidelines provided by the developers of your crypto wallet. Also, ensure you check out your SIM provider’s swapping procedures, especially if you’re using multi-factor authentication for your wallet.

Closing Thoughts

The adoption of cryptocurrencies has created a new playground for social engineers. While fraudulent schemes traditionally depended on fiat money, new social engineering ventures are now targeting even crypto users. The most common tactics involve threatening users to send funds, enticing them to divulge wallet credentials or even the more sophisticated SIM swaps. Regardless of the sheer scamming tactics out there, you can avoid falling victim by doing your due diligence when approaching investments, staying alert, and following security guidelines for your wallet(s). 

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Crypto Daily Topic

Mobile Devices Cryptocurrency Scams

The features of cryptocurrency, such as having no central regulating authority, being immutable, and having relative anonymity, makes it a high-profile target of hackers. And these days, more people own and spend time on mobile phones than they do on PCs. Crypto hackers are well aware of this and have mastered the art of targeting user funds using deceptive mobile apps. 

The features of cryptocurrency, such as having no central regulating authority, being immutable, and having relative anonymity, makes it a high-profile target of hackers. And these days, more people own and spend time on mobile phones than they do on PCs. Crypto hackers are well aware of this and have mastered the art of targeting user funds using deceptive mobile apps. 

 Cryptocurrency features, such as having no central regulating authority, being immutable, and having relative anonymity, makes it a high-profile target of hackers. And these days, more people own and spend time on mobile phones than they do on PCs. Crypto hackers are well aware of this and have mastered the art of targeting user funds using deceptive mobile apps. 

In this writeup, we’ll highlight the most prevalent ways crypto fraudsters are targeting mobile phone users. When you identify the red flags, it’s easier to protect yourself and your crypto. We’ll also list a few steps that you can follow to protect yourself against every type of scam. 

1. Fake Crypto Exchange Apps

Fake cryptocurrency exchange apps are one of the ways scammers can target crypto holders. Such apps, either on a dedicated website or app store, are designed to steal user data. Victims of such fraud will have their data compromised, and they could lose their funds as a result. 

A famous example of this scam is the several fake versions of the Poloniex exchange app that were released before the legitimate app’s release in July 2018. Many of these apps were listed on Google Play. People that downloaded these apps had their information massively compromised, and they lost money in the process. 

Below are ways in which you can protect yourself from a cryptocurrency exchange scam: 

  • Check the app’s official website to see if they have an app after all. If so, use the official link provided by the website to download the app.
  • Check reviews. Reviews can be a reliable way to identify a scam app. If the review section is full of negative reviews and ratings, you might want to steer clear. In the same vein, watch out for an app with nearly all-perfect reviews. A legitimate product will at least have some negative reviews.
  • Confirm whether the developer is legit by looking at their online presence. See if their information is related to a legitimate exchange.
  • Check how many times the app has been downloaded. A popular and legitimate app will likely have a substantial amount of downloads as opposed to a fake one.
  • Enable two-factor authentication on your accounts. It’s harder for a scammer to get past this.

2. Fake Wallet Apps

These are scam wallets that are designed to trick users into sharing personal information, send funds to attacker-specified addresses, and so on. Apps like these are created all the time. In the past, cryptos like Bitcoin, Ethereum, and Neo have been targeted, causing users to lose funds. 

Below are tips to avoid this scam:

  • Apply the precautions for fake crypto exchange apps highlighted above
  • Ensure that completely new addresses are generated the first time you open the app and that both private keys and/or mnemonic phrases are in your hands
  • Check whether the app allows you to generate public addresses.

3. Cryptojacking Apps

Cryptojacking is when a malware uses your device’s processing power to mine cryptocurrency. Although mobile phones have way less computing power than computers, that hasn’t dissuaded cybercriminals from using them for cryptojacking.

A cryptojacking app will often be disguised as a legitimate app for gaming, educational, or other legit use. In reality, such an app will surreptitiously use your phone’s processing power to mine crypto in the background. Other prepaid checking apps will be advertised as legit mining apps, but any rewards will go to the developer and not the user. Usually, such an app will employ an extremely lightweight mining script to avoid detection.

Cryptojacking is harmful because it degrades your phone’s performance and causes it to wear and tear quicker. In some cases, cryptojacking apps can even be hiding Trojan horses for even more malicious software.

This is how to prevent against cryptojacking apps: 

  • Only download apps from legit sites like Apple’s App Store and Google’s Play Store. Ensure the app is marked as ‘Verified.’
  • Check if your phone is draining the battery too quickly and remove any apps responsible.
  • Regularly update your apps, so any security bugs are fixed.
  • Use browsers that have anti-cryptojacking software in place. Also, use browser plugins such as MinerBlock and NoCoin.
  • Install and regularly update your anti-malware software

4. Fake Mining Apps

These are apps that purportedly mine crypto, but all they do is display ads. The apps trick users into keeping the app by a supposed increase in rewards that increase over time. However, these apps are not actually mining crypto. Instead, the developers are profiting from your watching of the ads. 

The best way to steer clear of this scam? Understand that for the majority of cryptocurrencies. Mining is done with specialized computers known as ASICs. Any mining proceeds from mobile mining are extremely trivial and not worth the effort. 

5. Clipper Apps

These are apps that hijack your transactions and replace your address with that of the hacker. With these apps, when you copy the right address, the one you paste is actually that of the attacker.

To avoid this scam, take these precautions when processing a transaction: 

  • Double-check the address before you hit ‘Send.’ 
  • Check not just portions of the address, but the whole thing. Some hackers are smart enough to use an address that resembles yours.

6. SIM Swapping 

This is one of the most serious threats. A SIM swap is a scam in which an attacker gains control of your phone number. They do this by convincing your service carrier that you want to transfer your phone number to a new SIM. Once the transfer is done, the attacker can now access all kinds of data that are related to your phone – from calls to text messages to various accounts’ details. It also means any personal and financial info tied to those accounts is in their possession. This includes crypto wallets and exchanges. 

Crypto entrepreneur Michael Terpin’s SIM swap saga should illustrate this very well. Terpin alleged that he lost over $20million worth of crypto as a result of AT&T’s recklessness with the handling of his phone number. 

Here’s how to avoid falling prey to a SIM swap scam.  

  • Don’t use your mobile number for two-factor authentication. Instead, use an authenticator like Google’s Authenticator or Authy. Other alternatives are hardware authentication devices YubiKey or Titan Security Key by Google.
  • Never reveal your phone number in places like social media. Imposters will readily use such info to impersonate you.
  • Be discreet about your possession of cryptocurrency on social media. This can make you a target. And if folks already know you own crypto, don’t reveal info such as the exchange or wallet you use
  • Talk to your SIM service provider about adding an extra layer of protection, such as a PIN or password to your phone number.

7. Public WiFi

Public WiFi is another entry point for crypto scammers to gain access to your phone and steal funds. Public WiFi is usually open for everyone, and this makes any device using it vulnerable to hacking. For this reason, employ extra precautions every time you use public WiFi. Even better, avoid using public WiFi at all. 

Final Thoughts

Mobile phones are now involved in every aspect of our lives. From entertainment to work to finances, the mobile phone is nearly indispensable. But that everywhere presence is also a vulnerability. And this can’t be truer for crypto holders. Now that you’re aware of the loopholes that crypto swindlers can exploit, you’re better set to protecting yourself and your funds.

Categories
Cryptocurrencies

How to Spot Cryptocurrency Scams

Cryptocurrency plays a big role in the world of Forex trading. This is because cryptocurrency, or virtual currency, can be used as a funding method for brokerage accounts, or it can be traded as an asset with many different brokerages. Unfortunately, there are many cryptocurrency-based scams out there that savvy forex traders need to be able to spot. We’ve compiled this guide to help point out some of the things you’ll need to look for to avoid being scammed.

Cryptocurrency plays a big role in the world of Forex trading. This is because cryptocurrency, or virtual currency, can be used as a funding method for brokerage accounts, or it can be traded as an asset with many different brokerages. Unfortunately, there are many cryptocurrency-based scams out there that savvy forex traders need to be able to spot. We’ve compiled this guide to help point out some of the things you’ll need to look for to avoid being scammed.

Cryptocurrency plays a big role in the world of Forex trading. This is because cryptocurrency, or virtual currency, can be used as a funding method for brokerage accounts, or it can be traded as an asset with many different brokerages. Unfortunately, there are many cryptocurrency-based scams out there that savvy forex traders need to be able to spot. We’ve compiled this guide to help point out some of the things you’ll need to look for to avoid being scammed.

Conditions for Scammers

First, many traders don’t entirely recognize what cryptocurrency is or how it works. The lack of understanding, in combination with lenient regulations or lack of them all together creates a recipe that scammers can take advantage of. Some countries have even banned the use of cryptocurrency altogether because regulating it is so complicated or next to impossible for some governments to work out. Regulation is something we can look at with many brokerages to see if they are legitimate, but you’ll need to do more research when it comes to cryptocurrency. We’d suggest sticking with safer, more well-known options, like Bitcoin, Litecoin, Ethereum, Ripple, PayPal, etc. Otherwise, try doing some research online to find out what type of experience others have had with a lesser-known option. Educating yourself about cryptocurrency and how it works is crucial to avoiding these types of scams. 

Types of Scams

There are a couple of common cryptocurrency scams out there that we know about: 

  • A pump and dump scam happens when creators of a certain cryptocurrency own a large portion of it. Once the cryptocurrency is released, the price increases, and more people buy into it. Then, the creators sell off their large portion after the price increase. Once the company has sold its holdings, the value of the cryptocurrency drops drastically and the company disappears completely. This leaves traders with a useless coin that isn’t worth anything. 
  • OneCoin is surprisingly still an active scam to this day, despite the fact that its creator has disappeared and with FBI involvement. These scammers didn’t use a blockchain, so this cryptocurrency did not have a public ledger, nor was it a real cryptocurrency. 
  • Fake mobile apps on the App Store and Google Play Store have become a nuisance lately. If you’re downloading an app for a trustworthy currency, be sure that it is the legitimate one. Read comments and try to choose the option that is highest on the list of search results. 
  • Email scams involve providers asking for cryptocurrency payments. These usually revolve around Bitcoin and scammers often give themselves away with poor wording or misspelled words. 

Avoiding Scams

We’ve covered the best conditions for cryptocurrency scammers and some of the most common types of scams revolving around cryptocurrencies. Below, we have also provided some tips that should help stop scammers in their tracks. Before giving out your personal information or purchasing any cryptocurrency, be sure to research the company thoroughly and follow these guidelines: 

  • Make sure that the cryptocurrency uses blockchain technology. This offers more protection against manipulation from scammers.  
  • Check for the small lock symbol near the web address and ensure that ‘https’ is included in the address. 
  • Look beyond the wording on any website. Many might claim to be better or faster, but you’re actually looking to see how the provider plans to accomplish these things. 
  • Another red flag to look for promises that a company will make you rich or that it is the magic answer. Most legitimate cryptocurrency companies are focused on the bigger picture, such as how cryptocurrency can improve the world’s financial system. 
  • Trading cryptocurrency as a CFD is one way to trade the currency without actually owning it. 
  • Always research the company behind the cryptocurrency. Does the company reveal who they are and where they’re located? If not, it’s a good idea to stay away. 
  • Try reaching out to the provider’s customer service team. You’ll want to see if they seem professional and polite. Are they willing to answer all of your questions? If support is hard to reach or pushy, or if they dodge some questions, then these are signs that they are scammers. 
  • Be careful with your personal information. If you hand out as much as your phone number to a scammer, you’ll open the door to a headache. Be sure that you trust the provider before disclosing any of your information, or use fake info when testing out customer support.
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Crypto Videos

Crypto News! Twitter Promises Additional Security After Another Major Hack…

https://youtu.be/rQOWbUd5TOk

https://youtu.be/rQOWbUd5TOk

Twitter Promises Additional Security Measures After Major Hack

Twitter vows to add more security training as well as measures in order to protect its platform from breaches such as July 15 wide-scale hack.
Twitter made a statement saying that it is continuing its investigation into the hack while also looking to provide more security training against social engineering tactics. These measures will be in addition to cybersecurity coaching that they get during onboarding as well as ongoing phishing exercises.

Around 130 accounts were compromised on July 15 when hackers took over these prominent Twitter accounts in a Bitcoin giveaway hoax. Elon Musk, Bill Gates, Kanye West, current presidential candidate Joe Biden, as well as many crypto firms like Binance, Coinbase, Gemini, and BitFinex were among the hacked accounts.
“We’re aware of our responsibilities to the people who are using our service and to society more generally. We are embarrassed, we are disappointed, and more than anything, we are sorry,” Twitter said.

Twitter said that the hack did not only allow hackers to access the accounts, but also to view personal information such as email addresses and phone numbers.

How did this happen?

The attackers targeted employees, as Twitter said, using schemes that intentionally manipulated them to perform specific actions in a certain way, therefore revealing information. Hackers got their hands on and used Twitter employees’ credentials and accessed internal systems, which explains how accounts with two-factor authentication were compromised.
This large-scale hack has been deemed a wake-up call for all centralized platforms and possibly paved the way for decentralized platforms to emerge.

Categories
Cryptocurrencies

18 Cryptocurrency Scams You Need to Know About 

Ten years into their existence, cryptocurrencies are still confusing to users. Combine this with the fact that some smart investors who got in early made a lot of money during the 2017 crypto boom. This has earned the asset class some allure, making them highly lucrative to investors. Also, cryptocurrencies are still largely unregulated. This combination makes them a ripe target for opportunists and fraudsters who have perfected the art of certain scams.

Ten years into their existence, cryptocurrencies are still confusing to users. Combine this with the fact that some smart investors who got in early made a lot of money during the 2017 crypto boom. This has earned the asset class some allure, making them highly lucrative to investors. Also, cryptocurrencies are still largely unregulated. This combination makes them a ripe target for opportunists and fraudsters who have perfected the art of certain scams.

Ten years into their existence, cryptocurrencies are still confusing to users. Combine this with the fact that some smart investors who got in early made a lot of money during the 2017 crypto boom. This has earned the asset class some allure, making them highly lucrative to investors. Also, cryptocurrencies are still largely unregulated. This combination makes them a ripe target for opportunists and fraudsters who have perfected the art of certain scams.

In this article, we describe the most common cryptocurrency scams, so you always know what to watch out for and hence protect yourself and your funds.  

1. Hardware Wallet 

A hardware wallet is one of the safest places you can store your private key. These wallets constitute a device that resembles a flash drive and offer a safe and secure way for crypto holders to avoid online transactions which are susceptible to hacking, malware, and other vulnerabilities. 

Scammers know that hardware wallets are the go-to safest option for the majority of crypto holders, and are exploiting that by creating hardware wallets that have inbuilt vulnerabilities that make it easy for your crypto to be targeted. Some scams include making hardware wallets with a ‘pre-configured’ seed phrase hidden under a scratch card. The user will be instructed to scratch the card and set up the compromised seed phrase. Once you set up the seed phrase, it’s easy for hackers to siphon your funds. 

While this scam is really efficient, it’s also easy to avoid. Always purchase wallets from trusted sources. A quick search through the internet should show such wallets. For example, wallets that are written about by legitimate websites are good examples. 

2. Exchange Scams

Crypto exchanges are sites where crypto traders can purchase and sell cryptocurrency. However, most crypto exchanges have no regulatory authority overseeing their operations. This has led to the emergence of fake exchanges that are solely out to scam unsuspecting crypto investors. Many traders have been left in the dust after putting their funds in exchanges that turned out to be traps. 

One way to avoid such scams is to only sign up with trusted exchanges. Also, watch out for exchanges touting unrealistically high prices or big discounts. Also, look at the exchange’s URL. A legit website address should begin with HTTPS, signaling that the website is encrypted and thus safe. If an exchange website seems to have a shady-looking address, or there are some grammar errors, chances are it’s a scam.

3. Fake ICOs

ICOs are like IPOs, only this time for crypto. ICOs are a way for new cryptocurrency projects to raise capital. Through ICOs, users can back and participate in crypto projects they’re interested in. However, with a new ICO happening every other week, fraudsters are now using them as conduits for scamming unsuspecting investors.

One way fraudsters do this is by creating fake websites that are purportedly for ICOs and instructing the public to send coins to a fake wallet. Other times, the ICO itself is a gimmick. Unlike some other scams, this kind of scam might be a little harder to detect. However, it’s not entirely possible to avoid one. If you’re interested in a particular ICO, start by picking apart its white paper. Also, do a search on the team behind it. Are they open and with an online presence, or are they shadowy? Do they have relevant experience in the cryptocurrency, finance, or tech industry?

4. Cloud Mining Schemes

What’s the other way to acquire cryptocurrencies if you don’t want to buy or exchange them? Mining. 

However, mining isn’t cheap. It’s very resource-intensive in terms of mining technology, electricity, and time. Some companies have seen a business opportunity out of this, and are now offering users server space to mine coins at a certain rate, for a fee. 

But just like anywhere that money is involved, scammers have now set their eyes on this venture. Some companies are offering what they call “lifetime contracts” that purportedly keep mining costs the same, with lucrative returns. But you’ll notice as the mining difficulty increases, the returns will decrease. Other companies will promise outstanding returns without really disclosing the true costs going into the process, and the diminishing returns occasioned by the increase in mining difficulty. 

5. Multi-Level Marketing (MLMs) 

Multi-level schemes are not just limited to the ‘real-world.’ They’re also well and alive in the digital world. MLMs are schemes that look legit on the surface; they offer huge returns while also taking more money from naïve investors with the promise of even higher profits.

OneCoin is one company that played this game very well. People all over the world were encouraged to sign up and get their friends and family to sign up with the promise of perks and massive earnings. However, it all turned out to be a scam when the leader of the whole set up disappeared, and several members of the scheme were implicated for shadowy operations. 

Always look for information about a company before committing in any way, especially where money is concerned. Read the fine print and establish, if at all, their claims hold any water and are indeed feasible. 

6. Blackmail

This is a scam in which strangers will threaten to release information that you don’t want others to know about, or claim that they’ve hacked your computer and can access it using a remote desktop protocol (RDP). They might claim to have used your webcam to record you doing something that you wouldn’t want others to know about.

They will then demand that you send Bitcoin or another cryptocurrency in return for them to suppress or discard the material or send nothing and see the information sent to colleagues, friends, and family and your social networks. Scammers like these usually steal email lists and other information and attempt to dupe thousands of people using that info.

7. Ponzi Schemes

These are offerings of handsome returns when you deposit a particular amount of money. When you see an offering such as this, know it’s likely to be a Ponzi scheme. A Ponzi scheme is a one where money from the latest rung of investors is used to pay off earlier investors. In the end, a lot of people will lose a lot of money in the process.

8. Free Giveaways

This is a scam in which scammers will take advantage of the viral way in which information spreads online. They will claim to offer free giveaways of cryptocurrency to people who send a small amount of crypto if they register or provide personally-identifying information. In truth, they will use that information in some other sort of exploitation.

9. Phishing Emails

Be wary of emails from services that you apparently use requesting you take a particular action, such as resetting your password or requiring you to interact with your account in any way. Usually, these scams intend for you to reveal or compromise your personal information.

When you get a request like this one, try to establish its legitimacy by calling your company or reaching out to them via their social media accounts.

10. Phishing websites

These scams usually go hand in hand with phishing emails. Usually, you’ll receive a phishing email that links to a replica website. This website will then prompt you to enter your information through a login or prompt you to install malware. These websites may also sometimes appear as sponsored results on search engines or in-app download sites.

You can avoid that scam by not installing any suspicious software or logging to a website unless you’re absolutely certain it’s not a fake one. Also, don’t download any app whose authenticity you’re not sure about. 

11. Impersonation

Some con artists have also mastered the art of impersonation. One way they will pull an impersonation plot is by taking the content of the person they’re impersonating and then publishing it in an account that looks exactly like the original poster. They will then add a follow-up message or some call to action, which is a ploy to acquire people’s information and use it for some swindling scheme.

Also, impersonators will sometimes use these fake accounts to trick followers into taking action, which is also intended to get them to reveal some sort of information.

You can avoid this kind of scam by never responding to any request emanating from a questionable social media account, or one that’s not straightforward with its intentions. Always seek to establish the authenticity of such a request by cross-checking such an account across multiple social platforms.

12. Malware

Use of Malware is another tactic that scammers use to fleece cryptocurrency out of unsuspecting people. This calls for you to be ultra-vigilant whenever you’re sending cryptocurrency. Confirm more than once that you’re sending to the right address.

Some malware can cause you to send funds to the hacker’s address instead of the right one. When you paste the address from your PC’s click board, the malware changes the address, so the funds are unknowingly sent to the hacker’s address. When you realize this, it’s too late, since cryptocurrency transactions are irreversible. Thus, be extremely cautious about what kind of software you install on your PC. A quality security scanner might also help, but it’s not 100% foolproof.

13. Meet in Person

You might come across someone offering to sell or buy crypto from you, and they will ask that you meet in person to conduct the exchange. If it’s not a trusted person that you already know, it’s a good idea to not entertain the proposition. You could end up being robbed or harmed.

Also, cons are known to exchange fake Fiat money for crypto in such meetups. If you must conduct a one-on-one exchange that way, consider asking them to put the money in a peer-to-peer escrow account. But, remember crypto exchanges exist for this purpose. Better to pay the extra transaction fees and stay safe than get in a potentially dangerous situation.

14. Money Transfer Fraud

These are scams in which fraudsters and con artists will send you an email telling you they need help moving money in exchange for a portion of the funds. These are scams geared toward getting you to reveal your identifying information one way or another.

15. Pumps and Dumps

In a pump and dump scheme, an individual (or individuals) usually goes on a hype campaign -on social media platforms -about a cryptocurrency in order to artificially drive up (pump) it’s the price, and when it reaches a certain price, they’ll sell (dump) their holdings for a profit. Usually, it’s inexperienced investors who fall for this ploy, thinking the coin in question is the next big thing. Most of the time, it will be a valueless coin that might never see the light of day, and you’re stuck with it since you’re unlikely to find a willing buyer anytime soon.

When making any crypto buying decision, always rely on your own research and bear in mind that no one knows what value any coin is going to be in the future, so don’t believe anyone who says otherwise.

16. Pyramid scheme

This is a scam where-in a fraudster will promise handsome returns to participants when they recruit a certain number of other participants. This enables the scheme to grow virally and quickly, but the whole thing crumbles soon when there are no more people to recruit. Also, members, or the ones they’ve recruited, will not realize any meaningful returns during the whole debacle.

Never be duped to recruit your network into a scheme with the promise that you (and them) will accumulate some sort of returns. Also, never contribute your money into such a scheme at the behest of any person.

17. Ransomware

This is malicious software that partially or completely blocks your access to your PC or another device. The malware will only grant you access to the device once you have paid a cryptocurrency in ransom. In such a situation, consult a professional to help you remove the malware rather than pay the ransom. Also, be careful about the kind of programs you install in your device. Always make sure that a program is not a fake one impersonating one that you’ve used in the past.

18. Scam Coins

Be careful what cryptocurrency you invest in. Some altcoins (cryptocurrencies other than Bitcoin) are scam coins. Scam coins usually entice investors to put money into a project via a private sale with the promise of high returns to those who get in early.

Scam coins may have a very flashy website and create a climate of fear-of-missing-out (FOMO) to trick people into investing. Other scam coins will offer airdrops (giving away free coins) to potential investors in exchange for investing in the project or joining their community. Also, watch out for cryptocurrency projects that invoke Bitcoin a lot. This is a ploy to trick people into thinking that it is a legitimate project.

Cryptocurrency scams are not going anywhere, and fraudsters are always looking for new ways to perpetrate them. But one scam is usually a variation of another, and knowing what to look out for can help protect you. This comprehensive list should help you avoid being duped and losing your funds.