Like anything that involves money, there will always be a few unsavory people looking to con honest people out of their cash, unfortunately, cryptocurrency has been subject to some fraudulent behavior and scams too. Luckily, these scams are quite rare for your average investor and if you are aware of the tell-tale signs then it can be easy to avoid such activity and keep your cryptocurrency safe.
In this article, we will discuss common cryptocurrency scams to look out for, why scammers target crypto, and our top tips in investing safely and protecting your cryptocurrency from criminals.
Why Scammers Target Cryptocurrency?
The simple answer to this question is for financial gain, but let’s have a more in-depth look at the reasoning and motives for defrauding someone out of their cryptocurrency.
The significant rise in investment in cryptocurrency has not gone unnoticed by criminals, who also want a piece of the action, with some very elaborate scams thought up over the last decade, putting the equivalent of billions of dollars into their pocket.
The anonymous and untraceable nature of cryptocurrencies makes them a top prize for many would-be scammers, as the chances of getting away with it are higher than if they were stealing cash or from a person’s bank account. This makes one of the major benefits of cryptocurrency also one of its downfalls from a safety point of view.
Although Bitcoin payments are visible in the public domain, a savvy criminal would be capable of hiding the money trail using anonymous digital wallets, made easier by no central bank or financial institution being involved.
According to Time Magazine, over $14bn in crypto was stolen, worldwide in 2021!
How Can Scammers Steal Your Crypto Tokens?
This news is obviously unsettling, but fear not, keeping your wits about you and knowing what to watch out for means your cryptocurrency can stay in your digital wallet and not somebody else’s. There is no more reason to be wary of cryptocurrency, than any other type of currency or banking system.
The scammer’s primary tactic will be to obtain personal details, especially security codes and passwords to allow them access to your crypto or attempt to deceive a person into sending cryptocurrency to a digital wallet that the scammer has access to.
Many of these scams involve social engineering to gain a person’s trust, so always be suspecting of strangers online who initiate the conversation of cryptocurrency.
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Known scams include:
- Bogus Giveaways – Scammers may use social media to pose as a famous brand or influencer, promising to match or better the amount of cryptocurrency that is sent to them.
- Romance Scams – Criminals use dating websites and apps to gain trust in order to receive money from the victim, with over 20% of romance scams involving crypto tokens.
- Phishing – Phishing emails attempt to get the holders of cryptocurrency to click a link, where they are then asked to enter private information such as their crypto wallet key.
- Extortion Emails – These sorts of emails attempt to make the victim believe that the sender has embarrassing or incriminating proof about them, asking for cryptocurrency to guarantee the information isn’t released. Such a scam breaks federal laws.
- Fake business and investment opportunities – In exchange for a lump sum of cryptocurrency, these bogus traders and funds will promise to generate a large return on investment, with no way of seeking a refund and likely, no return at all.
- Fake Initial Coin Offerings and Non-Fungible Tokens Offerings – These offerings try to entice investors by claiming their token is the next big thing, sometimes going to great lengths to make their website and marketing very convincing. However, once an investment has been made, the token being offered does not exist.
- Cloud Mining Scams – Aimed at investors and retail traders, these scams ask for significant sums of cryptocurrency to fund large mining operations that can offer generous rewards.
- Decentralized Finance (De-Fi) Cons – One of the latest scams to gain publicity is De-Fi rug pulls, where an investor funds their own decentralized finance platform or protocol in the search of a higher yield – only for the project to collapse once the funds have been deposited.
7 Ways To Trade In Crypto Safely and Avoid Scams
1. Research is key
Only rely on your own research. If you see something on social media, or in an email that sounds too good to be true, then it most likely is. Before any investment, research the crypto or digital security token thoroughly and decide for yourself whether it fits in with your trading strategy.
2. Don’t trust easily
Of course, not everyone is out to deceive you and some people may offer genuine advice, but when discussing cryptocurrency and investments with strangers, always err on the side of caution. You should even be wary of emails that appear official – always check the email address it has been sent from before clicking any links or downloading any documents.
3. Double-check URLs
To protect yourself from phishing scams you should always keep your antivirus switched on so it can flag up any potentially harmful links. The padlock symbol in the URL bar is also a good way of checking whether a website is secure.
Many of these scam-links direct to copies of legitimate websites but with a subtle difference in the URL.
4. Use reputable platforms
Again, this goes back to thorough research, but always use a trustworthy crypto trading platform and a secure digital wallet. Crypto trading platforms such as IOCBC, read review about it here, feature market-leading security and fraud protection and are a sensible choice for your investment endeavors.
5. Ensure your crypto wallet is secured
Always keep your private key and security phrases safe – a good option might be to physically write them down instead of storing them on your computer or online.
6. Multi-Factor Authentication is worth using
Of course, having to go through multiple authentication procedures each time you log in to your wallet or trading platform can be an inconvenience, but it is one of the best ways to secure your accounts and ensure only you have access.
7. Be wary of investment offers
Most online investment offers are scams that require you to pay an up-front fee, if you encounter such a proposal, then ensure you study their website and check online for reviews.
