Swindlers are always on the lookout for new methods to steal your money. Over the past few years, the explosive expansion of cryptocurrencies has provided plenty of possibilities for fraud.
According to research by blockchain intelligence company Chainalysis, thieves stole $14 billion worth of cryptocurrencies in 2021, a record amount.
If you are interested in crypto, you must be aware of the associated hazards. Learn more about frequent crypto scams, how to identify them, and how to prevent them by reading on.
Guide to Cryptocurrency Scams
An investment fraud known as a cryptocurrency scam includes crooks stealing money from those eagerly anticipating a bright future in the new realm of digital currency.
The Financial Services Compensation Scheme (FSCS) does not apply to most crypto assets and associated services, which means the FCA does not regulate them for more than money laundering purposes. If you lose money in cryptocurrency fraud, you won’t be able to get it back.
How to Avoid Cryptocurrency Scams
As we know, crypto scams are on the rise. Scammers have developed many ways to perform theft and make you lose all your money. But there are methods to prevent falling victim to a cryptocurrency scam as they get more complex and persuasive.
Keep your Wallet Safe
A wallet containing private keys is required to invest in digital currencies such as bitcoin. It is probably a hoax if an investing business wants you to hand up your private keys.
Ignore the Cold Calls
Any investment opportunity in cryptocurrencies that you’re approached about out of the blue is likely a scam. Don’t provide the company with any of your private information or send any money if they ask for it.
Does it Sound Too Good?
Scams using crypto sometimes offer exorbitant returns on your initial investment, rewards that are just unattainable. Investing in a firm that promises to make you rich quick is almost always a scam. In addition to significant returns, be wary of any promises of assured profits.
Take your Time before Investing
Companies that try to push you into making an investment decision fast are likely to be dishonest. Some fraudsters even try to get you to invest right away by offering you perks or discounts. Take your time and make sure you’ve done your homework before making any financial investments.
Avoid Ads on Social Media
Scammers frequently use social media to promote bogus bitcoin investment schemes. Celebrities and high-profile personalities can sometimes be used as ‘endorsements’ of a firm to make it appear respectable.
Types of Cryptocurrency Scams to Watch Out
There is a lot of room for error regarding cryptocurrency fraud. The price of Bitcoin is surging, and celebrities like Paris Hilton and Kanye are investing in newer “altcoins” that are causing a lot of excitement. However, most citizens in the United States have no idea what bitcoin is or how it operates.
According to the FTC, that’s an ideal combo for fraudsters. Interest in crypto assets is high, but many people have no idea how they function. They sound plausible because investors don’t know the difference between what is and what isn’t possible.
Scams involving cryptocurrencies come in a wide variety of forms and shapes, and they have the potential to take naïve investors by surprise.
Both the Entrepreneur magazine and Federal Trade Commission have cited these as examples of some of the cons committed most frequently.
Phishing Scams
In phishing, scammers try to steal personal information such as your address, name, and passwords by posing as legitimate companies. As a cryptocurrency investor, scammers may try to steal seed words or private keys from one of your wallets to steal your bitcoin.
Fraudulent emails, texts, and phone calls can all be used to perpetrate a phishing scam. Scams involving cryptocurrency may be found all over the internet, including forums, chat services, and social media platforms.
It is common for the fraudster to impersonate an authority figure or a corporation representative. They’ll then try to persuade you to hand your personal information to them.
In this case, the fraudster may contact you pretending to be a member of the company’s customer support team if you post that you require assistance with the bitcoin platform. They may ask you for information, such as a completed form or permission to use your computer to assist you.
Before you realize it, your digital assets may be transferred to a new account under their control once they’ve had a chance to access your data.
Hacking Theft
A crypto investment should theoretically be fully safe. Every transaction needs to be recorded on a blockchain, which verifies the details of the transaction by comparing it to a central database that is distributed across multiple computers.
To successfully hack the system, a criminal would need to access the majority of the computers in the chain. However, in reality, nothing can be taken for granted.
The many elements of the crypto economy, including exchanges, mining businesses, and digital wallets, have been routinely breached by hackers. Since FDIC insurance does not cover crypto accounts, there is often no way to reclaim the coins after they are lost.
Giveaway Scam
Cryptocurrencies are frequently discussed online by high-profile celebrities and corporate leaders. There has been an increase in giveaway scams to extort money from its victims.
Some fraudsters masquerade as famous persons, even creating social media accounts with their images and bios.
In certain cases, the con artist will claim to be handing out bitcoin tokens. The “giveaway” requires you to send money, which they will return to you in even more money. Instead, they’ll disappear after taking all your money.
Investments in Fake Crypto
It is common for criminals to put up fraudulent bitcoin investments and mining sites. Victims are attracted to these sites through a multitude of means.
On the internet, they may assume the identity of an investor and provide advice. Unsolicited emails from “investment managers” proposing to assist victims in developing their crypto investments are also sent out in other incidents.
Social media can play a role in attracting victims of phony crypto investment possibilities. To earn their victims’ trust, they may hack into the accounts of celebrities or those of their victims’ acquaintances.
Using a combination of a crypto scam and an online romance scam, some con artists recruit their victims into fictitious long-distance relationships on dating websites. It doesn’t matter how the fraud gets started; the result is always the same.
Using phony testimonials, the investment websites promise big profits and make themselves appear legitimate. Often, they have many investment tiers, with larger rewards for larger investments available. Victims who think they’ve found a winner put up actual money, either in dollars or cryptocurrency, believing they’ve struck gold.
Fake Websites and Apps
Fake websites and applications with names that are substantially identical to reliable bitcoin businesses might be created by cybercriminals.
If you submit your personal or account information onto one of these websites thinking it is the real deal, the scammers may steal your identity or bitcoin. Some users may unknowingly utilize the service to transmit their cryptocurrency directly to the wallets of fraudsters.
Fake Job Opportunities
Putting your money in crypto isn’t the only thing fraudsters will try to get you to do. As an alternative, they’ll put you in charge of it.
On employment portals, fraudsters advertise bogus job offers claiming to be looking for someone to help them mine cryptocurrency, sell it online, find investors, or assist them in converting cash into Bitcoin.
Depending on the situation, the following step differs. You may have to pay an application fee before scammers may take your money and personal information.
As a result, they have you do “work” in certain situations, turning money into cryptocurrency to cancel the cash transfers. Returned check scams, like this one, are common among scammers who target the elderly.
Blackmailing Scams
With the help of damning or embarrassing facts, some criminals would try to blackmail you. For example, they may threaten to send compromising recordings or photos of you to everyone on your email or mobile contact list. Alternatively, they may declare they’ll divulge “a secret” but not tell what it is.
Scammers frequently request payment in Bitcoin or another cryptocurrency, so that’s where the crypto comes into play. The FBI can be notified of any extortion or blackmail efforts.
Fraud of ICO
A new cryptocurrency is launched through an ICO or initial coin offering. An amazing chance to join in on the ground floor of what might be the next Bitcoin is available.
Since there is no way of knowing how the new coin will perform, ICOs are always risky investments. Some ICOs, on the other hand, aren’t simply dangerous; they’re outright fraudulent.
Two types of ICO fraud exist: The first is a completely fictitious medium of exchange. Criminals launch a new cryptocurrency with a lot of commotion. Then they take all of the money that was invested in it.
Fake cryptocurrency OneCoin was the most well-known example of this type of fraud. According to the BBC, more than $4 billion (almost $5 billion) was raised from investors worldwide via multi-level marketing for this fake cryptocurrency.
What to do if your Cryptocurrency gets Scammed?
It may be quite upsetting to fall victim to a cryptocurrency scam. Still, you must take prompt action if you have already paid money or supplied personal information. If any of the following apply to you, you must inform your bank ASAP:
- Made a Payment from your CC or Debit Card.
- Made a Payment by Bank Transfer.
- Shared Any Kind of Personal Information.
Swindlers frequently go after victims of bitcoin scams again or sell the victims’ personal information to other crooks. Suppose you believe that you have been the victim of a scam.
In that case, you should immediately update all of your security information and passwords, particularly those about your online banking accounts.
Is There a Way to Report Cryptocurrency Scammers?
To aid authorities in their investigations and prevent future victims from falling victim to scams, you must report any cryptocurrency scams you’ve come across.
Please contact Action Fraud (the UK’s national reporting centre for fraud and cybercrime) to report any cryptocurrency scams you may have encountered. You may also call the FCA’s consumer hotline or use their online reporting form to report a bitcoin fraud.
In a data breach, you can contact the Information Commissioner’s Office (ICO) to see if fraudsters have gotten hold of you. You might be fined if a company isn’t adequately protecting your personal information.