If you use a cryptocurrency wallet or exchange, it is essential to be aware of the scams in the crypto space. Unfortunately, these scams can have devastating effects on victims and their assets; however, there are steps you can take to safeguard yourself.
Phishing is the most prevalent crypto scam, but there are other types too. These involve emails with links leading to a fake website designed by cybercriminals to appear legitimate and collect personal data such as your cryptocurrency wallet key and passwords.
Scams in the crypto space
Cryptocurrencies have become a hot topic, and scammers have taken advantage of the excitement. They take advantage of people's lack of understanding about blockchain tools and emerging technology in order to defraud investors.
These scams can be extremely complex and intricate, so it's vital to do your due diligence before investing in a project. A reliable way of determining whether the venture is legitimate is by searching for white papers or other documentation outlining its purpose as well as websites with an active online community.
Furthermore, it's best to steer clear of crypto exchanges that are unfamiliar or unknown to you. These smaller platforms may be more vulnerable to scams than larger ones due to a lack of users or traders.
Another prevalent crypto scam is pump-and-dump, in which an unscrupulous individual introduces a new cryptocurrency into the market and sells it quickly, causing its price to increase and giving rise to their profit.
Phishing scams are common in the crypto space and involve fraudsters sending emails or other communications requesting private information such as passwords and wallet keys. Victims are duped into sharing their personal details, which allows the scammer to gain access to their digital wallets.
Social media scams are on the rise, with many cons using imposter social media accounts to defraud people of money or investments. Some may create fake email addresses in order to send out phishing or marketing materials designed to encourage investors to invest.
Scams often involve false investments, which can cause huge losses for investors. One such instance is advance fee fraud: when investors are asked to pay an inflated fee in exchange for false proceeds or money.
Cryptocurrency scams, often referred to as “cryptocurrency ponzi schemes,” offer large payouts but lack the capital for them. Scammers also often falsely claim celebrity endorsement or testimonial from a satisfied investor – something which cannot be verified.
The FTC has identified Gen Z and millennials as being particularly vulnerable to cryptocurrency scams due to their greater social media access and greater potential for being duped. Sift, a company which tracks consumer complaints, reported that 30% of Gen Zers and 25% of millennials involved in crypto scams reported losing money through them.
Pig butchering scams
Cryptocurrencies have become a breeding ground for scammers who take advantage of the new technology to make money. One such scheme, commonly referred to as “pig butchering,” involves criminals building trust with victims via digital connections before taking their cryptocurrency funds.
Typically, the process of online romance scams begins with an online romance scam on dating apps or social media. The fraudster creates a false online persona and uses an alluring photo before sending messages to their potential victim.
Once a victim trusts the scammer, they may persuade them to invest in an unreliable cryptocurrency trading platform that promises high returns. In exchange for sending money, the scammer may offer some portion of their earnings back to them.
Chinese organized crime groups typically perpetrate this kind of scam. They recruit victims by promising them jobs and travel opportunities in Southeast Asia, then force the migrant workers into running a scam under threat of violence, according to human rights advocates.
These criminal enterprises have become so lucrative that they're now spreading across countries and continents. In one tragic case, 25-year-old Indian woman Divya Gadasalli lost her $8 million inheritance to these criminals.
Another crypto scam involved a Cambodia-based Chinese operation operating the fraudulent app TradingView, which appeared to be an authentic cryptocurrency trading platform. According to the FBI's Internet Crime Complaint Center, they were successful in siphoning off more than $500,000 worth of cryptocurrency from victims.
Victims attempting to withdraw their profits may be instructed by scammers to pay large fees or taxes before their accounts can be unfrozen, leading them to lose all of their money before it can be retrieved.
Crypto platforms should implement rigorous Know Your Customer (KYC) procedures such as document validation and biometric authentication. Furthermore, these systems should enable detailed pool monitoring of user transactions, with alerts set up for suspicious activities.
Crypto platforms must also be aware of other investment scams that could impact their users. A recent Los Angeles case involved a man convincing his victims to move their existing cryptocurrency onto another exchange – this was an old-school crypto investment scam, but the man made it seem more glamorous than usual.
Non-fungible token (NFT) scams
Non-fungible tokens (NFTs) have become an increasingly sought-after way for risk takers to make money online. While NFTs have generated much excitement, there's also a downside: scammers have started targeting unsuspecting consumers.
There are various NFT scams, such as phishing, counterfeit NFTs and pump-and-dump schemes. These can occur in both the NFT and cryptocurrency markets so it's essential to be aware of them.
Phishing scams often involve the theft of user information through email or social media, which can then be used to obtain NFTs from wallets. In some cases, the criminal may even pose as a legitimate NFT marketplace in an effort to deceive users into transferring their funds.
Another type of non-fungible token scam involves false offers and giveaways. These tactics often originate from popular social media accounts, often to gain the attention of many people.
These scams often begin by impersonating an NFT giveaway site or customer service page. The con artists then record your typing and take your library of NFTs in exchange for payment.
Bidding scams are another common NFT scam that takes place when investors attempt to resell their NFTs in a secondary market. In these scams, bidders might alter the currency on their purchases or accept coins of lower value than what was originally advertised – leading to financial loss for the seller.
Uzzi reports an uptick in counterfeit NFTs within the crypto space. This occurs when someone impersonates an artist's work and lists it on an NFT marketplace, Uzzi notes. Unfortunately, these fake NFTs have no value.
Some NFT scams have also been connected to fraudulent art auctions. This presents a particularly hazardous scenario, as stolen artworks could be worth millions of dollars.
To avoid falling victim to scams, always cross-check prices on trusted trading platforms like Axi Marketplace, Mintable or OpenSea before making any transactions. Doing this will enable you to determine if the NFTs you're purchasing are genuine or not.
Avoiding NFT scams requires staying alert and educated on the industry. You can do this by reading up on different scams and learning how to identify them.
Recovering from a crypto scam
Cryptocurrency scams can be devastating, but there are steps you can take to recover. Reporting the fraud quickly helps authorities track down its perpetrators and returns your funds back to you.
Another way to protect yourself from a crypto scam is keeping track of all correspondence and other relevant information that could help investigators identify the perpetrator. This could include text messages, emails and other communications received during the scam.
It is also imperative to safeguard access to the accounts from which your funds were taken, as this will deter scammers from opening new accounts in your name and enable fund recovery efforts.
Criminals using cryptocurrency as bait often impersonate financial advisers, company representatives or celebrities to seduce unsuspecting investors. They may also leverage social media and online dating sites to obtain personal details through phishing attempts.
These scams tend to be more widespread than other types of crypto fraud. They usually take place over the phone or via email, and scammers may ask you to transfer cryptocurrencies to an address or give up control of your account.
They may promise to invest your cryptocurrency in a project or product that promises high profits, even if it appears unprofitable. They may also claim they have the capacity to multiply your crypto investments by an agreed-upon amount.
Investment crypto scams can be difficult to spot, yet they remain prevalent. They usually begin with an email, text or phone call promising you a large sum of cash if you send them a specified amount of cryptocurrency.
Fraudsters may state that you must pay an upfront fee to receive your funds, or they promise to settle taxes and other charges on your holdings before releasing them. These are all red flags which should be reported to the appropriate authorities right away.
Recovery scams are a type of investment crypto fraud, but they can also be used to steal funds from individuals. They often target those who have lost their job or are facing financial difficulty and promise them assistance in recovering their funds; however, in reality they end up taking your assets instead.
