What are fake crypto wallets?
A fake crypto wallet is a cryptocurrency wallet that is not intended to keep a user’s investments safe but instead gives fraudsters a secret backdoor to steal cryptocurrency directly.
To hold any kind of cryptocurrency, you need a virtual crypto wallet. These digital storage devices can be software programs, online apps/services, or physical devices. Wallets that remain constantly connected to the internet are called “hot wallets” and physical hardware wallets are called “cold wallets.”
Both hot and cold wallets can be faked, but the attack methods differ for each.
How do scammers create fake crypto wallets?
Scammers prefer hiding fake crypto wallets inside seemingly legitimate applications and crypto services. Then, they rely on classic fraud tactics to trick victims into using them.
In many cases, fraudsters develop malicious mobile apps that appear to be legitimate crypto wallets. These apps may seem to function similarly to real wallets, but in fact are designed to steal users’ private keys or login credentials. Scammers can also use fake wallet generator tools that create seemingly valid wallet addresses. These addresses are controlled by the scammers, and victims who use them unknowingly allow fraudsters to access any funds sent to those addresses.
To get users to download or use these fake wallets, fraudsters set up phishing websites to look like real crypto exchanges or wallet services. Once the victim is tricked into entering their credentials or private keys, scammers capture it and have access to the victims’ actual wallets.
They will often also distribute malware that targets cryptocurrency users. This malware can include keyloggers to record keystrokes and capture passwords or private keys, as well as clipboard hijackers which replace real wallet addresses copied by users with addresses controlled by the scammers.
As with every kind of fraud, social engineering techniques like impersonating customer support representatives or trusted figures within the cryptocurrency community, work well to trick users into providing their wallet information willingly.
How does a crypto wallet scam work?
Step 1: Scammers create a fake cryptocurrency wallet platform or app. This could be a website that mimics a legitimate wallet provider or a counterfeit mobile app available for download in app stores. Fake wallets might use similar domain names, logos, and user interfaces to real wallet providers to appear authentic.
Step 2: Scammers promote their fake wallet through social media, online forums, phishing emails, and paid ads. They often use enticing offers or outlandish promises, like offering free tokens or exclusive features, to attract users.
Step 3: Users lured into trying the fake wallet are directed to sign up or create an account on the fraudsters’ platform. This platform collects users’ personal information during the registration process, which can be used for further fraudulent activities.
Step 4: Once registered, users are encouraged to deposit their cryptocurrency funds into the fake wallet immediately. Scammers typically offer incentives or bonuses to entice users to deposit as large amounts as possible.
Step 5: After users deposit their funds into the fake wallet, scammers use their access to the private keys or account credentials to transfer funds to their own wallets, effectively stealing the cryptocurrency from the victims.
Step 6: After the scammers have stolen the funds they want or start attracting suspicion, they shut down the fake wallet platform and disappear altogether. Victims are often left with no way to trace the scammers or recover stolen funds.