If there is money to be had, scammers will find a way to take it from you. Encryption is no exception. In fact, cryptocurrencies are a prime target for scammers who take advantage of emerging technologies and the public’s unfamiliarity with blockchain tools to position themselves as experts or leaders in the field and gain trust.
Despite cryptocurrencies experiencing a dramatic downturn in 2022, cryptocurrency scams are still on the rise. According to data from CertiK’s 2022 “Web3 Security Report,” last year “was the worst year on record for the loss of value for the Web3 protocol. Cryptocurrency losses due to hacks, exploits, and scams reached an all-time high of $3.7 billion in 2022 , an increase of 189% from the previous record of $1.3 billion set in 2021.”
In this article, we briefly summarize the most common scams to explain what they are and how to spot them, so you can learn to recognize them and how to protect your wealth.
1. Bitcoin Scam
Bitcoin scams are almost as old as Bitcoin, the first cryptocurrency and the largest by market capitalization. It is the most well-known and widely adopted of all cryptocurrencies – even traditional financial companies like Fidelity include Bitcoin as part of their offerings! Because of this, Bitcoin feels "safe" to many new investors and is often the entry point into cryptocurrencies. One of the most common scams targeting Bitcoin is a phishing scam. Hackers often impersonate legitimate-sounding service companies or individuals in emails or text messages and try to trick victims into revealing their private keys or trick them into sending Bitcoin to the scammer's wallet. Avoid being scammed by checking any sender's email address and making sure the website they are linking to is legitimate. Often, phishing email addresses will slightly misspell the real site (i.e. http://Gogle.com instead of http://Google.com), or they will take you to a site with similar errors, such as http://coinbase .co instead of http://coinbase.com. A good habit to prevent visiting malicious websites is to bookmark any legitimate websites you use for encryption and only use these bookmarks to access those websites.
2. NFT Scam
Many people new to cryptocurrency are looking for a way into the space through non-fungible tokens (NFTs), whether through collection sites like NBA Top Shot, purchasing colored avatars for social media, or through NFTs (which also serve as tickets )event. Sometimes referred to as "digital collectibles" by big brands including Starbucks and Instagram, there are many scammers targeting both newbies and seasoned pros in the field. One type of scam unique to the NFT space involves fabrication and counterfeiting. When an NFT item (such as the Bored Ape Yacht Club) begins to rise in value, scammers will target people looking to "imitate" it by creating copycat collectibles, sometimes stealing the original art and cloning the entire item to imitate the real, valuable s project. While occasionally a blue-chip project NFT will be listed for a cheap price (usually falsely), if you see a project's NFT for sale at a price well below the market price (you can find it at http://NFTpricefloor.com, etc. can be easily viewed on the website), it is likely to be fake.
NFT marketplace OpenSea verifies the authenticity of an artwork or collectible via a blue checkmark on the listing page. You can also view past NFT ownership and sales. That’s the beauty of blockchain – if an NFT appears to appear out of thin air long after the original mint, that’s highly suspicious because all past transactions are recorded. If in doubt, you can look up the original artist's Twitter account and message them to ask if it's legitimate.
3. Social media scams
Many cryptocurrency scams originate from social media, particularly Twitter and Instagram. According to a June 2022 report from the U.S. Federal Trade Commission, “Since 2021, nearly half of people have reported losing cryptocurrency to scams, which they say originated from ads, posts, or scams on social media platforms. The news started.”
From giveaway scams to fraudulent “verified” or blue-checked accounts, social media is rife with fraud. Ever since Elon Musk bought Twitter, you can no longer simply glance at the blue check behind your name to determine that it's a verified account, as any Twitter Blue subscriber can pay that mark for just $8. Before you believe any advice or ideas from an account that appears to be verified, check out their other posts to see how long they have been active and how many followers they have. A brand new account with almost no followers appears to be just a shilling crypto project and is unlikely to be trusted. One scam unique to social media comes from YouTube, where people set up fake live streams to scam viewers out of their cryptocurrency. Scammers create a legitimate-looking YouTube live broadcast, often using stolen content to boost their authority and post links to giveaways or other seemingly enticing content. These links could be malicious phishing attempts or simply instruct you to send your cryptocurrency to an “expert” for investment. Check the channel's history, including when it started and what other videos they have posted, to avoid being scammed. New channel without videos? keep away.
4. Ponzi scheme
Many critics have called cryptocurrencies themselves “Ponzi schemes.” For example, JPMorgan CEO Jamie Dimon in 2022 called crypto tokens a “decentralized Ponzi scheme.” However, the true definition of a Ponzi scheme is a financial fraud that promises huge returns, not by actual investment to achieve it, but by allocating payouts to earlier investors using the funds of recent investors. Cryptocurrencies are a huge target for Ponzi schemes, which often rely on “experts” with extensive knowledge of complex new technologies. Experts promise to do the hard work with your money and eliminate the need for you to learn how things like decentralized finance (DeFi) work. One of the biggest warning signs of a Ponzi scheme is a "guaranteed" double-digit percentage return, a promise that no legitimate investment can deliver. All investments carry an element of risk, and cryptocurrencies are more volatile than traditional financial instruments. If someone promises you great guaranteed returns, the only thing you can guarantee is that it's a scam.
5. Carpet handle
Rug pulls are an exit scam that DeFi and NFTs are particularly susceptible to. Combine the fact that DeFi removes the intermediaries involved in financial transactions with the relative ease of creating new tokens, and you've created an environment ripe for scammers to exploit. Fraudsters can easily create crypto tokens and list them on decentralized exchanges ( DEX ) without going through any type of code audit or other type of background check. From January to December 2022, more than 117,000 scam tokens were created, stealing billions of dollars from unsuspecting investors. Newly listed coins tend to surge in price, and eager investors may use filters such as "Recently Added" or "Top Gainer" to filter out new hot coins without having to conduct research on the project. Once the founders of fraudulent cryptocurrency projects believe prices have peaked, they take investors' money, leaving holders with worthless coins. In the NFT space, scammers will create entire collections that copy or imitate well-known collections to attract susceptible buyers. Mutant Ape Planet, a counterfeit play on the legitimate Mutant Ape Yacht Club NFT series, defrauded buyers of nearly $3 million, promising them access to bonuses and other perks, and then walked away with all their money. The best way to prevent this is to do your research. Follow the steps to thoroughly evaluate any new cryptocurrency or NFT project, especially reading the white paper and understanding who the founders are. No white paper or previous track record? Huge warning sign.
6. Crypto romance scams
The U.S. Federal Trade Commission (FTC) said in June 2022 that a scam that didn’t start with cryptocurrency but popped up as the space expanded was a long-running scam known as a romance scam that netted victims $1.85 One hundred million U.S. dollars. Dating sites and/or social media sites to attract targets. They may also "accidentally" DM you on WhatsApp or another messaging platform and then have a conversation. Once Mark gets to know the victim, the fraudster turns the conversation to Bitcoin or other cryptocurrencies and convinces the person to invest a little money in the coin. Sophisticated fraudsters often create fake but convincing-looking websites as part of a pig-killing scam, fattening the "pig" with a small deposit and pretending to be a victim of huge returns until the person is convinced and deposits Large deposits. At that point, the scammer will cut ties with the target and steal the money after weeks or even months of liaising with them. We should be skeptical of any request from someone we've never met in real life, but a big common warning sign that your internet sweetheart isn't there for romantic purposes is that they refuse to meet in person or via Zoom or other video conferencing apps . Friends, beware of scams! Be optimistic about the coins in your pocket.
