What are crypto scams and how to spot them?
Cryptocurrency scams take many forms. Just like financial criminals will try to steal money from your bank account or put fraudulent charges on your credit card, cryptocurrency scammers will do anything to take your cryptocurrencies. To protect your crypto assets, it helps to know when and how you are being targeted and what you can do if you suspect that a cryptocurrency or any communication related to it is a scam.
Types of cryptocurrency scams
Cryptocurrency scams generally fall into one of two broad categories:
Attempts to gain control over your digital wallet or authentication details. Scammers strive to obtain sensitive information that can grant them access to your digital wallet or other sensitive data, such as security codes. This can sometimes involve gaining control of physical devices such as your computer or smartphone.
Tactics that trick you into sending cryptocurrency directly to a scammer. These can take the form of phishing, fake investment or business opportunities, or other deceptive methods designed to separate you from your crypto assets.
Social engineering fraud
Social engineering scams involve tricksters manipulating and deceiving their way into obtaining crucial details about user accounts. These scammers are experts at making people believe they are in contact with a trusted entity, whether it be a government organization, a reputable company, technical support, a fellow community member, a work associate, or even a friend.
These scammers will invest considerable time to build a relationship with their potential target. Eventually, they may request sensitive information such as private keys or ask the person to transfer funds to a specific digital wallet. A request for cryptocurrency from someone perceived as a trusted source should raise immediate suspicion and is often indicative of fraudulent activity.
Scams that promise romance
Dating platforms have become a common hunting ground for scammers looking to forge romantic connections. Once trust is established, they typically steer the conversation toward lucrative cryptocurrency ventures, with the ultimate goal of extracting digital currency or wallet credentials from their targets. The Federal Trade Commission reports that a significant portion of money lost in romance scams involves cryptocurrency, with losses reaching substantial amounts.
Imposter and gift scams
Scammers often pose as public figures or cryptocurrency influencers to lure victims with the promise of doubling or multiplying their cryptocurrency in so-called âgiveaway scams.â They leverage the appearance of legitimacy provided by social media profiles to create a false sense of authenticity and urgency. Such scams can lead victims to act hastily in hopes of quick profits. Additionally, scammers may pose as customer support or security personnel at cryptocurrency exchanges to trick people into transferring funds or revealing sensitive information.
Phishing
Cryptocurrency phishing aims to steal online wallet details, especially private keys that are essential for accessing digital assets. Following traditional scam tactics, scammers send emails that direct victims to fake websites, urging them to enter their private keys. Once obtained, these keys give scammers unrestricted access to the victimâs cryptocurrency holdings.
Blackmail and extortion schemes
Scammers use blackmail as a tactic, claiming to possess incriminating evidence about a victim's online activities, often related to adult content or other illegal websites. They threaten to release this information unless they receive cryptocurrency or the victim's private wallet keys. This type of coercion is a serious criminal offense, and victims are urged to report such incidents to law enforcement agencies, including the FBI.
Fraud involving investments or business opportunities
The timeless warning, âif it seems too good to be true, it probably is,â is particularly pertinent in the realm of cryptocurrency investments. Many deceptive sites promise âguaranteed returnsâ or large profits in exchange for significant investments. These empty promises can lead to substantial losses when people are unable to claim their funds.
New opportunities based on cryptocurrencies: ICOs and NFTs
Cryptocurrency-based startups such as initial coin offerings (ICOs) and non-fungible tokens (NFTs) have opened up new channels for fraudulent schemes. While they may present themselves as attractive investment opportunities, they may not always be trustworthy. Scammers may set up fictitious ICO websites and persuade people to deposit cryptocurrency into a fraudulent wallet. Alternatively, ICO creators themselves could issue unregulated tokens or engage in false advertising to mislead investors about the potential of their products.
Carpet Pulls
A ârug pullâ is a scam where developers raise funds or cryptocurrency for a supposedly legitimate project, only to abruptly drain the liquidity pool and disappear, leaving investors with worthless assets. This results in investors losing their entire contribution as the project is abandoned without warning.
Cloud Mining
Some platforms lure individual investors with the promise of consistent mining rewards in exchange for initial capital. However, these services may falsely claim to have mining power and fail to provide the promised rewards after payment. While not all cloud mining services are fraudulent, it is crucial to thoroughly vet any platform before investing to avoid scams.
Fake jobs on job sites
Fraudulent job postings in the crypto space may appear on job boards, promising roles in investor recruitment, cryptocurrency sales, or currency exchange. These positions typically request payment in cryptocurrency for a supposed fee, which is a definite sign of a scam. Scammers may also send fake checks, instructing victims to deposit, withdraw funds, purchase cryptocurrency, and transfer them to a specific account, leading to financial loss and liability for the victim.
Impersonating well-known companies
Scammers may pose as reputable companies such as Amazon, Microsoft, or banks, reaching out through various communication channels including phone calls, emails, social media messages, or computer pop-ups. They often create a false sense of urgency, claiming there is fraudulent activity or a risk to your funds, and instruct you to purchase cryptocurrency and send it to them as a solution. Engaging in these communications can connect you to a scammer, and following their instructions is invariably a scam.
How to avoid scams
To effectively avoid cryptocurrency scams, vigilance is key. Here are some preventative measures:
Never reveal your cryptocurrency private keys, as they are the gateway to your cryptocurrency and wallet. Legitimate transactions do not require them.
Avoid promises of high returns with little or no risk. Such offers are common tactics used by scammers.
Ignore unsolicited investment offers, especially those that claim they can significantly increase your funds in a short period of time.
Be skeptical about the extent of âcelebritiesâ promoting cryptocurrency investments. Genuine celebrities do not typically engage in such personal solicitations.
If you meet someone on a dating platform, arrange to meet them in person before considering any financial involvement.
Refuse unexpected communications from well-known companies or startups about account issues and refuse to follow any instructions involving the purchase or transfer of cryptocurrency.
If you receive messages claiming to be from the government or law enforcement agencies demanding frozen assets, please verify through official channels and not through the contact information provided in the message.
Stay away from job ads that involve converting cash into cryptocurrency or cryptocurrency mining, as these are often fronts for fraudulent schemes.
If someone threatens to publish confidential material unless you pay them in cryptocurrency, recognize this as blackmail. Report this to the appropriate authorities.
Finally, be wary of offers that seem too good to be true, such as âfreeâ money or cryptocurrency, as these are likely scams.
