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How to Avoid Being a Victim of a Cryptocurrency Scam


Fraudsters are always looking for new ways to steal users’ money. The massive growth in the use of cryptocurrencies in recent years creates a huge number of opportunities for fraud. Cryptocurrency fraud in 2021 has reached record volumes. According to a report by blockchain technology company Chainalysis , in 2021, cryptocurrencies worth the equivalent of $14 billion were stolen. If you are interested in cryptocurrencies, it is important to understand the associated risks. This article talks about common cryptocurrency scams and how to spot and avoid them.

Cryptocurrency Investment Fraud

There are many types of cryptocurrency scams. Below are the most common ones.

Fake sites

Fraudsters sometimes create fake cryptocurrency trading platforms or fake versions of official crypto wallets in order to trick unsuspecting users. The domain names of fake sites tend to be similar to the domain names of the sites they are trying to imitate. Their differences from legal sites are so insignificant that they are difficult to recognize. Fake cryptocurrency sites often work in one of the following ways:

  • Like phishing pages. All the data indicated on them, such as the password from the crypto wallet and the phrase for recovering funds, as well as other financial information, fall into the hands of scammers.
  • Like a simple theft. Initially, the site allows you to withdraw a small amount of money. This creates the impression of reliability and profitability of investments, which leads to an increase in the amount invested. However, on subsequent attempts to withdraw funds, the site either closes or rejects the request.

Phishing scam

The target of cryptophishing is often the data of online wallets, such as the private keys of a crypto wallet, which are needed to access the funds inside the wallet. This type of scam is similar to other phishing attacks and is associated with the fake websites described above. The attackers send an email that prompts recipients to go to a specially crafted website and enter secret key details. Once the attackers get this information, they steal the cryptocurrency in these wallets.

Market buildup schemes (“pump and dump”)

In this case, a specific cryptocurrency or token is promoted by scammers through email or social media campaigns: Twitter, Facebook or Telegram. In pursuit of profits, traders are in a hurry to buy this cryptocurrency, which leads to a sharp increase in its price. The scammers then sell their assets at inflated prices, causing the value of the cryptocurrency to plummet. This may happen within minutes.

Fake Apps

Another common way to scam crypto investors is through fake apps available for download on Google Play and the Apple App Store. Such applications are quickly detected and removed, but they still cause losses for many investors – thousands of people download fake cryptocurrency applications .

Fake Celebrity Recommendations

To attract the attention of potential victims, crypto scammers sometimes pose as celebrities, businessmen and influential people or claim support from them. Sometimes this involves selling phantom cryptocurrencies to novice investors that do not actually exist. These scams can be quite clever, with flashy websites and glossy brochures showing support for celebrities like Elon Musk.

Free giveaways

In this case, the scammers promise to return or multiply the cryptocurrency sent to them in the process of the so-called free distribution. Smart feeds, often simulating messages from real social media users, can create a sense of legitimacy for such a giveaway and give users a sense of urgency. Seeing such a “once in a lifetime” opportunity, users quickly start transferring funds in the hope of instant profit.

Blackmail and extortion

Another method used by scammers is blackmail. They send emails claiming to have evidence of user visits to adult websites and threaten to expose them unless they receive a private key or a cryptocurrency ransom.

Cloud mining scam

Cloud mining companies allow you to rent mining equipment from them for a fixed fee and a share of the supposedly earned income. Theoretically, this allows you to mine cryptocurrency remotely without purchasing expensive mining equipment. However, many cloud mining companies are fraudulent or, at best, inefficient. When cooperating with them, the user either loses funds or earns less than expected.


Cryptocurrency IPO Fraud

An initial coin offering (ICO) is a way for start-up cryptocurrency companies to raise funds from future users. Typically, customers are promised a discount on new cryptocurrencies in exchange for investing in existing cryptocurrencies such as Bitcoin or other popular cryptocurrencies. Some ICOs turned out to be fraudulent : to deceive investors, the attackers even rented offices and created high-quality marketing materials.

How to recognize cryptocurrency scams

So, how to recognize crypto fraud? We list the main points to which you should pay attention.

Promises of guaranteed profits . For any investment it is impossible to guarantee profitability: their market value can both rise and fall. Any cryptocurrency-related offer that promises guaranteed profits is a suspicious sign.

Inconsistent or non-existent white paper . A white paper is one of the most important attributes of a cryptocurrency initial offering, so every cryptocurrency should have one. This document should describe how the cryptocurrency works and how it will work. If the whitepaper doesn’t have any content, or worse, doesn’t exist, be careful.

Aggressive marketing . All companies use advertising. However, crypto scammers use aggressive marketing to attract users: online advertising, advertising with opinion leaders, offline promotion and other methods. Their goal is to reach as many people as possible in the shortest possible time and get paid quickly. If the cryptocurrency ad seems too intrusive and contains unrealistic claims that are not backed up by facts, take your time, do your own research and gather information.

Team anonymity . For most investment companies, it is possible to find out who their key employees are. This usually implies the availability of information about the key employees who manage the investment, as well as an active presence of the company in social networks. If it is not possible to find out who controls the cryptocurrency, this is an alarming sign.

Easy money . All investment offers that promise easy money, cash, or cryptocurrency are likely to turn out to be scams.

cryptocurrency-scams-2.jpgHow to protect yourself from cryptocurrency scams

Many crypto fraud schemes are quite complex and look convincing from the user’s point of view. To protect against cryptocurrency fraud, it is recommended to take the following measures.

Protect your wallet . Cryptocurrency investments require a wallet with private keys. The request to provide key data to participate in a profitable investment transaction is most likely a scam. Keep your wallet keys private.

Follow the wallet application . On the first transfer, send a small amount of funds to make sure that the application for working with a crypto wallet is legal. If you see suspicious activity while updating an app, stop updating and uninstall the app.

Invest only in understandable instruments . If you do not understand how a certain cryptocurrency works, before making a decision to invest, it is recommended that you take your time and study it in more detail.

Take your time . Fraudsters often use high pressure tactics, promising bonuses and discounts in case of immediate participation, in order to force users to invest funds faster. Take your time before investing, do your own research.

Don’t trust social media ads . Attackers often use social media to promote their fraudulent schemes. To increase user confidence, advertisements may include unauthorized images of media personalities or famous businessmen, as well as offer gifts or easy money. Maintain a healthy skepticism and exercise due diligence if you come across an advertisement for investing in cryptocurrencies on social media.

Ignore cold calls . If for no reason they try to offer you the opportunity to invest in cryptocurrency, it is probably a scam. Never give out personal information or transfer money to anyone who contacts you in this way.

Download applications only from official platforms . The Google Play Store or Apple App Store may also contain fake apps, but downloading apps from these platforms is safer than from other sources.

Do your own research . The most popular cryptocurrencies are not fraudulent. But if you haven’t heard of a particular cryptocurrency, research it: find out if there’s a white paper and read it, find out who hosts it, how it works, and find reputable reviews and testimonials about it. To avoid being scammed, check if it is on an up-to-date, trustworthy list of fake cryptocurrencies.

Too tempting offer . Companies that promise guaranteed profits or instant riches are most likely scams. If an offer seems too tempting, proceed with caution.

As with any type of investment, never invest the last money you can’t afford to lose. Even in the absence of fraud, cryptocurrency is an unstable speculative instrument, so it is important to understand the risks.

What Should Victims of a Cryptocurrency Scam Do?

Cryptocurrency fraud can have disastrous consequences for the victim. If you have made a payment or disclosed personal information, it is very important to act quickly.

Contact your bank immediately if you:

  • Made a payment using a debit or credit card.
  • Made payment by bank transfer.
  • Provided your personal information.

Cryptocurrency scammers often sell their data to other cybercriminals. Thus, to prevent further damage, it is important to change the usernames and passwords for all accounts. If you are the victim of a crypto scam on social media, you can report it on the relevant platform. Depending on your country of residence, you may be able to report fraud to the appropriate authority in your jurisdiction. For example, in the US, this is the Federal Trade Commission . There are similar organizations in other countries.


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