As with any other financial market, cryptocurrency scams have also become common in the digital asset class. In this article, we look at the common crypto scams and methods used by hackers to deceive.
Cryptocurrency Scams and How to Avoid Them
When you become engaged in the emerging asset class of cryptocurrencies, it does not take long before realizing a degree of risk involved in those transactions. Digital assets are liquid, easily portable, and it's impossible to reverse a transaction once made. For this reason, various types of scams have filled the digital realm, and today we are going to explore some common types of crypto scams and how to avoid them.
Phishing typically involves criminals pretending to be a person or a reputable company to draw personal information from the victims. Phishing can occur through various methods, including phone calls, emails, fake websites, and even messaging or social media platforms. Even newbies in the world of cryptocurrency are somehow aware of the practice of phishing.
Messaging apps are the most commonly used medium for phishing in the cryptocurrency landscape. Crypto scammers do not stick to any single strategy while attempting to acquire your details. They may send you an email informing you there is a technical glitch with your account that needs you to click a particular link to fix it. In most cases, the link probably leads you to a bogus site, identical to the authentic one, prompting you to log in. And just like that, the scammer will steal your authorization data and probably your digital assets.
In most instances, scammers flock to official Telegram crypto groups for exchange platforms or wallets. When a group member reports a problem with their account, the crooks reach out privately to the user posing as an official team member or customer support personnel. From that point, they exhort you to share your details and seed words.
If your seed words land in the wrong hands, your cryptocurrency is at risk of being smuggled. By no means should they become known to anyone. Resolving issues with exchange accounts or wallets does not require awareness of your seed; hence, we can say with absolute certainty that anybody asking for your seed phrase is a scammer.
Tips to evade phishing scams
Never share your private credentials such as passwords, private keys, or seed phrases under any circumstances.
Verify URLs before visiting a website. Scammers commonly register domains with names almost similar to the real domain.
Bookmark official domains you frequently visit to avoid the vicious ones.
Platforms contact you through official means, and you should always ignore a message when in doubt.
Social media scams
It is astonishing how these days, everybody seems awfully kind on social media platforms like Facebook and Twitter. If you open a high-engagement tweet's replies, you will likely see that your favorite exchange or crypto platform is giving away cryptocurrencies for free. For instance, they claim that if you send them 1 BTC/ETH/XRP, they will send back ten times more than that. Sounds so good to be true, right? Well, that is because it is not true. That is one golden rule to embrace to avoid many of these scams.
It is improbable that a person is organizing a free giveaway that will require you to send your own funds first. It would be best if you were very cautious of such fascinating messages on social media platforms. Most probably, they might come from accounts similar to your favorite accounts or famous people you follow. Hence you should note that this is nothing but a deception. In the case of the multiple accounts appreciating the detailed account for their generosity, they are probably fake, or bots meant to convince you the giveaway is real.
Tips to evade social media scams
Never trust any account pledging to double or multiply your funds by any figure by sending cryptocurrencies.
Confirm whether the account of the Telegram channel is legitimate or official.
Never give out your personal information, passwords, or private keys to anybody on social media.
Watch out for any promotional or giveaway bids that seem too good to be true.
Investors are promised considerable returns in these scams, which is usually the first red flag. Ponzi schemes commonly pose as portfolio management firms, and in reality, they do not have any product or rudimentary structure. Instead, they are just scams to derive money from unsuspecting victims with abnormal guarantees of high returns on capital.
In a Ponzi scheme, the early investors are compensated using the funds from the new entrants. The plan progresses, and in the end, the scammers disappear with the investor funds. A number of the initial coin offerings (ICOs) were Ponzi schemes in the cryptocurrency sector. The scammers raise funds through ICOs by falsely guaranteeing investors huge returns on their investment through marketing. Ultimately, they turned out to be exit scams, with the founders running away with investor funds.
Tips to evade Ponzi schemes
Never trust websites guaranteeing 'get rich quick schemes.'Verify details such as a whitepaper, tokenomics, founders, etc., before investing in an ICO or cryptocurrency project.
Never trust websites pledging instant and abnormal returns on capital.
Never transfer cryptocurrencies to random addresses promising to multiply your funds.
In these types of scams, fake wallet apps imitate the real platforms' user interface, while in reality, they are malicious apps designed to steal from victims. Typically, these apps exhibit promotional offers or bonus incentives to encourage users to deposit crypto assets to their accounts through a distinct address. Once cryptocurrencies are transacted, they cannot be reverted. Besides, once these apps are installed, they can gain access to the most delicate personal details.
Phony crypto exchanges encourage victims to trade on their platform by promising low trading fees. In almost all cases, fake exchanges make it complicated for victims to withdraw their funds once deposited. In other instances, exchanges earn commission by promoting fraudulent ICOs on their platforms.
Tips to evade fake crypto apps
Always make a habit of downloading crypto apps from the official website of crypto exchange or a wallet.
Highlight all the red flags on a promotional offer or bonus incentive—review testimonials from other sources before picking a crypto exchange or wallet.
Scammers have innovated new ways of siphoning funds from unsuspecting victims. To stay away from the majority of these common scams, you need to be regularly cautious of the strategies used by these criminals. Make sure you use official websites and platforms to carry out any activity regarding cryptocurrencies and stick to the thumb rule; if it sounds too good to be true, most definitely it is.