Over the last decade, cryptocurrencies have generated a large number of millionaires and extremely wealthy individuals. But this has not been without its risks. The crypto market is prone to extreme volatility. As a result, there is no assurance of instant success or profits after investing. Then some investors are exposed to cyber-attacks and criminal activity in the crypto realm. Investing in crypto has its own risks, but being duped should not be one of them.
According to the Federal Trade Commission, consumers lost over $82 million to crypto scams between the fourth quarter of 2020 and the first quarter of 2021, more than ten times the amount lost during the same six-month period the previous year. Scammers have preyed on everyone from tiny investors looking for investment ideas on social media to Wall Street veterans who supported an Australian crypto-fund manager recently accused of operating a $90 million scam. The following are a handful of the most well-known cryptocurrency scams that have occurred in recent years.
- According to the same FTC investigation, hundreds of individuals transferred money to the wallet addresses of fraudsters impersonating Elon Musk, the creator of Tesla and SpaceX, for a total of $2 million.
- CipherTrace disclosed in June 2020 that Wotoken, a Chinese crypto pyramid scam, allegedly took over $1 billion from investors.
- In July 2020, a hacker from Florida gained access to numerous high-profile personalities’ Twitter accounts, stealing a total of $121,000 after persuading their followers to pay money to a wallet address in exchange for a larger sum.
- CipherTrace stated in May 2021 that fraudulent DeFi projects had taken over $240 million from investors over the first five months of the year through rug pulls and stolen assets from crypto staking platforms.
Identify and avoid getting scammed
Scams are commonplace in the internet world, and the crypto realm is no exception. Be aware of the risks of losing your crypto assets when you contemplate investing in various cryptocurrencies and exchange platforms. Here’s a look at some of the most frequent scams and how to prevent being a victim of one.
Email scam tactics have evolved to include cryptocurrency phishing schemes, in which the fraudster attempts to get the investor’s login credentials to a wallet or crypto exchange account by encouraging them to log into their accounts via an impostor website.
How to avoid
If you are unsure whether an email address is valid, avoid clicking on the link in the message. Block and mark as spam any emails that come from unfamiliar addresses and seek your wallet details or encourage you to access your cryptocurrency exchange account via an unconfirmed link.
Fake websites and mobile apps
A surprising amount of websites have been put up to look like authentic, legitimate startups. Even though the site appears to be the one you expect to be visiting, you may be routed to another platform for payment. Along with numerous trusted exchanges that have proven to be legitimate and established track records as reputable crypto trading providers, there are crypto exchanges that have been linked to incidents involving stolen funds and allegedly hacked systems, resulting in multimillion-dollar losses for investors.
How to avoid
Think twice if there isn’t a little lock icon signifying security near the URL bar and no “https” in the site address. Perform your due diligence on each current or new project in which you wish to join.
Scams on social media
On social media, a fraudster may attempt to mimic a celebrity, a well-known figure in the crypto and financial sphere, or any other individual whose credibility is strong enough to make you believe the offer is genuine. We are all aware of how social media influences people’s opinions. And if a large number of people agree on something, it is more likely to happen. The fraudster will utilize several social media identities to legitimize a project, an investment concept, an initial coin offering, or a specific crypto-related service to convince genuine individuals to put their money into it.
People online may appear to be pleasant and eager to give their advice. However, this might be part of the deception to entice others to participate in their plan. Some of these schemes, in reality, are built on referral networks and function by bringing in people who then recruit new investors.
How to avoid
Avoid connecting with unfamiliar social media personalities who may be pushing a specific project without double-checking their identities and confirming that they are whom they claim to be.
Then there are giveaway scams, which claim to be supported by celebrities or other well-known cryptocurrency individuals and promise to multiply the cryptocurrency you donate instantly. However, many have reported that they afterward realized that they had just delivered their cryptocurrency directly to a scammer’s wallet. For instance, individuals have reported paying more than $2 million in cryptocurrencies to Elon Musk impersonators over the last six months.
How to avoid
Check to see if the individual or organization supporting the initiative is real. Make sure you are also aware of their background and records.
Many consumers have reported being duped into visiting websites that appear to provide possibilities for investing in or mining cryptocurrency but are fraudulent. They frequently provide various investment tiers — the more you put in, the greater the ostensible return. Fake testimonials and cryptocurrency lingo are used to make websites look trustworthy, but claims of large, guaranteed profits are merely falsehoods.
These websites may even make it appear as if your investment is increasing. However, when customers try to withdraw their gains, they are required to transfer even more crypto — and they end up getting nothing back.
To be clear, fraudsters will use whatever it takes to convince individuals to transfer cryptocurrency. This frequently entails impersonating a government official or a well-known business. The cryptocurrency ecosystem is still in its infancy and remains mostly uncontrolled. This creates possibilities for criminals to scam investors through various methods and strategies to gain access to their wallets or extract their hard-earned money by promising enticing but unattainable returns. As a result, you should understand more about how these fraudulent deals work and how to avoid them. The thumb rule is — if it is too good an offer, most likely it’s a scam.