Scammers are everywhere and they are getting smarter. They continue to innovate with newer technologies, and the cryptocurrency industry has attracted their attention. From October 2020 to March 2021, the Federal Trade Commission (FTC) reported that 7,000 people reported being scammed $80 million.
The FTC also reported that more than $1 billion has been lost to scammers since 2021; and in February 2022, Wormhole – a cryptocurrency exchange platform – lost $320 million following a cyber-attack. Given that cryptocurrency is not backed by a central authority and payment transfers are not reversible, investors can lose their funds in minutes if they fall prey to the antics of internet fraudsters.
Types of Cryptocurrency Scams
Fraudulent cryptocurrency schemers usually try to get people to send crypto coins to them, or they try to obtain the authentication credentials of targets to rip them off. Here are the types of cryptocurrency scams used by scammers over the years:
Scammers using giveaway models usually market themselves as popular social media influencers who want to give back to their fans. The impostors may set up a social media account with bloated followers and vacation photos of the impersonated influencer. Then they promise to match or multiply the cryptocurrency sent to them as part of a giveaway initiative to appreciate their community. Any cryptos sent to such impostors are gone.
Scammers using this method usually create a “believable” website that is actually a clone of a currency exchange platform where users can enter their authentication keys. Targets are directed to these clone sites without being aware of them – thinking it is the original sites – and when they enter their private wallet keys, the hackers steal the details and use them to access their accounts on the original sites from where they siphon off all cryptocurrency coins.
Extortion and Blackmail
This form of scamming method is not common, but it has been used successfully against some investors. Targets receive fake emails claiming to have records of adult websites and illicit web pages visited by the target. The sender threatens to expose the target unless cryptocurrency coins are sent as hush money. The best way to deal with this type of scam is to alert security agencies.
Bitcoin Investment Managers
Have you ever received emails from “Bitcoin investment managers” telling you how to increase your cryptocurrency investment? Do not fall for it; they are scammers. Bitcoin or other major cryptocurrencies do not have investment managers that contact people for investment schemes. These thieves usually ask unsuspecting targets to pay upfront fees for their services or to transfer investments that can be doubled to a given account, making away with either the upfront fee or deposit.
NFT Rug Pull
Non-fungible token (NFT) rug pull scam is a scheme where hackers lure people to invest in initial coin offerings (ICOs) with the promise of higher returns. Sometimes they can request gamers to buy tokens for online games with the promise of earning cryptocurrencies that can be exchanged for real cash. They can also use decentralized finance (DeFi) platforms for their scams by luring people to invest in high-yield crypto products. Then they pull the rug from under the feet of their victims by disappearing with their money.
Cloud Mining Scheme
Cryptocurrency miners expend lots of computer resources, electricity power, internet facility, and expensive hardware into mining for crypto coins. These huge resources are required to solve the complex algorithmic equations that are needed to acquire new coins and earn fees. Given the huge hardware and other resources required to mine cryptos, scammers may contact people and offer cloud mining opportunities with upfront fees, then they disappear with the money.
This thieving technique is carried out by someone who intercepts the information sent by a cryptocurrency user over public Wi-Fi. The man-in-the-middle intercepts the financial details transmitted over a public network, and then uses crypto wallet keys and passwords obtained through the technique to steal cryptocurrency from the victims. The most effective way to block this kind of attack is by using a VPN to encrypt all public data.
Other fraudulent schemes scammers use include fake cryptocurrency exchanges, Ponzi schemes, romance scams, and fake employment offers among others.
How To Avoid Losing Your Wallet Funds
You can avoid losing your wallet funds by taking the following precautions:
- Do not send your cryptocurrency access details over a public network
- Do not fall for any social media posts promoting cryptocurrency deals
- Do not invest or trade in cryptos based on advice from social media friends
- Do not go for any online investments accepting only cryptos for payment
- Do not believe any social media influencer endorsing any cryptos
- Do not send cryptocurrency or wallet details to anyone you meet on dating sites
- Report to law enforcement if you suspect that any crypto request is fraudulent
Cryptocurrency scams are on the rise and you must exercise due diligence to protect your investment and wallet funds.