Bitcoin and other cryptocurrencies’ unprecedented rise attracted a lot of attention including those of cybercriminals who perpetrate cryptocurrency scams. As the public becomes more involved in digital cryptocurrencies, the risk of scams will continue to increase.
The unregulated and private nature of various cryptocurrencies makes them a magnet for various fraudulent schemes and scams.
Whether through investment scams or impersonations there are various ways fraudsters trick victims into parting with cryptocurrency.
In this article, we will discuss various cryptocurrency scams and explore ways to avoid them.
1. Ponzi Scheme
Promoters of Ponzi schemes promise a consistent and high return on investment to lure in unsuspecting victims. This fraudulent scheme which is common with traditional investment has been successfully adapted to the crypto space.
While pretending to be a legitimate investment, scammers use crypto deposits from new investors to settle older investors’ profit. The scheme continues until new investments dry up and it becomes unsustainable. The scheme collapses, trapping investors’ money.
Cybercriminals often use fake testimonials and endorsements to promote such schemes.
2. Fake Giveaways
Fraudsters have devised means to convince victims to send them cryptocurrency by promising higher rewards. For example, victims have been asked to show loyalty to a public figure or company by donating bitcoins.
In return, they are promised a higher reward which never comes.
The scheme involves impersonating celebrities or organizations and deceiving their followers into parting with crypto.
3. Phishing Email Scams
Phishing for cryptos is also a popular scam. Hackers send messages from what appear to be legitimate companies.
They may ask targets to invest in new crypto portfolios or steal their crypto platform credentials by including links to fake websites controlled by the attackers.
Some scammers also set up a fake ICO and announce it via mass mailing to get as many victims as they can.
4. Pump-and-Dump Scams
In this scheme, a group of scammers gets together to buy a particular cryptocurrency in order to drive up his price.
The crypto price’s upward trend will deceive unsuspecting victims into thinking that there is a valid market move behind the rise. The crypto price will be further inflated when the public starts buying it.
When the promoters of the scheme hit their investment target, they will dump all their portfolio which will crash the crypto price and lead to panic selling by duped investors. Social media hashtags may be used to enhance this fraud.
The scammers can then move to another cryptocurrency to repeat the same pump and dump scheme. This fraud is difficult to detect even for seasoned investors.
5. Old Scams
Scammers can send emails or call victims to inform them that they owe the IRS a certain tax amount that must be paid immediately to avoid legal penalties.
In this case, the fraudsters ask for payment in crypto instead of giving out their bank account or requesting a wire transfer that can be easily traced.
Many victims only get to know that they have been defrauded after transferring crypto to the scammers.
6. Fake or Cloned Apps
Mobile apps are popular names for many people to be introduced to cryptocurrency investments and access their online wallets. Hackers take advantage of this to divert victim’s crypto funds.
Scammers convince victims to install fake crypto apps or clones of popular ones. They do this by promising freebies and rewards for using such apps. However, installing such apps can be used to compromise the target device and steal cryptos.
It may also be used to convince a target to deposit crypto for investment which is then stolen by the malicious app developer.
This scam is made easier by the proliferation of unvetted third-party app stores for Android devices.
How to stay safe from Crypto Scams
1. Be skeptical of every crypto investment, especially those with unrealistic promises. Scrutinize all crypto offers and confirm that they are from legitimate sources before participating.
2. Educate your employees on the dangers and risks associated with cryptocurrency and the various crypto scams that might be directed against your organization so they can be on the lookout for fraud attempts.
3. Avoid visiting questionable sites and set up security policies to block potentially malicious websites on your company’s systems.
4. Never click on any link that is asking for your password or wallet details whether through emails or SMS.
6. Do not follow anonymous crypto investment tips.
Volatility risks are not the only issue you have to worry about in cryptocurrency. Even if you are not an investor, there are various ways you could lose money to scammers via cryptos. Educate your employees about crypto scams so your organization can stay safe. Contact us today for more information about cyber security.