Do you have questions concerning cryptocurrencies such as Bitcoin or Ether? You’re not by yourself. Before you use or invest in bitcoin, understand what distinguishes it from cash and other payment methods, as well as how to spot cryptocurrency frauds and discover compromised cryptocurrency accounts.
Cryptocurrency is the type of currency that exists solely on the internet. To purchase bitcoin, you often use your phone, computer, or a cryptocurrency ATM. Bitcoin and Ether are well-known cryptocurrencies, but there are many more, and new ones are constantly being developed.
Cryptocurrency is kept in a digital wallet, which might be on the internet, on your computer, or on an external hard drive. A wallet address is a long string of numbers and letters that identifies a digital wallet. If something happens to your wallet or cryptocurrency funds — for example, your online exchange platform goes out of business, you send cryptocurrency to the wrong person, you forget the password to your digital wallet, or your digital wallet is stolen or compromised — you’re unlikely to be able to recover your funds.
As cryptocurrencies gain popularity, so do the number of scams associated with them. Cybercriminals stole over $1.3 billion in cryptocurrencies in the first quarter of 2022, according to the US Federal Bureau of Investigation (FBI). This sum is noteworthy because the entire value of all cryptocurrencies in mid-2022 was slightly under $1 trillion.
Types of Cryptocurrency Scams
Rug Pull Schemes :
A “rug pull” occurs when someone gets people to invest in a cryptocurrency project, then takes all of the money and flees before the project is completed.
The Squid Coin, named after the popular Netflix show Squid Game, is widely regarded as the best example of a rug pull scam. Individuals were required to play online games in order to obtain cryptocurrencies in this fraudulent operation. Investors bought tokens, played games, and earned more tokens to exchange for other cryptocurrencies. Squid tokens quickly soared in value from one cent to about $2,861 per token.
However, trading soon ended, and the crooks vanished with the monies of the investors. As a result, the token’s value fell to zero, and people were unable to sell their holdings. This swindle netted the crooks approximately $3.38 million.
How to Protect Yourself: Investigate the individuals involved, as many in the industry use aliases. Trusted developers often have websites that list team members by name. Also, verify the number of coins held by major wallets, known as “whales,” using a blockchain explorer like BSCscan or Etherscan.
If the top 10 wallets hold over 15% of the tokens, it could indicate a red flag. The reason being that if these whale wallets decide to sell their holdings, they could cause a sudden drop in the token’s price within seconds.
Fake ICOs :
Initial Coin Offerings (ICOs) are a popular way for new cryptocurrencies to raise funds. They work similarly to Initial Public Offerings (IPOs) in the stock market, where investors buy shares in a company in exchange for ownership and future profits. While some ICOs are legitimate, others are outright scams.
Fake ICOs lure investors in with promises of high returns and innovative technologies. They typically ask investors to buy tokens in the company with Bitcoin or another digital currency. Once the investors transfer their funds, the scammers disappear, leaving investors with worthless tokens.
How to Protect Yourself: To avoid falling for fake ICOs, do your homework. Verify that the company and its team members are real. Read reviews and feedback from investors, and learn about the technology that supports the cryptocurrency.
Pump-and-Dump Schemes :
A pump-and-dump scheme involves bad actors buying an asset. They promote it using false news on social media or online chat forums, which drives up its price. Then they sell it (dump) for a profit. The people who buy based on the hype lose out when the price falls due to the artificial demand disappearing.
How to Protect Yourself: Before investing in any new cryptocurrency, it is essential to research and be cautious of social media groups or forums that promote specific cryptocurrencies. Also, avoid cryptocurrencies that have had sudden and significant price increases.
Fake Wallets and Exchanges :
Scammers create fake websites and apps that resemble real wallets or exchanges. If someone deposits their cryptocurrency into these fake wallets or exchanges, the scammers take it for themselves instead of protecting it for the person. Recognizing these fake wallets and exchanges is tough because they frequently use the same logos and branding as legitimate businesses.
How to Protect Yourself: Always double-check that the website address is correct and that the company is registered with relevant regulatory bodies before depositing any cryptocurrencies.
Phishing Scams :
Phishing scams are a type of cybercrime where fraudsters trick people into giving them access to their accounts or personal information. In the crypto world, phishing scams take many forms.
For example, a cybercriminal might pretend to be a crypto wallet provider and send users an email or text message requesting them to change their seed phrase. If you click on the link provided to update your password or seed phrase, you unwittingly reveal your login credentials to the attacker.
How to Protect Yourself: Always double-check the authenticity of the wallet or exchange before sending any cryptocurrency. Check the website address, ensure it’s spelled correctly, and look for any warning signs such as unprofessional website design, spelling, or grammatical errors. Finally, use two-factor authentication (2FA) to add an extra layer of security to your cryptocurrency wallet or exchange account.
Cryptojacking :
Cryptojacking is a type of cybercrime in which hackers use malware to take control of a victim’s computer or smartphone and use its processing power to mine cryptocurrency. This can make the victim’s device run slower and use more energy, which could make their bills higher. Meanwhile, the hacker makes money from the cryptocurrency they made.
How to Protect Yourself: Use antivirus software that you trust and make sure it’s up-to-date. Be careful when downloading software or apps from untrustworthy sources.And finally, don’t click on links or download attachments from people or websites you don’t know.
Conclusion :
The world of cryptocurrency is full of potential, but it is also full of risks. Scammers and fraudsters are always looking for ways to exploit unsuspecting investors. By being aware of the most common crypto scams and following the tips outlined in this article, you can protect your investments and stay safe in the cryptocurrency world.
Remember to always do your due diligence, never invest more than you can afford to lose, and be skeptical of any investment opportunity that seems too good to be true.
