5 Common Cryptocurrency Fraud That Investors Need To Be Aware Of
If you are familiar with the latest cryptocurrency trends, it won’t take much time to recognize that there’s always risk involved with these transactions. In addition to the volatility in the market, scams have become pretty common in the crypto space.
In March 2021, the Federal Trade Commission (FTC) Consumer Sentinel reported that between October 2020 to March 2021, reports of crypto-related scams had risen to 7000 people reporting losses worth $80 million. This records an almost 12 percent increase in crypto-related scams reported a year ago.
By these figures, it is evident that there has been an exponential rise in cryptocurrency frauds. However, awareness of cryptocurrency frauds can protect investors from losses and theft. In today’s article, we will take a detailed look into the most common cryptocurrency scams and how to avoid them.
What is cryptocurrency fraud?
Since early 2020, the global economy has witnessed a massive growth of digital currencies such as Bitcoin, Dash, Ripple, Ethereum, etc. These coins have become a hot commodity in online trading, and investors are making huge profits. This prospect of quick riches can blind some people and cause them to make poor trading decisions.
Since any central bank or government does not back digital currencies, the value of these coins is purely driven by the concept of supply and demand.
As we said, cryptocurrency scams have taken a quantum leap in the past few years. Most of these frauds are examples of classic internet fraud where an investor’s assets are stolen.
On that note, let us take a look at the most common cryptocurrency frauds in 2022.
5 Most Common Cryptocurrency Frauds in 2022
Imposter or bogus websites
One of the most common cryptocurrency frauds in 2022 is through imposter websites. Anyone can fall prey to fake websites advertising great deals on cryptocurrency. Studies have shown that a surprising number of websites resemble original websites and scam their users. These websites are often flooded with fake testimonials, making it difficult to identify.
To avoid these websites, make sure you only use trusted crypto exchanges such as Zapit, Coinbase, Robinhood, and so on. Double-check the URL before you make any payment and start trading.
Phishing scams are the second-most common cryptocurrency frauds. In 2019, the FBI reported that more than 114,700 investors fell prey to phishing scams, collectively losing over $57.8 million.
These phishing scams target information linked to the investor’s online wallets. These scammers are generally interested in the user’s private keys to access funds in the wallet.
The phishing scam occurs when the user is sent an email that leads them to a website and asks for their private key information. Once the hackers have access to this private key information, they can easily exploit the investor’s assets.
Phishing scams can only be avoided if the investor is aware and careful. Most online crypto wallets and exchanges never ask users for their private key information.
Fake celebrity endorsements
Many times, celebrity imposter accounts cheat investors through cryptocurrency scams. These hackers or “con-artists” can pose like billionaires and crypto experts. They usually engage in a giveaway scam where investors are presented with a “once-in-a-lifetime” opportunity that can bring them promising returns.
In 2021, there were reports of several cryptocurrency transfers worth more than $2 million to Elon Musk impersonators. The most helpful way to avoid giveaway scams and fake celebrity endorsements is by being careful about who you follow on social media.
If you come across a cryptocurrency influencer, make sure you check their background thoroughly and do not believe everything they say.
These days, romance scams are on the rise. Scammers persuade people they meet on dating websites to invest in digital currencies. The unsuspecting targets are usually made to trust the scammer or made to believe that they are in a long-term “real” relationship. Once the trust has been established, conversations about lucrative crypto deals are brought up.
According to the FBI’s Internet Crime Complaint Centre (IC3), more than 1800 reports of crypto-based romance scams were reported in the first few months of 2021. The collective losses amounted to over $133 million. Studies have also confirmed that almost 20 percent of money reported stolen in romance scams involves cryptocurrency exchanges.
People should be careful about who they meet on dating apps. Besides, crypto exchanges should only be made when the investor is aware of the industry and knows how the market works. In other words, do not trust anyone when trading in digital currencies.
Social engineering scams
Social engineering scams are cryptocurrency frauds where the scammer uses psychological manipulation techniques to deceit investors and gain control over their private keys and other details.
These scams usually make the investor believe that they are dealing with trusted agencies such as a government body, fintech company, tech support, work colleague, friends, etc. Scammers invest a lot of time gaining the investors’ confidence and trust before exploiting their assets.
Blackmail and extortion scams are also examples of social engineering frauds. Once again, the best way to avoid these cryptocurrency frauds is by being aware.
How to be aware of cryptocurrency frauds?
Here are some preventive tips that can help investors be aware of cryptocurrency frauds:
- Don’t invest yet if you don’t understand how trading in digital currencies works. Make sure you research the market and related trends before investing your money.
- If someone you don’t know sends you a message about investing in cryptocurrency, ignore it.
- Don’t trust calls/emails/messages claiming to be from government agencies or any official body and asking for your private user details.
- Understand and assess the risk of trading in digital currencies, and only trust credible crypto wallets like Zapit. Zapit is a non-custodial crypto exchange platform that uses a decentralized escrow system. The funds remain in escrow which is secured by smart contracts. The platform holds your money at no time, before, during, or after a transaction.
- Be cautious about who you follow on social media, especially people claiming to be crypto experts or influences.
- Don’t fall for social media posts that promote cryptocurrency giveaways.
- Do not share your private user details and secret keys with anyone, even a close friend.