Cryptocurrency Scam Is Getting Out Of Hand. Here’s How To Spot A Scam Immediately.
Last Monday, a fake announcement stating that Walmart will begin accepting Litecoin as payment was spreading like wildfire in major outlets such as CNBC, Reuters and even Coindesk, sending the cryptocurrency soaring up 20% before crumbling back down.
What we see here is a cryptocurrency scam strategy called pump and dump.
FTC reports revealed that most cases involve hackers stealing from e-wallets to people falling for crypto investment scams. Another survey also found that cryptocurrency is the most common payment method in investment scams and fraud.
“Fake announcements are nothing new — but the fact that a scammer is willing to go so high profile shows that the old ways aren’t working anymore, that the industry is taking itself far more seriously,” John Wu, a crypto expert commented.
Crypto scammers may be getting smarter and more creative with their scams, however, there are still ways to spot the fakes if you know what you need to look out for. Here are the four most common types:
- Pump and Dump
First off the list is pump and dump. Pump and dump scams remain prevalent in the market today; a survey even showed that there are 355 price manipulation incidents happening in a span of seven months.
How Do Scammers Do It?
A group of scammers will pump a huge amount of money into specific crypto to falsely inflate the price. In the meantime, they will motivate investors via social media platforms to invest in it. Once the price rises, the scammers will sell their shares of profit before the price comes crashing down. This method is common in traditional investments too.
What you can do is to be wary of investments that seem too good to be true. Watch out for coins that have risen tremendously in value without a clear reason why as it may be a sign of a pump and dump scheme.
2. Fake ICOs
ICO is a new method to raise funds for new launch cryptocurrency and scammers often announce fake ICOs or initial coin offerings to make investors invest in a non-existing cryptocurrency.
The most notorious ICO scam would be One Coin that stole over 4 billion euros from investors worldwide via multi-level marketing. Another recent case is PlexCoin which is forced to shut down by the U.S. Securities and Exchange Commission (SEC) and charged with fraud.
How Scammers Do It?
Scammers can spoof a legitimate cryptocurrency that is having a legitimate ICO. They create a fake website or social media account to lure investors into believing they are getting their hands on the new crypto coin, but in reality, they are sending their funds directly into the scammer’s account.
The best way to avoid stepping into the traps of scammers is to always research ICOs and cryptocurrencies that you want to invest in. Be wary of emails and social media posts that offer you a chance to buy in early. Always double-check the legitimacy of an ICO through websites like CoinDesk.
3. Crypto-Stealing Malware
Another common crypto trick is when hackers injected malicious code programmed on the web to get into your accounts and steal cryptocurrencies. The malware can be a virus that steals your personal information or blocks you from accessing your data.
One of the latest crypto-stealing malware programs named WeSteal steals cryptocurrency by looking for matching patterns of Bitcoin and Ethereum wallet identifiers and provide a new code supplied by the malware, so whenever you make transactions, your fund will be sent to the fake wallet instead.
How Scammers Do It?
Crypto-stealing malware programs steal cryptocurrency by getting into your account when you’re making a transaction, capturing your crypto login credentials and even stealing your whole crypto wallet.
The best way to protect yourself from this is to use a good antivirus program and create stronger passwords for your account. You can also consider using a VPN to hide your connection.
4. Fake Crypto Wallets
Another way that scammers use to steal investors money is by creating fake crypto apps. Unfortunately, there are shady crypto apps in Google and Apple stores that will manage to avoid the app-checking process and proceed to lure victims with their convincing interface.
The 2017 Bitcoin Gold wallet scam is a good example. The scammer created a new website called mybtgwallet and prompted users to give their private keys to generate the newly launched cryptocurrency, Bitcoin Gold. The hacker managed to steal over $3 million in Bitcoin and $200,000 in other currencies.
How Scammers Do It?
Other than hacking crypto wallets, some scammers will create a new crypto wallet app hoping that investors will link their crypto wallet to crypto exchanges and steal any funds stored in the crypto wallet.
To avoid getting skimmed off by scammers, only trust well-known crypto wallet services with a proven track record. Also, it would be safer to have most of your money stored in a cold wallet that is not connected to the Internet.
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