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Like any other industry, the fintech industry is subject to theft and fraud. As cryptocurrencies such as Bitcoin, Ethereum, and other currencies become more popular and more lucrative, the number of online scams associated with them increases. The wisest choice a trader can make to safeguard their funds is to become informed of the prospective risks and common errors.

We don’t rely on banks to keep our crypto assets safe, unlike hard cash, and that’s when DeFi makes its spectacular entry. DeFi is a rapidly growing section of the Bitcoin industry that aims to cut out intermediaries like banks from everyday financial transactions like getting a loan.

The number of Defi transactions has shown a considerable increase of 91.2 percent in 2021, according to Chainalysis statistics, proving its rise in adoption.

​​Decentralised tokens like the Shiba Inu coin, $SHIB, have had impressive gains, which has fueled a feeding frenzy among DeFi tokens.

Looking at reports, we see that from t$3.2 billion in value in 2020, cryptocurrency theft increased an alarming 516 percent. DeFi has not been untouched by the darkness of the cyber world. According to reports, DeFi related scams have accounted for 72% of the stolen funds. Scam-related losses in the cryptocurrency have been shown to have increased by 82% to $7.8 billion.

The IRS’s Criminal Investigation Department, for example, announced in November that it had seized more than $3.5 billion in cryptocurrency in 2021, entirely from non-tax investigations, accounting for 93 percent of all the money confiscated by the department during that period.

This doesn’t mean DeFi has been untouched by the darkness of the cyber world. In this article, we shall bring to you key insights on crypto scams and proven ways to keep yourself immune amid the rising risks of the crypto underworld.

CRYPTO SCAMS

Scams involving cryptocurrency can be as basic as phishing and phony websites to as complicated as NFT rug pulls.

Rug pulls, including developers launching “what appear to be legitimate” crypto projects “before collecting investors’ money and disappearing,” have accounted for more than $2.8 billion of the overall loss, or 37 percent of the total, according to the research.

In rug pulls, the developers drain cash from the liquidity pool, causing the token’s value to drop to zero and vanish.

This year’s greatest rug-pull fraud amounting to 90% of the values lost to rub pulls was represented by Thodex, a Turkish exchange whose users lost over $2 billion after the CEO mysteriously vanished.

Another famous such rug pull incident involved the Squid ($SQUID) coin, which was inspired by the hit Netflix series “Squid Game,” which saw users lose approximately USD $3.36 million.

BELOW ARE SOME OF THE BIGGEST CRYPTO SCAMS OF 2021:

1. Faze Saga/Save The Kids

2. Squid Coin

3. Polynetwork Hack

4. Afriscrypt Scam

5. Stolen Bored Ape NFTs

DEMOGRAPHICS UNDER THREAT

While a crypto exchange in itself is safe, a scam artist can create a false website that compels the user to transfer crypto or even their own fiat money to a cybercriminal. Let’s now look at the statistics involving scams in cryptocurrency transactions.

We see that due to the rise of DeFi, scammers earned a record $14 billion in cryptocurrency in 2021. Crypto-related criminal losses climbed by 79% from 2020 to 2021, and from 2020 to 2021, cryptocurrency-related criminal losses have increased by 79%.

SCAMMING STRIKES

Cybercriminals continue to wreak havoc on the community with their cyber attacks. As businesses adopted workplace flexibility and all of its digital ramifications, scam artists took advantage of the situation to launch sophisticated assaults and demand large ransoms.

One recent example, among many, involved an attack on a decentralised finance (DeFi) company Cream Finance, which lost $186 million in three separate attacks. Another heavily targeted protocol was Poly Network, which lost $600 million in August until the hacker recovered $342 million days later.

According to the datasheet, Cryptosec.com (a website that keeps track of Defi exploits, during the last two years) it is observed that Defi protocols were subjected to around 60 attacks in 2021, with an average of one assault per week.

Pseudo Anonymous Structure

Although Bitcoin and cryptocurrencies have many rewards, there will always be some drawbacks, just as with any other technology. Because of the pseudo-anonymous structure of bitcoin and cryptocurrencies, scammers can get away with massive heists with little to no trace if they know what they’re doing; the cryptocurrency space is riddled with them.

We can assume that it’s most likely a hoax if a seemingly trustworthy person or retail establishment declares they don’t accept any currency other than Bitcoin. Because bitcoin and other altcoins are such a new asset class, analysts believe that reputable institutions will not take crypto without also accepting U.S. dollars via wire transfers, cheques, credit and debit card payments, and cash.

Anyone directing payment in Bitcoin may be attempting to hoard it and profit from its increasing value. Some blockchain companies, unlike banks, lack standard know-your-customer (KYC) processes. This means that consumers can access their wallets without needing to show legitimate identification, a Social Security number, or their address and contact information. Despite the fact that blockchain is accessible to the public and provides permanent, open-access records, people can transact on it anonymously, making it easier to defraud you, take your money, and flee.

HOW TO BE SAFE WITH CRYPTOCURRENCY?

The easiest approach to avoid falling victim to these con artists is to properly inform yourself and be extra vigilant of whatever you encounter on the internet in general.

It’s a red flag if there are promises of guaranteed huge returns or inflated claims that your cryptocurrency will be multiplied. The investment is the cryptocurrency itself. If you’re fortunate enough to sell it for more than you paid, you make money. However, people who proclaim to know a better path are not to be trusted.

As the cryptocurrency market expands at an incredible pace, so do the ways that criminals and fraudsters attempt to loot tokens and coins. On the other hand, If you are watchful, equipped, and take appropriate preventative steps to safeguard your digital assets, then you shall remain immune to these threats.

In this article, we’ve looked at the potential threats in the crypto industry, the infamous crypto scams, and also how to keep yourself away from such scams.

We shall come back with more useful content. Please visit Chickey Chik at https://chickeychik.com/ to learn more and become a part of a growing community!

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