Four Most Common Crypto Scam Techniques
It’s contrasting to imagine that blockchain has found wide-range applications across the security industry and identity management, yet cryptocurrencies have been prone to various degrees of attack, scams, and phishing activities. Each year a whopping sum of money is lost to cryptocurrency scams and fraudulent activities.
Crypto scams could be attributed to lack of crypto education which renders users vulnerable to obvious scam activities. Other times, lack of tight security features in crypto exchanges and wallets accounts for reasons why a lot of money is lost to scammers yearly.
Another contrasting fact is that there has been a great improvement in security measures deployed across cryptocurrency exchanges and wallets, yet the amount lost to theft stays on the rise with a record number of $4.4 billion lost in 2019.
Out of the $4.4 billion lost in 2019, the PlusToken scheme ($2.9 billion) and the QuadrigaCX crypto exchange fiasco ($195 million) accounted for a greater percentage of the losses. The hack into the world’s largest exchange also occurred in 2019, which amounted to 7000 BTC being stolen from Binance.
Considering how eventful 2019 was for scammers, the list could be endless. Barely 5 months into 2020, a whopping $1.4B has already been stolen. Digital asset intelligence firm CipherTrace has attributed this ever-growing amount of crypto exchange phishing due to an uptick of “insider jobs” at businesses such as crypto exchanges.
An interesting finding from Binance Research revealed that more than 60% of crypto scams recorded between 2018 and 2020 were perpetrated through individual crypto wallets while exchanges account for the second-largest number. The study also revealed that up to $9 million is lost in cryptocurrency scams daily.
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This suggests that as the crypto community races for wide-scale adoption, there is a big need to carry crypto education along. Briefly, we will run through 4 of the most common ways users could fall victim to fraudulent activities while dealing with cryptocurrencies.
1. Phishing Websites
Scammers have relied on this trick to steal sensitive information from unsuspecting users. There is a growing number of websites that have been built to resemble the original, legit companies and businesses. If a website doesn’t have a small lock icon that indicates security close to the URL or has an “https’’, you might need to crosscheck to be sure you are visiting the correct website.
Phishing websites always look almost identical to the original website, so it’s common for users to be phished without realizing it. For example, you click on a link that looks like a legitimate site, but attackers have created a fake URL with a zero in it instead of a letter ‘o’. If you don’t look closely, you might not notice it. This occurs mostly when you tried assessing a website through a search engine.
Through this means, passwords, private keys, 2FA codes, email details, etc could be stolen from users and used to gain express access to their accounts. This trick has been largely used across crypto exchanges and web wallets.
2. Fake Mobile App
If you use a wide range of mobile apps, you are likely to have been tricked into updating your app which most times might not be an official update from the company. Or your experience might be that you wanted to download a particular app but you found two or more of the same almost identical app in Google PlayStore or Apple AppStore.
Fakes apps employ the same tricks used by phishing sites. Their aim is to extract users’ info into their database and use this information to steal funds from the users’ accounts. According to a report, a fake Poloniex app appeared in 2017 which allegedly stole information from over 10,000 Poloniex users.
This is more of a bigger risk for Android users, as there have been more reports of fakes apps in PlayStore. The difference in this fake app could range from a slightly different spelling from the name of the original app or a hidden difference in the design. As a due diligence measure, users are encouraged to follow the app download link provided from the company’s official website.
3. Impersonating Tweets And Fake Telegram Groups
If you are active on Telegram, chances are that you might have been randomly added into a fake Telegram community that promises a huge investment return or probably running a fake giveaway campaign. The same trick is deployed across Twitter, these scammers impersonate the accounts of big crypto influencers.
They make a tweet announcing fake giveaway campaigns, asking users to send a specific number of BTC to receive double or triple of that instantly. It sounds like an obvious scam but surprisingly, people still fall for it. You probably will never fall for his kind of scam if you aren’t desperate for quick and fast gains. There ain’t no such thing as a free lunch.
4. Fake and Fraudulent ICO/IEOs
Our list will be incomplete if we don’t make mention of fraudulent ICO schemes designed to scam investors. ICO and IEO fundraising is an important model used by startups to fund crypto projects and it has also produced incredible returns for investors. Due to the flourishing nature of ICOs in 2017 and 2018, it gave rise to a lot of fraudulent projects who disappeared after collecting money from investors.
One common feature of fraudulent ICO is that they are usually conservative about team information, nobody probably knows about them till they surfaced in the crypto space. Basically, they made outrageous and attractive promises to investors, they have little or no existing product in the market, they sell full-blown promises to unsuspecting investors.
There are a handful of real ICO projects with high potential out there such as the SaTT one, however, before committing money into any ICO, due diligence is always advised. Make a good review of the team behind the venture, key board members, and investors.
Final Thoughts
Falling for cryptocurrency scams isn’t always the users’ fault, even most crypto veterans have been victims of one or two crypto scam. However, having a sound crypto education reduces your chances of being a victim. Cryptocurrencies give users control over their funds, but that comes with a huge price, users have a big part to play in safeguarding their funds.
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