Scammers keep finding unique ways to steal your money, and the entry of cryptocurrency into the mainstream in recent years has created numerous opportunities for fraud. Cryptocurrency crime broke records in 2021; fraudsters stole $14 billion of crypto. If you are entering the crypto arena, beware of the risks of bitcoin scams you are exposing yourself to. Here are some common crypto scams and how to spot them.
Cryptocurrency investment scams
Fake websites
Scammers at times create fake crypto trading platforms or fake versions of official crypto wallets to lure in innocent victims to bitcoin scams. These fake websites use similar domain names with just a few tweaks like the ones they attempt to imitate. They look quite similar to legit sites, making it hard to decipher from the original. Fake crypto sites largely operate in the following two ways:
Phishing pages: Every detail you put in, your crypto wallet’s password and recovery phrase, or any financial information, will end up with the scammer.
Simple theft: First, the site allows you to withdraw a small amount of money. As your investments appear to do well, you will want to invest more in the site. However, when you try to withdraw that money, the site will shut down or decline the request.
Phishing Scams
Crypto phishing scams usually target information on online wallets. Additionally, crooks target crypto wallet private keys required to access funds within the wallet. The scam method is similar to other phishing attempts and related to the fake websites mentioned above.
They send an email to entice recipients to a specially designed website asking them to enter private key information. Once hackers acquire the information, they steal crypto from those wallets.
Pump and dump schemes
Here, a coin or token is hyped by fraudsters through an email blast or social media, urging traders to rush to buy them and driving the price up. After doing so, the scammers sell their coins, crashing the asset’s value sharply. It can happen in minutes.
Fake apps
There are fake apps available for download through Google Play and the Apple App Store. Although these are quickly found and removed, they still manage to impact bottom lines. Many end up downloading fake cryptocurrency apps.
Fake celebrity endorsements
Crypto scammers at times pose as celebrities or claim endorsements by them. It can be businesspeople or influencers to capture potential targets’ attention. At times, this involves selling nonexistent cryptocurrencies to amateur investors. These scams are often sophisticated, with glossy websites and brochures that appear to show celebrity endorsements from names like Elon Musk.
Giveaway scams
Here, scammers promise to match or multiply the cryptocurrency sent to them. Clever messaging from what appears to be a valid social media account can create a sense of legitimacy and urgency. The so-called ‘once-in-a-lifetime’ opportunity can make people transfer funds in the hopes of instant returns.
Blackmail and extortion scams
Scammers send emails claiming to have a record of adult websites visited by the user and threaten to make it public unless they share private keys or send cryptocurrency to the scammer.
Cloud mining scams
Cloud mining means companies that allow renting of mining hardware they operate for a fixed fee and a part of the revenue you will probably make. Theoretically, this allows people to mine remotely without having to buy expensive mining software. Unfortunately, however, many cloud mining companies are ineffective or scam where you end up losing money or earning less than was implied.
Fishy initial coin offerings (ICOs)
An ICO is how start-up crypto companies raise money from future users. Typically, customers are guaranteed a discount on the new crypto coins for sending active cryptocurrencies like bitcoin or another such cryptocurrency. Several ICOs turned out to be scams, with criminals going to great lengths to deceive investors, such as renting offices and creating high-end marketing materials.
How to make out cryptocurrency scams?
So, how can you identify a crypto scam?
“Guaranteed returns”: Financial investments cannot guarantee future returns since investments can falter both ways, up and down. Crypto offerings that guarantee you will definitely make money are a red flag.
Poor or nonexistent whitepaper: Every crypto has to have a whitepaper; it is a critical aspect of an initial coin offering. The whitepaper should explain the design of the cryptocurrency and its workings. If the white paper seems gibberish or is nonexistent, tread carefully.
Over-the-top marketing: Businesses promote themselves, yes, but one way that crypto fraudsters attract people is by putting hefty amounts of money into marketing, online advertising, paid influencers, offline promotion, and so on. The marketing of bitcoin scams is designed to reach as many people as possible in the shortest time to make fast money. If the marketing for crypto appears heavy-handed or makes exaggerated claims without backing them up, do not take things ahead without further research.
Team members with no names: It should be possible to determine the key people of investment businesses, meaning easy-to-find biographies of people running the investment and their social media presence. Be cautious if you are unable to find out the people behind the cryptocurrency.
Free money: If any investment opportunity is offering free money, be it in cash or cryptocurrency, it is likely fake.
Conclusion
Now, you can look for the red flags before investing in any ICO or crypto-asset to avoid bitcoin scams. Learning about how these different scams operate and approach traders can make it easier to identify scammers. Although avoiding scams isn’t an effortless process, one might have to consistently practice awareness, adopt precautions, and secure their finances. Since the digital world comes with its loopholes, it’s best to be prepared for the worst case scenarios.
