These days cryptocurrency has become a significant source of investment for the American population. And like any industry in the market, the crypto industry is also not new to scams. But with its phenomenal rise in adding one new investor every few days, the number of scams is also bound to increase in the same short period.
How safe is cryptocurrency?
Cryptocurrency is all about dealing and investing in the market only if you have good trading knowledge and are vigilant enough to identify a scam when it’s right in front of you. You could be duped if you don’t.
Scams involving cryptocurrencies and how to prevent them
There are various methods a scammer dupes you of your crypto and money. While some techniques are unique and new, others are just modified versions of the old ones. So regardless of who you are, it is imperative to always look for cryptocurrency scams. And if you have even the slightest doubt on the broker, look him up on the RED list of the Commodity Futures Trading Commission’s (CFTC) website.
Following are the various types of cryptocurrency scams that are prevalent across the world and how to avoid each one of them:
- Giveaway scam
Who doesn’t love gifts and giveaways? It’s essential human nature. Unfortunately, scammers frequently take advantage of this aspect of human nature. The giveaway scam is the most popular crypto scam. This scam takes place through social media and, more importantly, Twitter and Facebook. In this scam, the scammers pose as celebrities or as well-known crypto investors who intend on giving away an offering of cryptocurrency. They ask the people to send a certain amount of crypto money, and they will get back double the amount of money and crypto sent. After receiving a certain amount, the scammers disappear.
Avoiding tip: Never believe in any such fake cryptocurrency scams. These scams fall under the “too good to be true” notion. If you come across such a scheme, just ignore it. If you fall for this scam, note that few firms out there that will help you recover your money. These firms have specialists who will gather all the information you provide to them, and when they get everything they need, they will catch hold of the scammer and get cryptocurrency scam money back.
- Phishing scam
Phishing scam falls under the modified version of the prevalent old fraud. Where the old phishing scam involves gaining access to banking credentials, this new crypto phishing scam consists in gaining admission to private crypto keys and crypto-wallets. The crypto scam can take on many forms, such as receiving a phone call seemingly out of nowhere from a fraudster impersonating a bank representative asking for credentials or receiving an email from someone claiming to be able to help you manage your crypto in exchange for your credentials.
Avoiding tip: Always bookmark the sites you use for trading cryptocurrency to avoid getting scammed.
- Investment scam
The fraudsters set up fake websites for crypto investments in the investment scam. Sometimes they pose as “investment managers” offering to help new investors. Investment scams are of two types – Exit scam and Rug Pull.
Exit scam: The exit scam is when a company raises money with the Initial Coin Offering (ICO). And when they have gained a substantial amount, they flee without even creating the product.
Rug Pull: A new coin is generated and exchanged with a rug pull, usually heavily marketed online. Once people convert their cryptocurrency to the new token, the coin’s creators abandon the project, leaving investors with worthless tokens.
Avoiding tip: Avoid unprompted offers asking for the broker’s verification or the person selling the coin.
- Blackmail scam
This scam involves a fraudster calling you up and informing you that he has access to some of your embarrassing details and can post them up on a social media site or send it to the people on your contact list for them to watch. Or sometimes they may not even have any information on you yet use it against you to make you squirm and give your crypto details to them.
Avoiding tip: Report this immediately to the FBI.
- Fake job offers
Sometimes scammers do not persuade you into sending them crypto; instead, they offer you a job that handles all the crypto exchanges. These people post fake job offers on employment websites and either ask you to pay registration fees first in crypto or offer you a job that involves converting cash to bitcoin for their sakes.
Avoiding tip: Employers never ask you to pay any fees for registration; that too in cryptocurrency, never! So do not trust such job offers. And always verify the company before agreeing to their terms.
Regardless of the various tactics used by criminals, the primary goal of these fraud games is to:
- Raise the value of a specific token to eventually sell a big chunk of the holdings to unsuspecting investors.
- Encourage individuals to submit their tokens to a specific wallet for a bigger reward.
- To withdraw all of the funds from a wallet, gain access to it.
As the crypto economy develops, fraudsters’ strategies will undoubtedly vary, but their ultimate goal will stay the same: to defraud investors of their hard-earned funds.