Be on the Lookout for These 9 Crypto Scams
You aren’t the only one who’s interested in cryptocurrency. Despite the volatile and uncertain nature of the crypto market, it is still the best and most popular alternative investment outlet available.
But remember: if you’re paying attention, then so are fraudsters.
According to Chainalysis, cybercriminals stole $14 billion from users in 2021 via several clever crypto investment scams. Now more than ever, it’s essential to know what you might be in for once you switch to crypto.
If you’re invested in cryptocurrency or just interested in getting started, it’s time to take a look at what you might be up against… and plan accordingly.
The Top 9 Cryptocurrency Scams
Unfortunately, there are dozens of cryptocurrency scams out there. With crypto’s recent emergence as a serious contender to the traditional investment market, it was only a matter of time before fraudsters worked out ways to capitalize on your investments.
That said, some crypto scams are more infamous than others. Here are the top 9 inflicting the market today:
#1 Phishing Scams
Aside from crypto, phishing is one of the leading online cyber scams. According to Tessian Research, phishing attacks account for around 90% of data breaches, with each employee in every industry receiving an average of 14 malicious emails per year. The reason for this is simple… phishing works.
When it comes to crypto, most phishing attacks target information relating to a user’s mobile wallet. The scammer will send out a bevy of official-looking messages to recipients to lure them to a false version of a site. Once the user fills in their personal information, the scammer will steal everything the user has in their wallet.
#2 False Websites
Some fraudsters go the extra mile to create convincing web pages and applications to trick users into clicking on and engaging with their fraudulent content. Fake websites, for example, are designed to look just like the site they’re pretending to operate. The sites will usually have many of the same graphics and fundamental navigation, minus one or two key details that are easily overlooked or harder to see on a mobile OS.
These fake websites work in a couple of ways:
- Phishing for login credentials: As mentioned above, the scammer will redirect you to the fake site to trick you into entering your login details to steal from your mobile wallet.
- Phishing for long-term payout: The site might operate as a genuine wallet by allowing the user to make small deposits and investments. Once the user attempts to make a withdrawal, however, the site will either shut down or decline the request.
#3 Fake Applications
Like Phishing scams, fake apps are another common trick that has been retrofitted to suit cryptocurrency users. This scam works much like the phony website scams in that the scammer will go out of their way to create a believable replica of an actual application, which would then be available for download from the mobile app store.
These fake apps are discovered and shut down almost daily. However, they can almost always ensnare their fair share of unsuspecting users before that happens.
#4 Fraudulent Initial Coin Offerings (ICOs)
Blockchain companies and startups typically use an initial coin offering (ICO) to attract new users. The legitimate company might offer inbound customers a discount on newer coins in exchange for higher-value coins like Bitcoin and Ethereum.
Many ICOs have turned out to be fraudulent. Indeed, many scammers dug into this method by going so far as to rent offices and spend thousands on fraudulent marketing materials. The end goal is to trick users into trading valuable coins like Bitcoin for worthless junk coins.
#5 Giveaway Scams
This is a classic scam. A fraudster tells the user “I’ll give you something unique for free if you send me a small amount of money up front.” Like those listed above, this one has been trotted out of storage to attack the next generation of investors.
Most of us would think twice about any “deal” that prompts us to spend money upfront to receive a potential payout later. But, then again, this scam is on this list because it still works…and it works often.
#6 Pump & Dump Scams
A “pump and dump” scam uses fraudulent social media hype and marketing email blasts to encourage users to rush out and buy or sell their coins to drive up prices.
Once the price is above the level the fraudster hoped to achieve, the scammer will sell all of their holdings in minutes. This will invariably result in an immediate crash in the coin’s value. The hapless buyers “pumped” the price, and the scammer “dumped” their stock of coins at a massive profit.
#7 Fake Endorsements
Don’t you just love celebrities trying to sell you stuff you don’t need? Well, according to fake endorsement scams, a lot of us do. The FTC now imposes fines of up to $45,000 when a scammer is caught flubbing their numbers via false reviews and fake celebrity endorsements.
Users should always be wary of any advertising or reviews that sound too good to be true. A good rule of thumb here is to navigate directly to the company’s main website without any emailed or SMS-related links and browse their current promotions. If the one in question is not immediately visible, or the business itself does not exist… don’t click any of their links.
#8 Cloud Mining Scams
This one is tricky. Cloud miners rent crypto hardware to users in exchange for fixed fees and revenue shares. The selling point scammers promote here is that users can mine coins remotely without purchasing the more expensive mining hardware.
There are a few companies out there that offer this service legitimately. But, in the long run, users who employ this method may end up losing their investment when the process proves ineffective or the hardware proves faulty or ill-equipped to deliver on its promise.
#9 Extortion Scams
A last method crypto users should be aware of is simple blackmail.
In this scam, the fraudsters will reach out to a user via email with the claim that they bear proof of the user’s illicit or risque browsing history. The scammer will threaten to expose the user’s behavior unless the user shares their private keys with the scammer.
In almost all cases, the extortionist is lying. However, they’re counting on the occasional user who might be willing to pay to keep their secrets.
Is That All?
Frankly, no. Not even close.
There are currently so many scams circulating online that we don’t even have names for them yet, and more are added or amended daily. In order to protect oneself from cyber and crypto attacks, users should NEVER give out their private login information, follow questionable links, or invest in companies that don’t bear overwhelming evidence of their legitimacy and efficacy.