As the price of crypto currencies increases, so too do the number of digital currency scams grow. The phenomenon of fraudulent crypto schemes can take on a variety of forms. It is thus important to protect yourself. What sounds too good often comes with a catch.
According to Federal Trade Commission (FTC) data, Americans have lost more than 80 million USD to crypto scams since October 2020 – a 1,000% increase from fall 2019. People between the ages of 20 and 39 were hit particularly hard, accounting for about 44% of reported losses. The latest FTC data showed about 7,000 reports of crypto scams, with an average loss of 1,900 USD. An overview of the most common types of scams in the crypto world.
Crypto scam 1: “Giveaways” from celebrities
Often, it is profitable prospects in ads, or posts with insider tips from celebrities that lead to fake investment sites via social media. A similar form involves the promise that a celebrity – often associated with the crypto industry – will return multiples of what someone sends them. The scam may seem obvious at first glance. However, users actually reported losing over $2 million to Elon Musk impersonators since fall 2020 alone.
Sometimes, world-famous livestreams are copied while they are still running and enriched with their own content. Thus, the visitors of this hijacked stream are made to believe that they are in the official broadcast. The channel operators are trying to use the global attention to spread their fraudulent methods. In the past, the real Twitter accounts of Barack Obama, Elon Musk, and other celebrities have already been hacked for this kind of scam. As a rule of thumb, funds should never be sent to “well-intentioned” celebrities.
Crypto scam 2: Phishing for credentials
Since many people navigate the Internet via Google search results, scammers try to mislead users with similar sounding or looking domain names. Even a capital “i” often displays the same as a lowercase “L” on a smartphone or computer screen. These methods are often used in social media profiles and should be reported when encountered on the platform. Here, well-known portals or exchanges are often replicated, where users gullibly enter their data.
These include credentials from established exchanges on the one hand and “seed phrases” on the other. For crypto exchanges, two-factor authentication (2FA) provides additional protection, and is therefore generally recommended. Bookmarks are also useful to avoid succumbing to a typo and misleadingly landing on a malicious copy. The 12-24 “seed words”, on the other hand, should not be entered on a website under any circumstance, as they provide full control over a wallet.
Crypto scam 3: Fake apps and extensions
With the proliferation of cryptocurrencies, many fake wallets have been released on Google and Apple app stores. Therefore, it is not recommended to install just any wallet. There is a chance that it is a fraudulent app and the cryptocurrencies will end up being lost. So, before installing a new crypto wallet, users should inform themselves thoroughly.
However, caution should also be taken with other apps on the device which have access to cryptocurrencies. Malicious third-party apps can influence the device, and possibly change the copied wallet addresses. Before sending a transaction, the recipient address should always be checked. Smartphone wallets are considered “hot wallets” in this regard and should not have too many assets.
The situation is similar with browser extensions. In many cases, they are useful programs that allow a convenient way to customize the web browser. Others, however, are harmful and can compromise the computer’s security. One of the most common targets? Personal data, keys and wallets. The most popular marketplace for extensions – Google Chrome Web Store – does not check extensions before they are released. This makes it extremely easy to publish malicious browser extensions.
Crypto scam 4: Ponzi schemes and “pump and dump” groups
These forms of scams are the easiest to spot and are not limited to the crypto markets. Projects that actively promise additional profits for recruiting new investors are in many cases a Ponzi scheme. Early entrants are lured with the investments of recruited users – usually only the founding team wins. Systems that promise absurd returns can also fall into this category. What sounds too good to be true often times has a catch.
“Pump & dump” groups on Telegram, Facebook and other social media are also nothing new. In some cases, crypto groups with over 100,000 members can be found. These groups are the tools with the help of which prices of cryptocurrencies with low market capitalization are manipulated. In almost all cases, only the founders benefit, who know the token in advance and can then sell it to the group members.
Crypto scam 5: “Support” making contact via social channels
Last but not least, the “nice” requests from supposed support staff need to be addressed. A question posed by a crypto user in product or service-related channels on social media such as Reddit, Telegram or Twitter is often picked up by “people willing to help”. These users contact the questioner directly and pretend to be employees of the corresponding application. The only goal here is to obtain the digital assets of the person asking the question. If you are contacted directly by “support staff” when you present a problem in social channels, you should be extremely careful. No-goes are, of course, the disclosure of private keys or seed phrases.