The increased popularity of cryptocurrency has also increased the opportunities for malicious people to exploit all of the loopholes in the crypto space and defraud unsuspecting people.
In 2020, cryptocurrency scammers stole more than $7.8 billion, and this figure more than doubled in 2021, when scammers stole more than $14 billion in cryptocurrency in the previous year. Every day, new types of crypto scams emerge, and if you are not cautious, you may fall victim to them.
Types of Cryptocurrency investment scams
To deceive unsuspecting victims, scammers will sometimes create fake cryptocurrency trading platforms or fake versions of official crypto wallets. These fake websites usually have domain names that are similar but slightly different from the sites they are attempting to imitate. They appear very similar to legitimate sites, making differentiation difficult.
Phishing scams have been around for a while but are still prevalent. Scammers send emails containing malicious links to a fake website to obtain personal information, such as cryptocurrency wallet key information.
In contrast to passwords, users only receive one unique private key to digital wallets. However, if a private key is stolen, changing it is difficult. Because each key is unique to a wallet, updating this key necessitates the creation of a new wallet.
Pump and dump schemes:
This involves fraudsters hyping a specific coin or token via email blasts or social media platforms such as Twitter, Facebook, or Telegram. Traders rush to buy the coins in order not to miss out, driving up the price. After successfully inflating the price, the scammers sell their holdings, causing a crash as the asset’s value falls precipitously. This can happen in minutes.
Fake celebrity endorsements:
Celebrities have recently become involved in cryptocurrency and blockchain, but which are genuine and which are not? Numerous fraudulent websites promote giveaways and false recommendations for unknown tokens or Bitcoin itself.
Because of his enthusiasm for the crypto space and his constant tweeting, Elon Musk is a popular target for crypto scammers. There have been numerous reports of investors losing money due to “Elon Musk Bitcoin Giveaways” without checking the website or conducting any research.
Fraudulent initial coin offerings (ICOs):
An initial coin offering, or ICO, is a method for new cryptocurrency companies to raise funds from future users. Customers are typically promised a discount on the new cryptocurrency in exchange for sending active cryptocurrencies such as bitcoin or another popular cryptocurrency.
Several ICOs have proven to be fraudulent, with criminals going to great lengths to deceive investors, including renting fake offices and creating high-end marketing materials.
How to spot cryptocurrency scams?
Promises of guaranteed returns:
No financial investment can guarantee future returns because investments can go down as well as up. Any crypto offering that guarantees profit is a red flag.
Unnamed team members:
Most investment firms should be able to identify the key individuals behind them. This typically entails easily accessible biographies of the people in charge of the investment, as well as an active social media presence. If you can’t figure out who is running a cryptocurrency, be wary.
Every business promotes itself. Crypto fraudsters, on the other hand, attract people by investing heavily in marketing – online advertising, paid influencers, offline promotion, and so on.
It is intended to reach as many people as possible in the shortest amount of time – to raise money quickly. If the marketing for a crypto offering appears heavy-handed or makes extravagant claims without supporting evidence, pause and conduct additional research.
A poor or non-existent whitepaper:
Every cryptocurrency should have a whitepaper because it is one of the most important aspects of an ICO. The whitepaper should explain how the cryptocurrency was created and how it will function. If the whitepaper doesn’t make sense – or worse, doesn’t exist – proceed with caution.
We all enjoy getting something for free. And it is for this reason that free money and giveaways are one of the more successful methods of theft in cryptocurrency scams. Any investment opportunity that promises free money, whether in cash or cryptocurrency, is most likely a scam.
How to protect yourself from cryptocurrency scams?
Many cryptocurrency scams are sophisticated and convincing. Here are some precautions you can take to safeguard yourself:
Protect your wallet:
A wallet containing private keys is required to invest in cryptocurrency. If a company asks you to share your keys to participate in an investment opportunity, it’s most likely a scam. Keep your wallet keys to yourself.
Keep an eye on your wallet app:
Send only a small amount the first time you transfer money to confirm the legitimacy of a crypto wallet app. If you notice suspicious behaviour while updating your wallet app, stop the update and uninstall the app.
Do your thorough research:
The most well-known cryptocurrencies are not fraudulent. But if you’ve never heard of a cryptocurrency, look into it. See if there’s a whitepaper you can read, learn who runs it and how it works, and look for genuine reviews and testimonials. To avoid scams, look for an up-to-date and credible fake cryptocurrency list.
Download apps from official platforms:
Companies that promise guaranteed returns or the ability to make you rich overnight are most likely scams. If something appears to be too good to be true, proceed with caution.
While adopting cryptocurrency has become important in today’s digital world, protecting your company from cryptocurrency scams is just as important for protecting your brand reputation. Some of the red flags mentioned above can assist you in protecting your business online and avoiding crypto scams entirely.
Carret’s secure cryptocurrency investment platform includes industry-leading security features to protect your investments and personal information. To ensure the security of our users’ assets and deposits, we have partnered with Fireblocks, one of the world’s leading cryptocurrency custodians.
Carret regularly audits its partners’ protocols and creditworthiness to ensure the safety of funds. We also use multi-signature authentication and DDoS protection to ensure asset security.
Download our app and start the safest and most secure crypto journey with Carret.