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The Ultimate Guide to Protecting Yourself Against Cryptocurrency Scams

Vrinda Mathur
Jul 11, 2024

Fake ICOs (initial coin offerings), Ponzi schemes, and phishing assaults are some of the most prominent types of cryptocurrency scams. These scams frequently promise huge returns or easy profits, but they are actually intended to steal people's money or personal information.

The anonymity and decentralization of cryptocurrencies have contributed to an increase in cryptocurrency frauds. While many people see this as one of the advantages of bitcoin, it also allows criminals to operate undetected. Furthermore, the absence of regulation in the cryptocurrency market provides minimal safety for investors, making it difficult to retrieve monies that have been stolen.

Brief about Cryptocurrency Scams

Cryptocurrency scams come in various kinds. Just like financial thieves may try to steal money from your bank account or place false charges on your credit card, crypto scammers will go to any length to get your cryptocurrency. To protect your crypto assets, you should understand when and how you are being targeted, as well as what you can do if you feel a cryptocurrency or any connected communications are a fraud.

The world of bitcoin is fast expanding, and cryptocurrency frauds are following closely behind. In fact, scammers stole $14 billion in bitcoin in 2021, and victims reported a 79% rise in losses from cryptocurrency crime, including scams and theft, compared to the previous year.

According to Michela Menting, digital security research director at global technology intelligence firm ABI Research, there are two forms of cryptocurrency scams: standard scams that need payment in cryptocurrency, and crypto-specific fraudulent investments or ventures.

Bitcoin scams are similar, but instead of seeking dollars or another fiat currency by bank transfer, gift card, or money order, the fraudster requests bitcoin. The victim faces a high risk because cryptocurrency transactions lack legal protection or a dispute procedure, and they are typically irreversible.

Traditional scams that use cryptocurrency payments are "fairly well-known and nothing new in cyberspace," Menting said. "Unlike with banks and the possibility of reverse charges, no third party can make the recipient return the money.

Criminals approach targets on dating apps or social media, just like in a classic romance scam, but after building a relationship, they claim to help victims get into cryptocurrency trading and eventually steal their money.

Also Read | 7 Types of Cryptocurrency Scams

Most Common Cryptocurrency scams to be aware of

Crypto scammers adopt many of the same strategies used in conventional financial crimes, such as pump-and-dump scams, which mislead investors into purchasing an item by making false promises about its value, or direct attempts to steal digital assets. We've compiled a list of some of the most typical Bitcoin and other cryptocurrency scams that you should be aware of.

Get Rich Quickly

Scams, such as investment or 'Get Rich Quick' schemes, are not new to the cryptocurrency industry. However, with cryptocurrency, scammers use the anonymity of wallets and the irreversibility of transactions.

These scams can take a variety of forms. One of the most prevalent includes a fraudster contacting individuals in crypto forums via social media or instant messaging, claiming to represent a certain platform (for example, a crypto exchange, mining firm, or new coin initiative).

Fake exchanges and wallets.

Keep a look out for bogus Bitcoin exchanges, which operate similarly to phishing frauds. They may appear to be a legitimate exchange, but they are nothing more than a ruse to defraud customers of their hard-earned money.

Some will tempt users with promotions that appear too good to be true. Others encourage users to open an account and deposit funds, possibly even giving "bonuses" to those who deposit higher sums. However, once they have your money, these platforms may demand exorbitant fees, make withdrawals difficult, or even take your investment entirely.

Withdrawal scams

In these scams, the fraudster will claim they are unable to withdraw or remit funds and will beg the victim's aid in exchange for a portion of the funds. This scam might take a variety of forms. For instance, the scammer may request help with withdrawal of actual funds (USDC/USDT tokens, for example) in a wallet controlled by the scammer, who will even give the victim access to the wallet, claiming they are having difficulties withdrawing.

Old-school frauds

Cryptos may be built on new technology, but there are still plenty of scammers who use old techniques to defraud unsuspecting people. The typical example is receiving an unsolicited phone call or email from someone purporting to be from the Internal Revenue Service. This fictitious taxman will try to persuade you that you owe the IRS money and will face legal action if you don't send them a specified quantity of Bitcoin as soon as feasible.

The tried-and-true "Nigerian prince" fraud has spread to the realm of bitcoin. So if you're ever contacted out of the blue by someone overseas promising you a share in a large sum of digital currency if you help them transfer funds out of their own country.

Romance scams

Romance scams are another typical scam that has made its way into the cryptocurrency arena. In this fraud, a con artist starts a relationship with someone they met online. The scammer frequently professes love early on in the relationship. A telltale clue is when the fraudster refuses to accept video calls, citing reasons such as a weak Internet connection.

Once the scammer has strengthened their grip on the victim, they will use strategies to extract money, such as distancing themselves and, when questioned, claiming financial trouble or caring for a sick family member who requires care that they cannot afford. In other circumstances, they wish to meet with the victim but cannot afford the journey.

Also Read | All you should know about Cryptocurrency Phishing

Ways to Protect yourself from Crypto Scams

Be aware of investments that appear too wonderful to be true. Cryptocurrencies are still relatively new, and no one has any genuine skill with them—so if someone claims to have any, flee! We have listed some of the ways to protect yourself from these scams

Research before investing in cryptocurrencies

Before you invest in cryptocurrency, do your research.One negative experience with cryptocurrency scams might inflict long-term financial damage. Do not allow this to happen by doing nothing at all!

Be aware of social media ads

Crypto scammers frequently utilize social media to promote their fraudulent schemes. They may utilize unauthorized photographs of celebrities or high-profile entrepreneurs to create a sense of authenticity, or they may offer free gifts or cash. When you see cryptocurrency prospects touted on social media, maintain a healthy skepticism and conduct your own research.

Do not reply to unsolicited contact

"The best strategy is not to respond to anyone from your crypto brokerage—or any financial institution, for that matter," Cohn advises. "Look for the institution's official phone number and contact them independently."

Ignore urgent demands

If someone involved in a project is continuously pressuring you to send them money or take some other action immediately, it's a clue that they're attempting to defraud you. Legitimate projects will never put you under pressure to invest quickly or take any other action before allowing you time to research and make an informed decision.

Report any questionable conduct immediately.

If you suspect a crypto scam, report it to the appropriate authorities. Scams can be difficult to detect, but some common warning signs include promises of guaranteed or excessively high profits, pressure to invest quickly, and ambiguous or nonexistent investment dangers. If you are unsure whether something is a scam, proceed with care and report it if necessary.

Ignore cold calls

If someone reaches you out of the blue to sell you a cryptocurrency investment opportunity, it is most likely a fraud. Never disclose personal information or transfer money to someone who contacts you in this way.

Summing Up

It is critical to be aware of the signals that someone is attempting to defraud you. If this is the case, don't panic. Simply follow the measures outlined in this article to keep your cryptocurrency funds safe and avoid being a victim of crypto scam.

The easiest approach to avoid scams is to educate yourself and conduct your own research before making any investing decisions. This will help you to not only evaluate whether or not an offer seems good, but also to ensure that the company behind it has what it takes to deliver on its claims (or lack thereof).

Also Read | 2024 Fraud Alert: Top Scams to Watch Out For & Prevention Tips

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The Ultimate Guide to Protecting Yourself Against Cryptocurrency Scams

Brief about Cryptocurrency Scams

Most Common Cryptocurrency scams to be aware of

Get Rich Quickly

Fake exchanges and wallets.

Withdrawal scams

Old-school frauds

Romance scams

Ways to Protect yourself from Crypto Scams

Research before investing in cryptocurrencies

Be aware of social media ads

Do not reply to unsolicited contact

Ignore urgent demands

Report any questionable conduct immediately.

Ignore cold calls

Summing Up

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