Cryptocurrency refers to a form of digital currency that primarily exists in electronic format. Cryptocurrency can be typically purchased via your phone, computer, or cryptocurrency ATM. Bitcoin and Ether are popular among the various cryptocurrencies, and new ones are constantly being developed.
How do people use cryptocurrency?
Cryptocurrencies serve various purposes for individuals, including swift transactions, evasion of conventional banking transaction fees, and the allure of enhanced privacy and anonymity. While some others keep cryptocurrency as an investment, expecting the value rises.
Warning signs of cryptocurrency scams
Listed below are some common red flags of cryptocurrency scams:
● claims of huge profits or two times the investment;
● accepting only cryptocurrency as a payment option;
● contractual responsibilities;
● misspellings and grammatical mistakes in emails, social media posts or any other interaction;
● using extortion or blackmail as a form of manipulation;
● claims of free money;
● fake influencers or celebrity advertisements that appear out of place;
● brief information about money movement and the investment; and
● multiple transactions in one day.
Safeguard your digital wallets from scammers by engaging in digital security habits like creating strong passwords, using only safe connections or VPNs and choosing protected storage. Digital and hardware are two forms of wallets. Digital wallets are stored online and thus more likely to be hacked. Hardware wallets hold information offline within a device, such as the bitcoin wallet and keys.
Because cryptocurrency is not guaranteed by the Federal Deposit Insurance Corporation, it must be kept secure. Never give someone your wallet keys or access codes.
Common Cryptocurrency Scams
Although cryptocurrency is a recent craze, thieves are employing traditional methods to steal it. We have compiled a list common cryptocurrency scams to be wary of:
1. Bitcoin investment schemes
In bitcoin investment schemes, fraudsters reach investors, pretending to be skilled "investment managers." As part of the scheme, the alleged investment managers say they have made millions investing in cryptocurrency and guarantee that they will make a profit by investing.
To begin, the scammers ask for an upfront fee. Then, instead of making money, the thieves merely pillage the initial fees. Scammers can also demand personal information under the pretext of paying or depositing money in order to gain access to a person's cryptocurrency.
2. Scams involving rug pulls
Rug pull scams include investing con artists "pumping up" a novel idea, non-fungible token (NFT), or currency in order to obtain money. Scammers’vanish with the stolen money. The code for these investments stops consumers from selling bitcoin after they acquire it, leaving them with a worthless investment.
With non-traditional assets (NFTs), rug pull scams are also common.
3. Romance scams
Crypto frauds are not uncommon on dating apps. These scams feature long-distance or entirely online relationships in which one party takes time to build the confidence of the other. Over time, one side begins to persuade the other to buy or give money in cryptocurrency.
The dating scammer vanishes after receiving the money. They are often referred to as "pig butchering scams."
4. Phishing scams
Phishing scams have existed for a while but are still popular. Personal details, such as cryptocurrency wallet key information can be collected by emails containing malware links to a bogus website by the scammer.
In contrast to passwords, consumers only receive one unique private key to digital wallets. However, if a private key is taken, changing it is difficult. Because each key is peculiar to a wallet, updating this key requires the development of a new wallet.
5. Social media cryptocurrency giveaway scams
There are many phony posts on social media platforms promising bitcoin giveaways. Some of these scams also entail fake celebrity accounts promoting the giveaway to entice people.
However, if a person enters the giveaway, they are directed to a fake website that requests verification in order to receive the bitcoin. The verification process also involves making a payment to confirm that the account is real.
If the victim clicks on a malicious link, they risk losing this payment and/or having their personal information and cryptocurrency stolen.
6. Ponzi schemes
Ponzi schemes reimburse older investors with the earnings of new ones. To get novice investors, cryptocurrency scammers will draw in fresh investors with bitcoin. It is a scheme that goes in circles, as there are no real investments; it is all about victimizing new investors for money.
The primary attraction of a Ponzi scheme is the guarantee of enormous profits at low risk. There are always risks associated with these investments, but there are no assurances of returns.
7. Fake cryptocurrency exchanges
Scammers may entice investors with claims of a massive cryptocurrency exchange perhaps with some extra bitcoins. However, there is no exchange, and the investor does not realize it is a scam until they have lost their deposit.
Cryptocurrency utilizes blockchain for confirmation and does not run via financial institutions, so it is much difficult to recuperate after theft. Unknown exchange can be prevented by using known crypto exchange markets -- like Coinbase, Crypto.com and Cash App. Before entering any personal information, conduct some research and visit industry websites to learn more about the exchange's reputation and legitimacy.
How to stay safe from this scam
● Recognize the risk. The exchange of virtual currencies is risky and speculative. The FTC stated that "An investment that may be worth thousands of dollars on Tuesday could only be worth hundreds on Wednesday."
● Don't give in to pressure to buy now. Scammers typically attempt to create a bogus urgency around a purportedly hot cryptocurrency.
● Research any dealer in virtual currency options or futures contracts before purchase. An online background check tool is available from the Commodity Futures Trading Commission (CFTC) of the United States.
●Conduct a careful investigation of any virtual currency platform or digital wallet provider before giving away any credit card details, transferring money or revealing any personal data.
● Carefully go through any agreement with a digital wallet provider. The Consumer Financial Protection Bureau cautions that, unlike banks and credit card firms, they might not take responsibility for replacing your money if it is stolen.
●Don’t put money into or trade virtual currencies on the word of someone you’ve only spoken with online, whether it’s an unidentified tipper on social media or likely a romantic partner. Additionally, under no circumstances send cryptocurrency payments in response to threats of legal action or promises of a prize.
●Don’t invest in an individual retirement account endorsed as “IRS-approved” or “IRA-approved.” Some self-directed IRAs do allow spending on virtual currencies, but the Internal Revenue Service does not allow or examine IRA investments.
● Don’t provide your “private keys” — the long letter-and-number codes that let you access your virtual currency — with anyone. Keep them in a secure place.
