Ever since the launch of the first cryptocurrency, the entire industry has been embroiled in controversy. There is no denying that crypto has fueled hundreds of rags-to-riches stories, but there is also an equal number of stories about cryptocurrency fraud and how it has enabled scammers to make millions from unsuspecting investors and buyers. The profit potential of the market always draws people in, but if you truly want to real its benefits, you have to know how cryptocurrency fraud happens and how you can avoid it. If you are unable to do that, you will end up losing your hard-earned money.
Let’s take a look at how cryptocurrency frauds happen and how they can be avoided:
- Fake crypto investment platforms
One of the easiest ways for scammers to commit cryptocurrency fraud is through fake websites or mobile apps due to which a large number of them can be found. As they resemble authentic crypto websites or apps, a lot of people don’t look too closely and fall into their trap. However, there are ways for people to identify such websites, which include checking the URL of a website to ensure it has ‘https’ in the site address and there is a lock icon next to it. Similarly, you should ensure there are no changes in the URL at all.
As far as mobile apps are concerned, scammers make fake apps that have similar names and user interface as the authentic ones. Before entering your log-in credentials on any platform, you should ensure whether the app or website is secure or not.
- Giveaway scams through social media networks
Misleading tweets on Twitter, posts on Facebook or giveaways on Instagram can also be used to commit cryptocurrency fraud. If you come across a social media post that offers a cryptocurrency deal, which seems too good to be true, the chances are that it is fake. Even influencers will advertise giveaway schemes, asking you to send a little crypto to the address provided and they will send you five times more. This is just another elaborate fraud.
- Scamming emails, technical support, phishing and impersonation scams
These are some of the most common ways to commit cryptocurrency fraud and most people have come across it at least once. Everyone gets a lot of spam emails or calls that are impersonating an officer from your bank. Their aim is to fish out your sensitive information, such as login credentials. As far as cryptocurrency is concerned, scammers pretend to be from your legitimate crypto wallet or platform and have identical branding and logos. They usually comprise of malicious files or links, so you should always avoid clicking on a link inside such messages or emails.
In fact, some cryptocurrency frauds go as far as announcing fake initial coin offerings, or ICOs, for stealing funds. You should never fall for these fake website offers and should take some time to go over the details. It is also recommended that you never share your passwords or security codes and make use of 2-FA (two-factor authentication). Ignore outbound calls asking for your confidential personal information because it is possible for scammers to poof legitimate phone numbers. Never give remote access to your device to anyone.
- Investment frauds
Another common cryptocurrency fraud involves scammers setting up seemingly legitimate platforms, which claim to offer mostly unrealistic and high returns in exchange for sending cryptocurrencies. In such situations, you should be skeptical because the returns are mostly unrealistic. You should always send cryptocurrencies to trusted and known third parties only. If you have gotten in touch with someone new, you should research the exchange or organization thoroughly before trusting them with anything.
- Initial Coin Offerings (ICOs)
Similar to how IPOs work in the stock market, ICOs, or initial coin offerings, are essentially fundraising mechanisms that are used for newly launched cryptocurrencies. Those who invest in ICOs are given tokens in the new venture. Billions of dollars are poured into ICOs on a yearly basis, but not all ICOs are legitimate. Some scammers have used them to commit cryptocurrency fraud and investors later discover that these ICOs don’t have any technology or real business plan behind them. Therefore, you need to be extremely cautious before investing in ICOs, regardless of how great promises they make.
- Unregulated exchanges and brokers
There are hundreds of unregulated online brokerage firms and exchanges that offer cryptocurrencies and other crypto trading products. But, these are also a way of committing cryptocurrency fraud, so it is essential for people to be wary of too-good-to-be-true promotions and promises of get-rich quick schemes because this could be just another cryptocurrency fraud. Once you have invested money in such firms, they will charge you outrageous commissions and can also make it immensely difficult for people to withdraw funds. In the worst-case scenario, these unregulated brokers and exchanges will steal your money.
- Mining frauds
It is possible for any regular investor to mine cryptocurrencies through cloud mining, which can work without expensive hardware. There are a number of cloud mining services that allow users to rent server space at a fixed cost for mining altcoins. This can come off as a very lucrative option for mining altcoins while sitting at home and not having to invest in hardware. However, you should bear in mind that not all of these services are genuine and you could end up becoming a victim of cryptocurrency fraud.
How can you identify the frauds? One way to go about it is to see if they are making any lofty promises. The fraud ones tend to make promises of high returns on your investment and don’t mention any hidden fee that might be applicable on the returns. Moreover, their systems have been designed smartly enough that they keep on sucking money from the unsuspecting investors.
You should always be vigilant when you are investing in the crypto industry in order to avoid becoming a victim of any kind of cryptocurrency fraud.