There is no doubt that the cryptocurrency industry has evolved substantially since the introduction of Bitcoin in 2009. However, there are still risks involved in these transactions and they are not just related to volatility in the market. Due to lack of regulation and because of decentralization, the crypto market has become rampant with scams and frauds. Even though the underlying structure of the virtual currencies remains secure due to blockchain, hackers have come up with sophisticated techniques to scam crypto users. However, it is possible for users to avoid becoming victims of crypto scams if they take some precautionary measures.
Outlined below are some common cryptocurrency scams and the tips you can take for avoiding them:
- Phishing scams
One of the most common scams online are phishing scams and they have also become widespread in the crypto industry. Put simply, scammers impersonate a wallet service or crypto exchange and trick people into giving their sensitive information like passwords. In this cryptocurrency scam, the attacker is fishing for your private data through sources, such as fake websites, telephone, email or social media platforms. You will receive messages or emails asking you to click on the link, which takes you to an external website where you will be asked to fill in your private information. As it is a duplicated link, the attacker is able to get their hands on your credentials and can access your cryptocurrencies easily.
To avoid phishing scams, you should check the interface, URL and logo of the website for any ‘red flags’. It is also a good idea to use anti-phishing software for blocking malicious and suspicious websites. Bear in mind that platforms will always get in touch with you through official channels and if they are offering a deal that’s too good to be true, it probably is. Lastly, never give your credentials, such as passwords, API key or seed works to any entity that claims to be associated with your exchange.
- Ponzi schemes
This kind of cryptocurrency scam has also become rampant and is one where people are generally promised a solid return on their investments. A Ponzi scheme doesn’t have any underlying structure of product. Rather, it is just a scam for extracting money from investors by promising them a ‘get rich scheme’ or offering them abnormally high returns. Such schemes use funds from new investors to pay old ones and so it continues, until the scammer runs off. Numerous ICO scams in the crypto industry were essentially Ponzi schemes.
In order to avoid this cryptocurrency scam, you should not place your trust on websites that are promising instant and enormous returns. The same applies to websites that have ‘get rich fast’ schemes in place. It is also best to avoid sending cryptocurrency to a random address. If an ICO is promising 3 times more returns by sending crypto to a ‘special address’, there is a good chance it is a Ponzi scheme. Before you invest in any ICO, it is best to go over different details like the project itself, the founders, its whitepaper etc.
- Social media cryptocurrency scams
Using social media channels for carrying out a cryptocurrency scam has become quite common. Some of these scams are organized as giveaways on different social media networks. For instance, influencers will promise to give 5 times more for sending a small amount of crypto on their address. These messages have become common on Instagram and Twitter and they are nothing but scams for stealing cryptocurrencies. In fact, social media platforms are also being used for delivering malware files to users, which can reveal your confidential data.
If you want to avoid a cryptocurrency scam on social media, you should always verify that any offer being made is from an official channel/page. Never put your trust in accounts that offer you double or triple amount of what you are investing by sending some crypto. You should always steer clear of any giveaway or promotion that sounds too good to be true. Never reveal your private credentials, passwords or any other such data to anyone under any circumstances. Bear in mind that official channels will never ask a user to share such information.
- Fake mobile apps, wallets and crypto exchanges
Fake wallet apps are designed to mimic the interface of the wallet, but are actually malicious apps that have been developed primarily for scamming users. These apps usually give a bonus incentive or promotional offer for luring users into depositing their crypto to a specific wallet address. Once you have complied, there will be no way for you to get your funds back. These fake apps can also gain access to your sensitive and private data once you download them on your phones.
As far as fake crypto exchanges are concerned, they lure traders to their platforms by charging low transaction fees. They also make it immensely difficult for their users to withdraw their crypto funds, once they have been deposited with the exchange. In some situations, these exchanges earn commissions by adding fraudulent ICO tokens to their platform.
In order to avoid this particular cryptocurrency scam, you should always check for any red flags, such as bonus incentives or promotional offers. If you are downloading an app from the app store, you should first check its credentials. Always download the app from the official website of the wallet or crypto exchange. Lastly, always consider external sources for testimonials before you choose a crypto exchange or platform.
Doing your due diligence before investing in the crypto market is always recommended. If you do become a victim of a cryptocurrency scam, you don’t have to lose hope completely because there are some services that can help you out. These include modern recovery services like Money-back, which can help you in figuring out how to get your funds back. You can get in touch with them, share your details and they will take the appropriate steps to help you in making up for the loss you have suffered.