Cryptocurrency investments and cryptocurrency scams are currently one of the trendiest subjects in the investing world. Investors purchase digital currencies such as Bitcoin, Ethereum, and Dogecoin using cryptocurrencies in the hopes of subsequently selling them for a profit.
Cryptocurrency, sometimes known as “crypto,” is a legal but dangerous investment option. Because it is a precarious bubble, you may make or lose a lot of money quickly.
Hackers employ various methods to obtain your money, including stealing your cryptocurrency accounts and generating counterfeit currencies. And, as crypto becomes more popular, so do crypto frauds. Between October 2020 and May 2021, Americans lost more than $80 million to crypto trading fraudulent activities, according to the Federal Trade Commission (FTC). Here is a list of the four most prevalent forms of fraud in the cryptocurrency industry.
4 Cryptocurrency Scams
1. Theft by Hacking
Hackers have frequently discovered ways to access different aspects of the cryptocurrency system, including exchanges, mining firms that produce currencies, and digital wallets where users keep them.
Among the most famous crypto hacks to date are:
The 2016 DAO breach, in which a venture capital firm using the Ethereum network lost 3.6 million ether worth around $70 million.
The 2017 NiceHash breach, in which hackers gained access to a Slovenian Bitcoin mining company’s payment system and stole $64 million.
The Coincheck heist occurred in 2018, in which hackers stole over $500 million in digital tokens from a Tokyo-based cryptocurrency exchange.
2. Giveaway Scams
The freebie scam is another common form. Fraudsters disguise themselves as celebrities or well-known bitcoin investors and promise to assist small investors. They claim that if you send them your cryptocurrency, they will match it with some of their own to enable you to quadruple your investment.
In actuality, all money sent to them goes directly into the scammer’s coffers. According to the FTC, scammers posing as Elon Musk defrauded investors out of more than $2 million in cryptocurrency in six months.
3. Fake Cryptocurrency Investments
In cryptocurrency trading scams, criminals put up bogus websites to invest in or mine bitcoin. They use several techniques to lure people to these sites.
They will sometimes masquerade as investors providing investment advice on the internet. In other situations, they send unsolicited emails from so-called “investment managers” claiming to assist victims in developing their cryptocurrency assets.
They may provide various investment tiers, with higher rewards for more significant investments. Convinced they’ve discovered a wonderful thing, the victims deposit actual money in either dollars or cryptocurrency. The fraud proceeds in the same manner regardless of how it begins. The investing sites offer big profits and utilize false testimonials to appear legitimate.
Installing malware (harmful software) on your computer is the most advanced form of trickery for hackers to burrow their entrance into your accounts. Many forms of malware are mainly designed to extract cryptocurrency. These applications can hijack your crypto account login credentials, steal your whole crypto wallet, or get access to your account while you’re in the process of a transaction. WeSteal is one of the most recent crypto-stealing malware applications.
According to Palo Alto Networks, it operates by examining your clipboard for sequences that match the IDs for Bitcoin or Ethereum wallets. Then it changes the wallet IDs with a new code that it provides. When you conduct a transaction, the money goes to this new, fake wallet instead of the real one.
How to spot a crypto scam
The warning signals of cryptocurrency fraud are the same as those of any other type of financial scam. These are some examples:
- Huge Returns are Promised- A fixed return on any investment, especially a large one, does not happen. With genuine investments, great profits come at the expense of significant risk.
- Free money offers- Anyone who promises you money for nothing, whether in cash or cryptocurrency, is almost always a fraud.
- lack of detail- Scams involving cryptocurrency investments frequently skirt over the specifics of how the investment works. In contrast, legitimate financial consultants are typically eager to demonstrate how they may earn money for you.
As interest in cryptocurrency rises, so will interest in cryptocurrency scams. As a result, there will very certainly be newer frauds in addition to the points listed here.