Where money is concerned, scams always follow. And the same is true with cryptocurrency.
In February 2022, cryptocurrency exchange platform Wormhole lost $320 million after a cyber attack. In addition to this attack, cryptocurrency scammers have stolen more than $1 billion since 2021, according to a report by the Federal Trade Commission.
Digital currency is a form of currency stored in a digital wallet, and the owner can turn currency into cash by transferring it to a bank account. Cryptocurrency, such as bitcoin, is different from digital currency. It uses blockchain for verification and does not run through financial institutions, so it is harder to recover from theft.
Even though cryptocurrency is a newer trend, thieves are using old methods to steal. Here are some of the common cryptocurrency scams to watch out for.
1. Bitcoin investment schemes
In bitcoin investment schemes, scammers contact investors claiming to be seasoned "investment managers." As part of the scheme, the so-called investment managers claim to have made millions investing in cryptocurrency and promise their victims that they will make money with investments.
To get started, the scammers request an upfront fee. Then, instead of making money, the thieves simply steal the upfront fees. The scammers may also request personal identification information, claiming it's for transferring or depositing funds, and thus gain access to a person's cryptocurrency.
Another type of investment scam involves using fake celebrity endorsem*nts. Scammers take real photos and impose them on fake accounts, ads or articles to make it appear as though the celebrity is promoting a large financial gain from the investment. The sources for these claims appear to be legitimate, using reputable company names such as ABC or CBS with a professional-looking website and logos. However, the endorsem*nt is fake.
2. Rug pull scams
Rug pull scams involve investment scammers "pumping up" a new project, nonfungible token (NFT) or coin to get funding. After the scammers get the money, they disappear with it. The coding for these investments prevents people from selling the bitcoin after purchase, so investors are left with a valueless investment.
A popular version of this scam was the Squid coin scam, named after the popular Netflix series Squid Game. Investors had to play to earn cryptocurrency: People would buy tokens for online games and earn more later to exchange for other cryptocurrencies. The price of the Squid token went from being worth 1 cent to about $90 per token.
Eventually, trading stopped and the money disappeared. The token value then reached zero as people attempted but failed to sell their tokens. The scammers made about $3 million from these investors.
Rug pull scams are also common for NFTs, which are one-of-a-kind digital assets.
3. Romance scams
Dating apps are no stranger to crypto scams. These scams involve relationships -- typically long-distance and strictly online -- where one party takes time to gain the other party's trust. Over time, one party starts to convince the other to buy or give money in some form of cryptocurrency.
After getting the money, the dating scammer disappears. These scams are also referred to as "pig butchering scams."
Phishing scams have been around for some time but are still popular. Scammers send emails with malicious links to a fake website to gather personal details, such as cryptocurrency wallet key information.
Unlike passwords, users only get one unique private key to digital wallets. But if a private key is stolen, it is troublesome to change this key. Each key is unique to a wallet; so, to update this key, the person needs to create a new wallet.
To avoid phishing scams, never enter secure information from an email link. Always go directly to the site, no matter how legitimate the website or link appears.
5. Man-in-the-middle attack
When users log in to a cryptocurrency account in a public location, scammers can steal their private, sensitive information. A scammer can intercept any information sent over a public network, including passwords, cryptocurrency wallet keys and account information.
Anytime a user is logged in, a thief can gather this sensitive information by using the man-in-the-middle attack approach. This is done by intercepting Wi-Fi signals on trusted networks if they are in close proximity.
The best way to avoid these attacks is to block the man in the middle by using a virtual private network (VPN). The VPN encrypts all the data being transmitted, so thieves cannot access personal information and steal cryptocurrency.
6. Social media cryptocurrency giveaway scams
There are many fraudulent posts on social media outlets promising bitcoin giveaways. Some of these scams also include fake celebrity accounts promoting the giveaway to lure people in.
However, when someone clicks on the giveaway, they are taken to a fraudulent site asking for verification to receive the bitcoin. The verification process includes making a payment to prove the account is legitimate.
The victim can lose this payment -- or, worse yet, click on a malicious link and have their personal information and cryptocurrency stolen.
7. Ponzi schemes
Ponzi schemes pay older investors with the proceeds from new ones. To get fresh investors, cryptocurrency scammers will lure new investors with bitcoin. It's a scheme that runs in circles, since there are no legitimate investments; it is all about targeting new investors for money.
The main lure of a Ponzi scheme is the promise of huge profits with little risk. There are always risks with these investments, however, and there are no guaranteed returns.
8. Fake cryptocurrency exchanges
Scammers may lure investors in with promises of a great cryptocurrency exchange -- maybe even some additional bitcoin. But in reality, there is no exchange and the investor does not know it's fake until after they lose their deposit.
Cryptocurrency uses blockchain for verification and does not run through financial institutions, so it is harder to recover from theft
Stick to known crypto exchange markets -- such as Coinbase, Crypto.com and Cash App -- to avoid an unfamiliar exchange. Do some research and check industry sites for details about the exchange's reputation and legitimacy before entering any personal information.
9. Employment offers and fraudulent employees
Scammers will also impersonate recruiters or job seekers to get access to cryptocurrency accounts. With this ploy, they offer an interesting job but require cryptocurrency as payment for job training.
There are also scams when hiring remote workers. For instance, North Korean IT freelancers are trying to capitalize on remote job opportunities by presenting impressive resumes and claiming to be U.S.-based. The U.S. Department of the Treasury issued a warning of this North Korean scam targeting cryptocurrency companies.
These IT freelancers seek projects involving virtual currency and use access for the currency exchanges. They then hack into the systems to raise money or steal information for the Democratic People's Republic of Korea (DPRK). These workers also engage in other skilled IT work and use their knowledge to gain insider access to enable the DPRK's malicious cyber attacks.
Learn more about continuous employee background checks to protect organizations.
How to protect bitcoin and cryptocurrency
To protect against cryptocurrency scams, here are some of the common red flags:
promises for large gains or double the investment;
only accepting cryptocurrency as payment;
contractual obligations;
misspellings and grammatical errors in emails, social media posts or any other communication;
manipulation tactics, such as extortion or blackmail;
promises of free money;
fake influencers or celebrity endorsem*nts that seem out of place;
minimal details about money movement and the investment; and
several transactions in one day.
Protect digital wallets from scammers by practicing good digital security habits such as strong passwords, using only secured connections or VPNs and choosing safe storage. There are two types of wallets: digital and hardware. Digital wallets are hosted online and have a higher rate of getting hacked. Hardware wallets store information, such as the cryptocurrency wallet and keys, offline within a device.
Cryptocurrency is not insured by the Federal Deposit Insurance Corporation, so keeping it safe is vital. Never give wallet keys or access codes to anyone.
Signs of crypto scams include poorly written white papers, excessive marketing, and claims that you'll make a lot of money quickly. You can contact several federal regulatory agencies and your crypto exchange if you suspect that you've been the victim of a crypto scam.
Once you pay with cryptocurrency, you can only get your money back if the person you paid sends it back. But contact the company you used to send the money and tell them it was a fraudulent transaction.Ask them to reverse the transaction, if possible.
Getting scammed is a major fear among cryptocurrency investors, considering the trend of cyber crimes in the industry over the past few years. Unfortunately, Coinbase cannot refund losses due to scams.
However, BitConnect was soon under the suspicion of being a Ponzi scheme, which proved to be true. In February 2022, BitConnect founder was charged with orchestrating a global Ponzi scheme worth $2.4 billion. Not to mention he was added to the Bitcoin scammer list. That makes it the biggest crypto scam in history.
Ruja Ignatova, a 42-year-old woman dubbed the 'Cryptoqueen', features in the FBI's 10 most-wanted fugitives for allegedly swindling millions of investors of more than $4 billion (roughly ₹ 31,580 crore) through the OneCoin cryptocurrency company she founded, CNN reported.
As a digital currency, there is no way to track or identify who is sending or receiving Bitcoin. This is a perfect way for a scammer to receive a lot of money with no way of tracing it back to them.
It is possible to trace the movement of funds and determine how they are being used by tracking down these transactions in order to follow the trail of money. This can be useful in spotting potentially illegal activities like gambling or money laundering.
An IP address can be used to trace the location of the scammer if the IP address is not hidden using a VPN or other means. There are a variety of ways to obtain someone's IP address.
Reporting a scam helps law enforcement to build a case against scammers. If you were scammed, report it to the Federal Trade Commission (FTC) at ReportFraud.ftc.gov.
At Coinbase we go to great lengths to keep all of your sensitive information safe. Account numbers and routing numbers are stored using bank level AES-256 encryption on our servers. In addition, all traffic is encrypted in transit to prevent third parties from eavesdropping on your connection.
For US customers, Coinbase uses the ACH bank transfer system for transfers to your bank account. The ACH bank transfer system typically takes 3-5 business days to complete after initiating a sell or withdrawal. Coinbase will deduct the balance from your source of funds and begin the bank transfer immediately.
In less than a week, the cryptocurrency billionaire Sam Bankman-Fried went from industry leader to industry villain, lost most of his fortune, saw his $32 billion company plunge into bankruptcy and became the target of investigations by the Securities and Exchange Commission and the Justice Department.
Now here's a metric that isn't made up. According to the latest FTC Consumer Protection Data Spotlight, since the start of 2021, more than 46,000 people have reported losing over $1 billion in crypto to scams. That's about one out of every four dollars reportedly lost to fraud during that period.
Federal prosecutors describe OneCoin as one of the largest international fraud schemes ever perpetrated. Ruja Ignatova is one of the FBI's 10 most-wanted fugitives -- the only woman currently on that list.
The best crypto analysts are Anthony Pompliano and Vitalik Buterin. Anthony is one of the most popular and iconic crypto analysts. Vitalik Buterin is the Ethereum co-founder and one of the world's youngest crypto billionaires.
Ruja Ignatova was declared one of the FBI's most wanted fugitives in 2022. The “Cryptoqueen” vanished more than five years ago with more than $4 billion, and at least one report said she was murdered roughly a year later.
A self-proclaimed "cryptoqueen" accused of defrauding investors out of billions of dollars is on the FBI's Ten Most Wanted Fugitives List. Bulgarian-born Ruja Ignatova is only the 11th woman to ever make the list.
Yes, the government (and anyone else) can track Bitcoin and Bitcoin transactions. All transactions are stored permanently on a public ledger, available to anyone. All the government needs to do is link you to your wallet or transaction.
Because someone's wallet address does not have to be anonymous but can be hard to find, a Bitcoin wallet address is called a pseudonym, an alias, which is different from someone's actual name. The data is not linked to an identity, but it is still possible to trace someone's identity or a pseudonym.
In addition, major exchanges issue 1099 forms to customers and to the IRS reporting on your crypto transaction activity. If you don't report transactions that have been reported to the IRS via Form 1099, you may automatically be sent a warning letter about your unpaid tax liability.
At the basis of cryptocurrencies like Bitcoin (BTC) stands blockchain technology. A fundamental characteristic of blockchain technology is transparency, meaning that anyone, including the government, can observe all cryptocurrency transactions conducted via that blockchain.
Investment Scams. Investment scams involve a bad actor enticing people to send their cryptocurrency to the fraudster with promises of “huge gains.” ...
Phishing Scam. Phishing scams are an old favorite among scammers. ...
Cryptocurrency is especially attractive to scammers for three main reasons: a lack of centralized authority, irreversible transactions and the ability to be almost anonymous.
Answer: The four major types include utility, payment, security, and stablecoins. There also are DeFi tokens, NFTs, and asset-backed tokens. Of all cryptocurrencies, the most common are utility and payment tokens.
Before investigators can begin tracing your assets, they will need all the transaction IDs identifying the funds you sent to the scammers. These transaction IDs will allow investigators to “follow the money” and see exactly where your coins are moving.
Reversing market losses is impossible and recovering funds from scammers is highly unlikely. There are legitimate recovery services that may be able to help you regain access to your crypto assets under certain other circ*mstances.
Bitcoin Loophole is an automated AI-based crypto trading platform that runs on behalf of traders to identify potential trading opportunities in the crypto trading market and then executes profitable trades for its users after evaluation.
Keep a close eye on website URLs. You don't want to fall victim to a spoofed website, or enter your information into any website that is not secure. So be sure to look carefully to confirm the web address is legitimate and that it starts with https (not http) before attempting to log in.
Ecoterra (ECOTERRA) – Green Crypto Offering High Recycling Rewards. Metropoly (METRO) – Real Estate Altcoin with Real World Utility. RobotEra (TARO) – Rebuild the Metaverse in a Sandbox-Like P2E World. Lucky Block (LBLOCK) – Vast Crypto Casino With Instant Payouts and a Huge Sportsbook.
Ripple - Cross-Border Payments Network for Banks and Financial Institutions. Next up on this list of the best cryptocurrency to invest in 2023 is Ripple. Just like Bitcoin, Ripple is an established project with more than a decade in the blockchain space.
Address: 747 Lubowitz Run, Sidmouth, HI 90646-5543
Phone: +99513241752844
Job: Design Supervisor
Hobby: Digital arts, Lacemaking, Air sports, Running, Scouting, Shooting, Puzzles
Introduction: My name is Delena Feil, I am a clean, splendid, calm, fancy, jolly, bright, faithful person who loves writing and wants to share my knowledge and understanding with you.
We notice you're using an ad blocker
Without advertising income, we can't keep making this site awesome for you.
