With all the buzz around cryptocurrencies, you might be interested in investing in a digital currency yourself. Our previous article went over the basics of cryptocurrencies, highlighting that their constant fluctuating value brings risk to transactions.
But another cause for concern is the rise of crypto scams. In the Cryptocurrency Scam Report by Bolster, a 75% increase in scams in 2021 was predicted based on current levels of suspicious activity, from 400,000 scams in 2020. When it comes to cryptocurrencies, if your digital wallet has been compromised or currency has been stolen, no one can help you recover what’s been lost. That’s why it’s important to be familiar with common crypto scams and take measures to avoid being scammed by fraudsters in the first place.
5 Cryptocurrency scams to look out for:
You might think you’re browsing the right website, when in fact lots of websites have been set up to resemble cryptocurrency companies and start-ups.
Not only that, but attackers have come up with fake URLs that mimic legitimate sites that have started to accept crypto as payment. Most likely, the fake website will direct you to another platform for payment, asking you to provide your wallet’s PIN, private keys and other sensitive information to purchase a good or service online.
Avoid visiting fake websites by typing in the exact URL of a website into your browser. Once you’re on the site, make sure it has security credentials like a secure sockets layer (SSL) certificate by checking for a small lock icon near the URL bar and seeing whether ‘HTTPS’ appears in the site address – ‘HTTP’ is the insecure version of a website.
Social media scams
Social media is a way for many people to follow celebrities, professionals, family and friends. But you can’t be certain that you’re following imposter accounts, especially if you don’t the people you’re following in person.
Fraudsters have attempted to impersonate celebrities and reputable figures within the cryptocurrency field as their credibility makes an offer more legitimate.
The most notable attempt was a bitcoin scam last year in which attackers successfully hacked into the Twitter accounts of prominent US figures like Barack Obama, Bill Gates and Elon Musk. Requests for cryptocurrency donations were made to followers using tweets.
Be wary when people you follow online promote projects that ask for donations. Check their identities first to make sure that they are who they say they are, and then wait for some time to make sure this isn’t a scam.
Social engineering scams
Many times, fraudsters create fake social media accounts to send out crypto offers over Twitter and Facebook, promising an impossible return.
Unsuspecting people might invest in opportunities that appear to be validated by lots of people. When in reality, the fraudster has created multiple fake social media accounts supporting the project to get people to invest their money into their scam.
A fraud that has been coordinated so precisely can be hard to escape. But there are ways to spot these scams before it’s too late.
Any offer for a small amount of cryptocurrency should be avoided as it is likely it won’t be returned. Even if other accounts are replying to the offer, these are likely bots rather than actual people.
Furthermore, any link sent by a social media account to register or access your crypto wallet is also a scam. More generally, treat all requests related to cryptocurrencies on social media with extreme caution.
As most people are aware of dealing with regular span mail, email scams have become more sophisticated and arise in a variety of different ways.
One phishing scam involves fraudsters sending out emails to recipients instructing them to log into their cryptocurrency accounts through an imposter website. If successful, the fraudsters gain access to the credentials of investors’ wallets and even entire crypto exchange accounts.
Another phishing scam is receiving an email offering a reward or compensation from a distinguished company that deals in cryptocurrency. This email has been disguised as being from this company but is coming from an unknown domain that is unrelated to the company’s official website.
To avoid email phishing scams, verify that the emails you’re getting are legitimately being sent by the company in question. This can be done by checking the email address, logo and branding of the message. If you’re still unsure, contact someone working at the company to confirm the email has been sent by them.
For emails coming from unknown addresses, immediately flag and block spam so they stop appearing in your mailbox. If some emails get through, do not click on any of the unverified links that appear in these messages, even though they claim to take you directly to a company’s site.
After all of this, if an email is identified as being from a legitimate cryptocurrency company, always take care when investing in your digital currency.
Although this has briefly been mentioned in previous sections, initial coin offering (ICO) scams aim to raise money for the “development stage” of a blockchain project through investors.
Investors are asked to give valuable tokens such as bitcoin (BTC) or ethereum (ETH). In exchange, investors are promised that the set amount of tokens they receive will gain value once the project has launched. But once substantial funds have been raised, fraudsters quickly disappear with these tokens.
The best advice here is to do your due diligence on any existing or new crypto projects you would like to engage with. Spend some time looking over details to make sure the project you’re going to participate in isn’t an ICO scam.
Scammers have exploited insecure computing systems to steal cryptocurrency from your digital wallet in several different ways. And with the figure of scams set to rise, it is important to stay safe and protect yourself when investing in cryptocurrency. Check out the Financial Conduct Authority (FCA) website and seek advice from a qualified advisor for more information.
A good mantra to keep in mind is to “only invest the money you can afford to lose.” While you may be trading and investing in legitimate projects and companies, it is still possible to lose a lot of money due to the volatility in the value of tokens.
While risk management procedures can protect some of your invested funds from sharp drawdowns, the instability of cryptocurrencies should incentivise you as an investor to remain cautious while becoming more involved in the cryptocurrency market.
- What are Cryptocurrencies and Why do I need to know about them?
- 5 Important Cryptocurrencies to Look Out for Besides Bitcoin
- What are NFT’s and Should You Invest in Them?
- Predicting the Future of NFTs: A Reliable Investment?
As you begin to invest in cryptocurrency, if you need assistance managing your income, get in touch with our Count team today to find out more!