9 Types of Crypto Scams – How to Identify and Avoid Them?

With the boom witnessed in the Bitcoin, Ethereum and other cryptocurrencies, the same market has given rise to another demon. Fraudulent crypto schemes and scammers are trapping investors from across the globe. In the mid-2018, legitimate customers lost up to $9 million per day. That means that by the time you have read this sentence, scammers have executed crypto scams of around $1000.

To ensure that cryptocurrency investment is a safe place for the visitors, there are some important measures that users and the service providers, in this case, cryptocurrency exchange platforms need to take.

Therefore, in this blog, I will try to shine some light on all the different crypto scams that have circulated in the market and how many individual investors and companies have fallen prey to them. Additionally, we will discuss all the fundamental measures to avoid them in the very first place.

1. Blackmail

This is one of the most common forms of cryptocurrency scams in which the scammer could take different measures to get inside your head. Basically, the blackmailer may claim to have hacked into your system through a Remote Desktop Protocol (RDP). Although the chances of that actually happening are slim, however, he or she may ask a ransom while leveraging your personal information.

If you are wondering how the scammer may have found out your address, well, then such scammers generally use a compromised database and then target multiple customers hoping that some may comply to their demands, which they do.

In another case, the hacker may have actually got access to your device using ransomware. The hacker can block your access to your own device. Instead of coming into the influence of the blackmailer and sending the cryptocurrency or transferring the amount, it would be wise to contact a professional to get the ransomware out of your system. Sometimes one may feel hesitant to confront the blackmailer because of the data he or she might be leveraging but you should never comply.

2. Impersonation

Impersonation is a common tool for the scammers to lure you into an emotional trap by using tried-and-tested psychological tricks. They may create one or even multiple fake social media profiles and approach you via private messages.  As soon as you deposit the money, the person you have been contacting does not reply to you or demands a bigger sum.

Such tricks take a long time to execute from a few days to weeks or even months to lure you into a get-rich-fast or similar scheme. During the initial period, there are chances you could get a good return. This makes it hard to separate the legitimate from the fake.

Therefore, it is essential for you to run checks of your own. How?

Well, use the World Wide Web! Use search engines to know the cryptocurrency platform inside out, if they are impersonating an individual or service provider. If you spot any red flag, stay away from them to save yourself from getting into a crypto scam.

3. Malware downloads

At all points, refrain from opening unknown email attachments. If you are one of those who has not secured his or her important device(s) and keep your credentials on the desktop saved in a folder called, “Credentials” or “Passwords” (you got my point), just don’t do that!

If your device contains any sophisticated information or personal details, always keep them in a secure drive. Be it your online profile or even your device (if it is connected to any server), you must prefer a 2-factor authenticationbecause Prevention is Better than Cure!

4. Hardware Wallet Theft

Instead of storing the password and important credentials in the cloud, there are multiple individuals and companies that prefer to store their cryptocurrency’s private keys in a physical device. This could immune you from digital theft but if the physical storage is stolen, the data could get compromised. Therefore, just like the hot-storage (online storage devices), it is strongly recommended to have a security pin to access your cold-storage (physical storage).

5. 419 scams

Highly popular in Sub-Saharan nations like Nigeria and Ghana, in 419 scams, the scammer may ask you to deliver a specific amount of money from point A to B, where A and B could be location or banks, or individuals. You will be promised to get a significant commission from the entire transaction but here’s the catch!

Firstly, any transaction of this sort is illegal. At the same time, the con-man will ask you to deposit a specific amount of money or cryptocurrency to facilitate the transfer. There could be creative manners to convey the message but the end result is always the same. As soon as you transfer the money to the scammer, it’s all gone!

6. Meeting in Person

Taking a few notches up, in this type of cryptocurrency scam, the con man may ask you to schedule a face-to-face meeting. If you do not know the person or have no mutual connection or any well-known associate who is recommending you the same, consider meeting with the stranger – a Big No!

Reason being, it could end up in fatal consequences.

7. Free Prize or Currency Giveaway

A different type of crypto scam, the fraudulent platform or individual asks you to register. They ask your payment details. The whole process, courtesy to a decent website developer or developers’ team, may seem very authentic. The platform could promise free prizes or giveaways in the form of complimentary coins or even fiat currency as soon as you complete the process.

In such cases, before giving your payment details, you must conduct extensive research about the platform you are planning to deal with. Make sure that the platform is reliable and that legitimate individuals and professionals recommend it. If not, just refrain from such platforms that just sound too good to be true.

8. Crypto-MLM – Pyramid schemes

In the name of affiliate marketing, a platform may reach out to freelance affiliates to market their products. Before launching such campaigns (generally done via emails), the concerned company ensures that the documentation can be falsified professionally. Once the platform turns phoenix, cryptocurrency investors turn to the affiliates instead of the company itself. So, other than the company, all the tiers involved in the pyramid suffer.

9. Exchange Scams

Illegitimate cryptocurrency exchanges and websites running Ponzi schemes claiming to double your cryptocurrency have become a norm in Nigeria. They could even have a glittering interface.

By putting up false numbers of users, such companies may use FOMO (Fear of Missing Out) technique to lure in potential customers. Further, while talking about crypto scams, the fake cryptocurrency exchange may use scam coins to mislead people into thinking that they are actually missing out on a chance to deal with a valuable asset that has been accepted by a large community when in reality, the prices are just artificially inflated. This is also called Pump and Dump (P&D) securities fraud.

One of the examples of ‘exit fraud’ is an ICO – LoopX that went dark after raising $4.5 million.

To know more, read – How To Identify Bitcoin Scams?

Last But Not the Least…

So, until and unless you can connect with the client response team of the concerned website, and they give a convincing response for all your queries, just stay away from buying or selling cryptocurrency as they could be running a fake wallet to infect your system. An unstable cryptocurrency exchange could result in getting hacked after which all the data is at the mercy of the culprit.

Do not browse websites without an SSL certificate, i.e. the website must have HTTPS property instead of HTTP.

Look out for links similar to domain.com/ponzi/?ref=12345 and save yourself from Ponzi schemes.

To curb such scams, countries all across the globe are applying different measures. For instance, made up of the top forensic and legal team along with law enforcement agents and government agencies, Nigeria Blockchain Alliance (NBA) is a platform created by Cryptography Development Initiative in Nigeria (CDN) to fight crypto-related crimes in Nigeria. In line with that, it is the responsibility of reliable Bitcoin, Ethereum and other crypto-to-crypto to crypto-to-fiat and fiat-to-cryptocurrency exchanges to help customers identify crypto scams and how to avoid them.

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