Millions of new and old investors are lured by the world of cryptocurrency which promises a bright future for high returns and decentralization. But, with the rapid rise comes numerous crypto scams meant to exploit the uninitiated. In this blog, we will understand 10 crypto scams that made unwavering attempts at harming the crypto market. How can we protect against these scams and stay safe in crypto space?
Top 10 Crypto Scams and How to Recognize and Avoid Them
- Ponzi Schemes:
The First crypto scam that has been happening for a decade and has shaken the crypto world as well as Ponzi schemes. These crypto scams promise users with high returns and little risk for investors. The returns for the investors earned came early from the capital rather than from profits. But, unfortunately, this pyramid eventually collapsed and there weren’t many investments to pay new investors.
These Ponzi schemes came with complex investment models that posed themselves as legitimate investment opportunities. Many newcomers became greedy as there were great returns on initial investments and were paid in full by using the funds of other new investors.
Likewise, these crypto scams became more popular with new people joining in every day. These operators promised wholesome returns and created a shining facade for a successful enterprise. However, on the flip side, there were no real profits generated and inevitably this scheme slowed down with many losses. At some point, these investors also started to lose money every day.
How to avoid Ponzi schemes?
- One should be aware of investment opportunities that promise you heavy returns with no risk on investment.
- Try to research properly different crypto schemes and the people behind these initiatives.
- Always watch out for proofs and how these profits are generated.
- Check testimonials and online reviews before investing.
- Phishing Scams:
On the number two, we have a new type of crypto scam that involves fraudulent individuals stealing your private keys and login credentials by faking their identity. They tried to masquerade as a legitimate entity and take away information through emails, social media messages and misleading emails.
These attacks are meant to trick people and investors through some interesting tricks to get their sensitive information. Scammers create a website or platform that looks identical to the original websites. Scammers send emails through a cryptic message asking you to verify your account details.
After the person enters the information, the scammer captures the private data to steal your funds and other details necessary for them. Social is another crucial aspect that helps scammers gain access to your account and influence the crypto community.
How to avoid phishing crypto scams?
- You can always double-check the site where you put your information and credentials.
- Put double authentication on all your accounts whether social media or emails.
- Do not click on luring links or download any unacceptable attachments from unknown sources.
- And lastly, verify the authenticity of any contact or ones claiming to be official channels.
- Fake ICOs (Initial Coin Offerings):
Third, we have initial coin offerings that also doubled the crypto scams. 2017 saw the rise of these scams, as many investors fell into the loopholes of fake ICOs where they were scammed through bogus whitepapers and sites. Through fake portals, they collected funds and disappeared without any trace looting plenty of money from new investors.
Fake ICOs created hype and excitement claiming to offer high returns on newer crypto projects. Some detailed whitepapers and sites outline the benefits and advantages behind the newer coin. These sites worked on jargon and fake enforcements from industry experts that build credibility.
Through such gimmicks, investors were intrigued by the prospects of a revolutionary new technology or cryptocurrency and invested in it. After the desired amount of funds was raised, these scammers closed the projects. And became aloof, leaving investors with worthless tokens.
How to avoid fake ICOs crypto scams?
- Take your time to research the newer technologies or projects you want to invest in.
- Look for credible members, a lack of information or a poorly designed website.
- Also, check for testimonials and analyze the project before investing.
- Pump and Dump Schemes:
The fourth type of crypto scam is called the pump-and-dump scheme. In this one, the price and value of certain cryptocurrencies are inflated to create a buzz and positive reviews.
Scammers then try to sell the holdings when the value has reached the peak and try to manipulate the market leading to huge fluctuations in prices. Leading to significant losses to all the traders. Pump and dump schemes as the name suggests are orchestrated through partnerships on chat rooms and social media pages.
For this, people buy a whole batch of low-volume cryptocurrencies and try to promote it heavily through every means until the right hype is created, spreading rumors and exaggerated claims about its value and potential.
As the value becomes stable and rises, investors see a chance and invest hoping to make profits from the upward trends. After a certain amount is accumulated and investments close. They purchase all the holdings leading to a crash and one who invested in it because of the hype is left only with devalued coins.
How to avoid these pump and dumb schemes?
- Try to be skeptical of sudden hype and unsubstantiated claims of particular cryptocurrencies.
- Don’t make any investments or rash decisions solely based on social media group chats.
- And try to stick to popular cryptocurrencies and well-known projects with solid foundations.
- Look for liquidity indicators and volume to find the risk of manipulation.
- Malware:
The fifth one in the crypto scams is called malware which helps cyber criminals gain access to your crypto wallets and steal your funds. All the software was designed through malicious emails, websites or downloads.
It can take many forms including keyloggers, remote access through Trojans ( RATs) and various clipboard hijackers. Keyloggers are used to record every keystroke that can capture login credentials and private keys. Whereas, RATs helped attackers to remotely control your device and access your wallet files.
Plus, many clipboard hijackers replaced cryptocurrency addresses with their private URLs hence redirecting your funds during transactions. Malware can also be distributed through various email attachments, fake websites or through software downloads
How to avoid malware crypto scams?
- Try to keep your computer updated with antivirus protection.
- Use hardware wallets for larger amounts of cryptocurrencies.
- Don’t download any files or software from untrusted sources.
- Try to scan your devices for any malware.
- Fake Exchanges:
Next, we have fake exchanges that copy legitimate cryptocurrency trading platforms. And lured users by giving them extremely favorable terms such as bigger discounts and zero fees. Once the trader deposited their funds it became impossible to withdraw.
All the bogus deals were done through newly created websites that performed similarly to original trading websites. With so many deals, offers, no fee clauses and higher bonuses leads to the creation of newer accounts.
These exchanges take place in professional interfaces and fake trading volumes to give the likes of a legitimate platform. However, once people made investments, they couldn’t withdraw any amount and the platform was shut down.
How to avoid these fake exchanges?
- Try to verify the authenticity of the exchange through reviews and thorough checks.
- Also, use well-known and established exchanges with a good track record of security.
- Be cautious of any fake exchanges or deals that are too good to be true.
- And lastly, find the user feedback and transparency before doing any operations.
- Rug Pulls
The next crypto scam we are talking about is called Rug Pulls. These scams commonly take place in a decentralized space where new projects are initiated. In these types of scams, developers create a new system that can attract more investment. And then abandon these newly created projects after finding the right investors with them.
Developers initiate these scams by creating a token and then listing it on decentralized exchanges. Developers create a token and list it on decentralized exchanges (DEXs). They may provide initial liquidity and promote the project heavily to attract investors.
Once a significant amount of funds is locked in the liquidity pool, the developers withdraw all the liquidity, leaving the token worthless and investors with significant losses.
How to avoid rug pulls?
- You can research the developer’s history and reputation of the project.
- Also, find the projects with locked liquidity and transparent development roadmaps.
- Don’t invest in any suspicious projects with pseudonymous teams or anonymous individuals.
- Try to get community feedback and find an active or engaged user base.
- SIM Swapping
Next, we have swapping of SIM which is a common type of crypto scam that tricks mobile users. It’s a form of social engineering where some malicious attackers transfer your phone number into a new sim without your knowledge and control it.
They access your number, the data and your contacts by tricking your mobile carrier. Once they fully take control they can see your authentication codes bypass factor authentication and steal your crypto assets. They can also use this access to steal any code, withdraw funds and lock access to your accounts.
How to avoid any sim-swapping scams?
- You can use extra secure features in your mobile and carrier such as PIN.
- Also, use double factor authentication rather than OTPs.
- Be cautious about sharing personal information for verification purposes.
- Timely monitoring of your phone services and checking for unusual activities, also report any issue immediately.
- Social Engineering Attacks:
Next, crypto scams are social engineering attacks that can manipulate people into divulging confidential information and data. These attacks solely rely on human manipulation rather than technical hacking methods.
Scammers use and scam people by impersonating trusted figures in the crypto world. Or by mind tricks that can gain access to private keys. These people pose and impersonate trusted individuals, support representatives, influential members and friends to build trust and goodwill.
After gaining your trust they will use tactics and try to use your mood to manipulate you into revealing sensitive information about you. Once they gain access they will steal the necessary data and information.
How to avoid these crypto scams?
Don’t read any unsolicited messages or suspicious ones that ask for personal information.
Verify the person or anyone contacting you for personal information.
Educate and be aware of social engineering tactics and remain vigilant.
And lastly, try to use unique passwords and security measures for all your accounts.
- Exit Scams:
The last crypto scam we are talking about occurs when an operator’s exchange or project suddenly halts and steals user funds. This type of scams occurs when this happens in regulated areas.
This type of scam happens in both ICOs and exchanges when operators fraud their user base. They occur when these phone operators lure their users, accumulate more funds and shut the platform more abruptly.
Without any warning or action, they close down the platform and leave users stranded. And they are unable to access their funds or seek recourse, these scams are more prevalent in regions with less strict laws and enforcement.
How to Avoid Such Crypto Scams?
- To avoid such scams, read positive reviews.
- Try to choose exchanges and projects that are regulated and have transparent operations.
- Don’t use large amounts of cryptocurrencies on exchanges, instead use secure wallets.
- And monitor communities and news signs that show suspicious activities and platforms.
Conclusion
Today’s market provides exciting opportunities and possibilities for the crypto world. But it’s a hotbed for crypto scams that one needs to be wary of. Try to understand these crypto scams and protect yourself from making such rash investments.
Also, conduct thorough research, be aware of the latest security patches and stay informed when dealing with unknown sources in the crypto space. One needs to understand these scams to avoid financial losses and make the most of the opportunities cryptocurrencies offer.
Remember not to be swayed away from too good sounding offers that are not always true. The truth is to verify and always prioritize security over potential profits. Educate yourselves, be aware, share knowledge and build a positive platform that values security and transparency over fraudulent individuals. Together, we can create a positive and constructive cryptocurrency platform for every individual to join and invest in.
