Author Alex Moix
In partnership with Breezeline
The cryptocurrency craze has piqued the interest of many, including that of scammers - the real cons of crypto. For those less familiar, cryptocurrency is a form of digital currency that is often stored in a digital wallet. Although it may feel a bit like an abstract concept, this currency can be easily turned into cash by transferring to a traditional bank account or by visiting crypto ATMs. A key characteristic of cryptocurrencies is that they can operate outside of traditional financial institutions due to the use of blockchain. Blockchain provides verifiable and immutable ledgers of transactions much like financial institutions would, but instead do not require a third-party. Unlike traditional currency, cryptocurrency markets can be quite volatile. This has resulted in many seeking opportunities to trade crypto, in the hopes of buying low and selling high. 😍What makes crypto so attractive (to scammers)?
There are several aspects of cryptocurrency that make it appealing to scammers. Transfers cannot be reversed and there are no centralized authorities like banks flagging suspicious transactions for fraud. Instead, third-party applications are used with some providing anonymity that scammers use to hide behind their crypto wallets. Additionally, currency can be quickly converted into fiat money and moved to a traditional financial institution. Lastly, the general population is still somewhat unfamiliar with how cryptocurrencies work and are more susceptible to following the instructions of scammers. According to the Federal Trade Commission, more than 46,000 people reported losing over one billion dollars to crypto scams, which nearly a quarter of all of what was lost to all financial scams in 2021. 🤑What are the most common scams?
Scammers have found that many of the traditional financial scams work just as well with crypto. Though, there are still a few novel scams that have been born out of the unique characteristics of the currency. Romance Scam
This type of scam is older than crypto itself, yet it has still maintained its potency in its newest evolution. It all begins with an online romantic interest that garners your trust. They start to show off the wealth they have made through crypto trading and begin to offer tips. Finally, they offer to help out and manage some crypto for you. From there the rest is history, the rest of your crypto that is.
There are many types of investment scams, from the rug pull and the pump and dump to the fake crypto growth tracking apps and celebrity endorsements. Each of these have one thing in common: promises of getting rich quick with next to no risk.
Business and Government Impersonation
Businesses and government agencies should never require that you pay them in crypto for something you owe that is past due or a result of something you have done wrong. Although cryptocurrencies have grown in popularity, they are no de facto currency and should never be a required form of payment.
The credentials to your crypto wallets can, for obvious reasons, be an intriguing target for scammers. Phishing is the use of fake websites, security requests, or other techniques to harvest these credentials directly from you.
Growing in popularity among scammers, this type of scam also has the goal of gaining access to your crypto wallet. The scammer will trick your mobile phone’s carrier into giving them a copy of your SIM card in order to gain control over your phone number. This potentially gives them the ability to reset passwords and login to accounts.
This one is somewhat unique to cryptocurrencies and involves convincing you to upgrade to a “new” crypto wallet, exchange, or other software that offers free crypto or major discounts.
👀What does a scam look like?
When transferring, purchasing, or managing cryptocurrency online, always maintain a skeptical eye. If something feels off, trust that instinct and verify before proceeding. However, not all scams are easy to spot, so here are some things you can do to stay on guard:
Take caution with crypto opportunities seen on social media - according to the FTC, nearly half of those who reported losing crypto since 2021 said that the scam started with an ad, post, or message on social media.
Beware of unsolicited messages from brokers or others requesting information or action on your account.
Use software and websites of well known and highly rated companies.
Only visit websites that are using HTTPS.
Be suspicious of requests or offers that require making several transactions per day.
Do not accept free crypto.
Do not be pressured by (fake) contractual obligations.
Do not click links or open files from people you do not trust.
Do not permanently link your bank account to your crypto wallet.
Freeze your account as soon a you suspect you have been scammed.
🔊What do you do if you get scammed?
File a complaint to the crypto exchange you used.
Report it to the Federal Trade Commission (FTC), Internet Crime Complaint Center (IC3), Securities and Exchange Commission (SEC), and/or Commodities Futures and Trading Commission (CFTC).
About the Author: Alex Moix is a former intelligence analyst and current security engineer in tech, investigating customer related security issues and detecting platform abuse. He is a member of the Trust & Safety Professional Association and serves as Director of the CyberSafety Initiative for CSNP.