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The most popular crypto scams. How not to become their victim?
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The most popular crypto scams. How not to become their victim?

created Paweł MosionekJune 18 2024

Although kryptowaluty is a relatively young market compared to, for example, the stock exchange, but it must be admitted that the number of scams and their varieties is truly alarming. The creativity of fraudsters knows no limits. In this article, we will introduce you to the most popular types of fraud, such as: Phishing, blackmails, software Ransomware and others, and we will point out how you can avoid falling victim to them.

Where there are new technologies, there are new scams

One may get the impression that the more groundbreaking and "fashionable" the technology, the more fraud there is. And indeed, there must be something to it. Blockchain technology and cryptocurrencies it "game changer" on a global scale, which quickly attracted the attention of a huge number of people. Thus, the spectacular increase in the value of many virtual coins in a short time resulted in the birth of many new multi-millionaires, which further aroused the imagination and expectations of the public. And this greed, combined with naivety and lack of sufficient knowledge about this market, began to be exploited by fraudsters.

Decentralized nature Bitcoin allows you to have full control over your investments. However, it also makes it difficult to define an appropriate regulatory and enforcement framework. If the fraudsters' actions prove effective and they manage to extort cryptocurrencies such as BTC from their victims, there is practically little that can be done about it. Therefore, the best solution is prevention and spreading knowledge, including understanding how fraudsters operate and learning how to identify potential warning signs. We have selected below the 7 most popular methods used by scammers.

Popular Bitcoin scams

Blackmail

Everyone has probably heard of blackmail. The perpetrator usually wants to achieve specific benefits through pressure that causes fear in the victim. But what does it look like in practice in the world of cryptocurrencies? Most often, this is done through various forms of contact (e.g. e-mail, What's App), where the threatening person finds or falsifies confidential information about the selected victim, warning that it will be disclosed if the payment is not made by the specified time. fee in cryptocurrencies. Often, victims of panic and without much thought decide to take such a step, even though the fraudster probably did not even have access to the victim's data (or they were insignificant).

The best way to prevent this type of situation is, first of all, to check the credibility of the information provided without unnecessary emotions and to use the Internet consciously. This means being careful when choosing your login details (different passwords with a high level of difficulty, changing them regularly), the websites you visit online and wisely providing your personal data for various types of registrations. It is also worth using two-factor authentication (e.g. confirming login in the application), if the website offers this option.

Fake cryptocurrency exchanges

This is one of the most popular scams in recent years. According to data from Coinmarketcap website, there are currently over 250 legally operating ones on the market cryptocurrency exchanges. Of course, the quality of the services they offer varies, but there is no way to remember all of them. Fraudsters also take advantage of this by creating "exchanges" that are typical scams whose sole purpose is to extort funds from their victims. Often, fraudsters create their "businesses" by using the image of existing, legally operating companies, e.g. by using part or all of their name, cloning the appearance of the website, or even impersonating their employees. Sometimes, dedicated applications are even created for mobile devices that download data from our phone. Some fakes can be of a really high standard, so it's easy to make a mistake.

Potential customers often do not pay enough attention to what e-mail address the message came from, whether the website URL is 100% consistent with the original and whether the website is properly secured. This is a huge mistake. You should carefully look at these elements when you plan to use the services of a given exchange for the first time, regardless of whether it is a large, well-known brand (because there is a risk that someone will impersonate it) or a smaller, local company. You should always check the number of downloads of the application, its author, as well as user reviews. If an offer looks too good, it often isn't real.

Phishing via email

Phishing is a type of fraud in which a criminal impersonates another person or company. Its purpose is most often to extort sensitive data such as logins and passwords, money or to infect your computer with a virus. There are several types of phishing. One of the most common ones involves the use of e-mail messages in which the fraudster tries to encourage the victim to download an infected file or visit a website that is "equipped" with a virus. Often these emails are extremely well crafted, imitating products or services you may use.

In the case of cryptocurrencies, fraud often involves a request for an urgent response in order to, for example, secure an account or the funds in it. The excuse may be a password leak, the need to urgently update account information or the need to send additional documents. The hidden goal is most often to obtain appropriate data allowing logging in to the victim's account and being able to withdraw funds from it.

The most important step to avoid phishing email scams is to verify that your emails are from the original source. In case of doubt, it is recommended to contact the company directly to confirm its authenticity. The next step is to carefully check the link to the page to which you want to be redirected. Remember that fraudsters are creative - they often introduce various small typos that may go unnoticed at first glance.

Just in case, if the e-mail does not raise any doubts, instead of clicking on the link in the e-mail, you can go to the sender's website (if it is actually him) by directly entering the URL address in your browser.

Gift fraud

Some fraudsters try to extort funds from their victims by offering them the so-called bonuses. This means that the scammer advertises a new service which, after depositing a relatively small amount, will provide a bonus/gift in the form of a larger amount of a given cryptocurrency. For example: the victim receives a message to transfer 0.2 BTC to the indicated wallet address, which will automatically unlock a bonus that returns 0,5 BTC back to him (the example illustrates a gross simplification of the situation). Sounds naive? Absolutely, but some people decide to do so. After all, the cryptocurrency market itself, and even the Forex market at one time, was full of this type of promotion. Forex brokers, cryptocurrency exchanges and some crypto projects offer a "bonus" on your deposited funds. There are airdrops for this, launchpools, cashbacks, promotions covering losses, etc. There is quite a lot of it, so if we are not properly vigilant. Of course, some are more brazen, offering free cryptocurrencies after meeting quite abstract conditions, such as providing private keys or other confidential information.

Most often, this type of scams appear on Twitter (X), Telegram or Discord groups. The best way to avoid getting caught in a "giveaway" is to never enter any giveaway that requires you to submit something of value first (e.g. cryptocurrencies, passwords).

Phishing on social media

Phishing on social media is a common fraud related to the cryptocurrency industry, but not only. You have certainly heard, and perhaps even seen, advertisements using the image of Elon Musk, Mark Zuckerberg, Kuba Wojewódzki, Robert Lewandowski or other famous people who "promoted" a suspicious (for them) product with low popularity. This is phishing on social media. Fraudsters create an account, e.g. on Facebook or Twitter (X), using the popularity of a given person in order to lure inattentive users of the platforms. Sometimes the profile is "corporate", and only the published content uses the image of a famous person. In the cryptocurrency space, scammers often use the faces of famous people from the industry, such as: Changpeng Zhao (ex-CEO of Binance), Vitalik Buterin (creator of Ethereum) or Michael saylor (ex-CEO of MicroStrategy).

phishing changpeng zhao

An example of phishing on social media using the image of Changpeng Zhao.

Of course, the goal is the same as always - to extort funds or sensitive data from its victims (which will lead to theft). Therefore, before you click on this type of ad or follow a profile, carefully check its address, credibility or popularity (number of followers).

Ponzi scheme

Ponzi scheme comes from the name of Charles Ponzi, the creator of one of the most famous financial pyramids in history. This is another type of scam that often occurs in the cryptocurrency world. A Ponzi scheme is a type of investment strategy (if it can be called that) that is intended to provide a profit to the first investors taking part in the venture using the money of new investors. Everything lasts as long as there are new investors financing the previous ones. When the source of financing is stopped, the pyramid "collapses". One popular example of a Ponzi scheme in the crypto world is OneCoin project, run by Ruja Ignatova (pseudonym Crypto Queen), which extorted USD 4 billion in this way.

The best way to avoid falling into a Ponzi scheme is to thoroughly analyze the project in which you plan to invest. Checking the feasibility of the assumptions, who is behind the project and assessing its prospects are the basics that should be done at the very beginning.

Ransomware

Ransomware is a type of malware that blocks access to a computer or mobile device or prevents reading data stored in it. The condition for unlocking access is... to make a payment, e.g. in cryptocurrency to the indicated wallet address. Typically, ransomware blocks access to important files or databases and threatens to delete them if payment is not received within the specified time period. At the same time, the victim has no guarantee that access will be unblocked even after paying the ransom. It's not just retail users who fall victim to this technique. Sometimes they are directed to hospitals, airports or government agencies.

To avoid becoming a victim of Ransomware scams, it is worth taking several steps:

  • install high-quality antivirus software and perform regular updates,
  • update the operating system and applications (also on a mobile device),
  • do not click on suspicious links and ads,
  • pay attention to attachments sent in emails. Don't click too hastily on files with the extensions .exe, .vbs or .scr.
  • Back up your files and system regularly so that you can restore them in the event of an attack.

Summation

As you can see, there are many cryptocurrency scams to watch out for. In the above article we have listed only the most popular ones, but the creativity of scammers knows no limits, so you can certainly come across alternative versions or completely new ideas. The first step to avoid becoming a victim is to increase your awareness of potential threats. The next step is preventive actions, and ultimately, above all, caution. It is always worth considering what link we click, where we create an account, who we share our data with and what applications we download. Let us also remember that there are no free lunches in financial markets. If an offer or promotion looks too good, it probably isn't real.


How to recover funds from a fraudster

There are many scams on the market and people impersonating legally operating companies, and the number of them is growing all the time. Such entities are just waiting for a careless investor to fall victim. Recovering funds is not always possible. In addition to reporting the matter to the police or to an institution regulating financial markets (e.g. Polish Financial Supervision Authority), however, it is worth reading the information that may be helpful in the fight to recover the money.


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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the ForexClub.pl website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.