The following is a guest post from Josef Moser, co-founder of Cryptoradar.
Crypto scams are getting more sophisticated. As more retail investors get on board the crypto train, it’s not surprising that malicious actors are trying to take advantage of new traders and unsecured crypto accounts.
If you’re fresh on the crypto scene, it’s critical that you watch out for all the gimmicks and traps. But even veteran investors should still pay close attention to some of the more recent and sophisticated scams that are now beginning to circulate.
The Rise of Guest Article Phishing
Articles written by guest contributors, like this one, are a great way for industry experts to share their insights with a wider audience. If you need any more proof of that, consider the e-Krona scam.
Sweden was planning to introduce a digital version of their currency called the e-Krona, but someone beat them to it by launching a fraudulent version of the coin before the government even had the chance.
Whoever created this project managed to get an article on a well-known business website before the Swedish government revealed they had nothing to do with the fraudulent e-Krona coin.
The website was not registered by the Swedish government but by a private entity in Reykjavik, Iceland. e-Kronas were also sold through a spoof website that mimics a financial advisory to make the scam look more trustworthy.
Unfortunately, the article had already been advertised on Facebook before being taken down by the publication. As a result, people were led to believe they could buy e-Krona – but only through an “official” website and only by wiring money directly to the site’s e-Krona brokers.
If that’s not a red flag, the e-Krona site claims that every €1 investment will potentially be worth €4,307 in “a few months”. Despite the fact that nobody on the internet would publicly offer a deal that suggests an ROI of over 4000% ROI, there are still people falling for this scam. So much so that Sweden’s central bank stepped in to address the problem directly.
Social Media – a Perpetual Wellspring of Disinformation
Twitter crypto scams have been common for years, despite the platform’s best attempts at regulating fraudsters. Someone will create an account, gain a blue verification badge, and then change the account name and information to look like a famous person.
There have been Barack Obama crypto scams, Bill Gates crypto scams, and – of course – Elon Musk crypto scams, and they usually follow the same format. The famous person will announce that to start the widespread use of cryptocurrencies or “give back to the community,” they’ll send back double of any amount of crypto sent to them – usually within a time frame of 30 minutes or so.
This scam has become so widespread that the Federal Trade Commission released a statement reporting that consumers have lost an estimated $80 million to cryptocurrency investment scams from October 2020 to May 2021 alone. As interest in cryptocurrency grew during this time, so did the possibilities for scams – with more than a ten-fold year-over-year increase reported, resulting in an average of $1,900 lost per consumer.
Famed for his championing of digital currencies, Elon Musk impersonators seem to have had the most success, securing around $2 million from crypto-hopefuls.
The bottom line? Nobody on the internet is ever going to give you free money (especially not a celebrity), so try to employ common sense. If it sounds too good to be true, it probably is.
When They “Caught You” Doing Something Online
Scams, where you’re accused of being caught in the act, are a classic form of blackmail. Most often, the scammer will claim something to the effect of: “We have your browser history, and we know what explicit material you were looking at. We accessed your webcam and have a video you certainly don’t want the world to see. Pay us $1,500 in BTC, as we’ll let you off the hook. Here’s our wallet address.”
The best strategy is simply to ignore these emails. If you’re unsure if an email is a hoax, it’s important to remember never to click on any included links. Clicking a hyperlink could give hackers an opportunity to install malware on your computer, allowing them to spy through your webcam and microphone, or launch a ransomware attack. A common ransomware attack is to encrypt your computer and ask you to pay a fee for decryption, for instance.
You can help further protect yourself from ransomware attacks by doing daily backups. If you do become the victim of an unfortunate ransomware attack, with a backup, you can eliminate the ransomware via a factory reset and clean install of the operating system before restoring your data.
When Using Cryptocurrency as Actual Currency
Falling prey to this scam is the crypto equivalent of falling at the last hurdle. After successfully purchasing your crypto, it makes sense that you would next look for opportunities to spend it. However, paying for something using cryptocurrency isn’t like paying with PayPal and contains a much higher risk as there is less of a safety net to ensure you get what you pay for with a purchase.
Crypto transactions are final, so if you want to buy something like a car, exchange in person or pay who you’re buying from only after you have the keys in hand. Still, there are some software subscriptions that can be paid for in crypto and are generally considered safe. For example, buying a VPN service for a year, for instance, can make sense as a BTC transaction.
Legitimate businesses who take crypto transactions will want to look after their reputation to have good customer service in place. Some retailers who accept BTC will happily assist in making sure the wallet address is correct so that you can pay the right person. Looking for user reviews from various verifiable sources and forums can help you decide whether to go ahead with a transaction. Just remember, these types of transactions are currently safest in person, when possible.
Good Ol’ Fashioned Hacking
Of course, people have been trying to hack crypto exchanges since their early days. It’s the 21st-century version of robbing a bank, with the added bonus of potentially getting to scoop up a wealth of personal information at the same time.
The best way to protect your cryptocurrency from hackers is to take your assets offline by using a “cold” wallet. Cold wallets come in the form of a USB-stick-type device, and are not connected to the internet, unlike their “hot” counterparts. If you set it up correctly and keep the passwords safe, it’s almost impossible to hack these pieces of hardware.
Cold wallets cannot be accessed without a pin code that helps keep them extra secure. To get them to work, you need to input a string of predetermined seed words, and if you put all 24 words in the right order, you gain access. Some wallets also offer an option to include a customizable 25th word. Adding 24 words + 1 random choice helps make a crypto wallet virtually impossible to hack.
Scams have been around as long as people have been interacting with other people, and the best way to avoid them is to stay informed. Following cryptocurrency news from diverse sites will help you stay up-to-date on the latest, as well as make comparisons for yourself about the information you’re receiving.
Ultimately, it’s important to trust your judgment and seek out multiple reliable sources – and our handy guide to crypto wallets can be a good start.
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