Cryptocurrency can be complicated, and scammers love to take advantage of “complicated”. If you’ve heard of common tax scams where a person posing as the tax collector calls you up and threatens you, you’ll notice that it preys on people’s lack of knowledge about tax payment procedures.
Cryptocurrency transactions are similar; and by educating yourself to identify the telltale signs of a scam, you can protect yourself and your loved ones from being victims.
- Giveaway Scams
The most common type of scam is a giveaway scam. These are usually in the form of forged twitter posts, fake screenshots and doctored messages that purportedly show big companies and famous people offering to give BTC away for free.
The catch? In order for you to reserve your place or “secure” the giveaway, you have to first send them cryptocurrencies! They will usually provide a wallet address where you will have to send your cryptocurrency to, and they promise to “double” it.
Even on twitter itself, scammers are using bots to continually post fake giveaway messages under multiple twitter profiles, usually imitating the profile picture and name of a verified account. The issue was so prevalent that Vitalik Buterin, the founder of Ethereum, had his profile name as “Vitalik NOT GIVING AWAY ETH Buterin” for the longest time!
Ways you can identify giveaway scams:
- It’s too good to be true
- It needs you to send something first (crypto, or personal information)
- It appears outside of the intended platform as a screenshot
- It’s a giveaway
- Investment Scams
Under the guise of an ICO, new project or any number of trending fundraising terms, scammers have set up entire websites and communities. The scams can even be fairly difficult to detect without appropriate knowledge of cryptocurrencies - some of the websites can look even more professional than real projects. Sometimes, these projects are run as ponzi schemes, returning real money and interest to early investors in order to build up interest and community around their scam.
Typically, these scams come in the form of high-yield returns, claiming to have exclusive technology such as “cloud mining” or “trading bots”.
Ways to identify investment scams:
- It promises high yields of doubling your investment or more in weeks
- It’s not covered by any major cryptocurrency news sites
- It’s not listed as a token for trade on any major exchanges
- It has no contact details or way to prove the people are real
- It emphasizes technology that is too good to be true, yet has no major details
- Phishing scams
Phishing scams are extremely common and often catch a user unaware. They come in the form of websites that look, feel and act like the actual website it is imitating, often to get users to key in passwords, personal details or other information that would then be used to gain access to real accounts.
In cryptocurrency, where private keys and wallets have no way to be changed or recovered, these phishing sites can cause immense damage. Once you are phished, the wallet is compromised and will likely lose all its funds in a matter of minutes. This is why it is recommended to access websites and services through verified links, bookmarks, and always double-checking to make sure the website is secure, on top of setting up 2FA and other account protection and security mechanisms offered by the platform.
Ways to identify phishing scams:
- It’s a link you clicked from anywhere but your own bookmarks or keyed in via your address bar. Accessing important links through clicking on emails, social media and third party websites is always a bad idea!