With the development of cryptocurrencies, fraud in this area has become one of the pressing issues. The decentralized nature of digital assets and the anonymity they provide attract not only investors and users but also malicious actors. The lack of government regulation, the complexity of tracking transactions, and the availability of digital assets have made cryptocurrencies a lucrative target for fraudsters.
Cryptocurrency scams are prevalent in various scenarios, and familiarizing yourself with the main types makes it easier to subsequently recognize fakes and deception.
How Cryptocurrency Frauds Occur
Malicious actors may use malware to steal cryptocurrency and other tools for earning. Some programs change wallet addresses in the clipboard so that when transferring funds, the user sends cryptocurrency to the fraudsters' address. Other malware, such as keyloggers, can intercept passwords and seed phrases, allowing fraudsters to gain full access to the wallet.
With the growing popularity of Bitcoin, the number of scams related to this area has also increased. Cryptofraud has become a widespread phenomenon in the world of digital assets. The anonymity of transactions, the lack of central control, and the complexity of tracking transfers create favorable conditions for scammers. Bitcoin scams are led by a common scheme – fake investment platforms that promise incredible returns on Bitcoin investments.
Fraudsters attract investors by promising high returns in a short period without specifying a real business model. After collecting funds, the fraudsters disappear, leaving the clients with nothing.
Signs of fake investment platforms include:
- unrealistic promises of high returns;
- insufficient transparency of cooperation conditions;
- lack of detailed information about the company;
- concealment of documentary base;
- promises of instant withdrawals or large bonuses for attracting new participants.
Cryptocurrency Scam Schemes
ICO – a process by which startups raise funds for the development of new projects through the sale of tokens to investors. Fake ICOs are one of the most common forms of cryptocurrency schemes, where scammers create fake projects promising high returns. After collecting funds, these projects suddenly disappear, leaving investors with nothing.
Phishing is one of the classic fraud schemes that has gained new popularity in the cryptocurrency sector. Fake sites are created that mimic real crypto exchanges or wallets to steal cryptocurrency and user data, such as private keys, passwords, and two-factor authentication codes. This allows fraudsters to access information and transfer digital assets to their wallets.
Pyramids and Ponzi schemes are attractive due to promises of huge returns by attracting new participants. The funds of newcomers are used to pay "profits" to old investors, creating the illusion of a successful project. However, such schemes inevitably collapse when the influx of newcomers stops, and the founders disappear with the remaining funds.
Cryptocurrency Wallet Frauds
Specially designed programs are used to hack cryptocurrency wallets. These can be malicious resources that monitor the clipboard and replace the crypto wallet address with the attacker's address. There are also keyloggers that record keystrokes to steal passwords and keys.
Fraudsters do not stop at what has been achieved and go further by creating fake applications for storing cryptocurrencies or simulating the operation of online exchanges. Externally, cryptocurrency services may look very similar to legitimate ones, but the goal is different – to steal funds when users attempt to transfer their assets.
Hardware cryptocurrency wallets are considered one of the safest ways to store cryptocurrencies. However, fraudsters may sell fake or modified devices that contain vulnerabilities or pre-installed malware. This can lead to the loss of crypto assets when using such devices.
Protection Against Cryptocurrency Scams
Cryptocurrency scam schemes are complexly designed and often look convincing from the user's perspective. To protect their funds, users need to be vigilant and follow basic security principles.
There is a specific algorithm of actions for working with cryptocurrency to avoid becoming a victim of fraudsters.
What to do:
- Verify information sources and download applications only from official platforms.
- Use two-factor authentication.
- Store cryptocurrency in cold wallets that are not connected to the internet, reducing the risk of hacking.
- Regularly update software.
- Check URLs and monitor applications for working with the wallet.
- Copy private keys onto reliable media to avoid losing funds in case of technical failures caused by attackers.
- Learn and improve financial literacy.
- Invest only in understandable instruments.
- Do not trust advertising on social networks and exercise due diligence.
- Do not agree to experiments with any unknown cryptocurrency.
No one is immune from scam attacks, especially in the crypto industry, where there are millions of scenarios, and the identity of the fraudster is often impossible to identify, leaving no grounds for the return of lost money. Cryptocurrency frauds remain a significant problem amidst the growing popularity and increasing investment in digital assets. But maintaining confidentiality and information security by any means is crucial.