While crypto continues to outperform every other traditional investment class, it’s not without its risks. Hacking and scams still plague the industry.
A major risk for cryptocurrency investors is falling victim to scams. Scammers are constantly looking for ways to exploit unsuspecting users, and unfortunately, there are many opportunities in the crypto space.
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The most common crypto scams that you need to be aware of
1. Phishing attacks
Phishing scams work by creating fake websites that mimic legitimate cryptocurrency exchanges and wallets. These scams trick users into submitting their login credentials and then use this to gain access to their accounts. Hackers recently began using TeamViewer and fake support conversations to bypass multi-factor authentication (MFA) in order to steal cryptocurrency from KuCoin, Crypto.com, MetaMask, and Coinbase users in a new phishing email campaign.
2. Ponzi schemes
Ponzi schemes are fraudulent investment activities that promise unreasonably high returns on investment, but ultimately end up losing all of the money that users invest. These schemes rely on new investors to fund older investors and are often operated by shady characters who try to evade regulations and law enforcement.
Ruja Ignatova, notoriously known as the ‘CryptoQueen‘, caused a ruckus in the cryptocurrency world when she founded Onecoin. Operating from 2014 to 2019, this Ponzi scheme lured legions of investors who were led astray by false promises that it was set to be “the next hottest innovation” and even overtake Bitcoin – all while swindling billions ($5.8 billion at last count) without remorse.
3. Exit scams
Initial Coin Offerings (ICOs) are a way for blockchain projects to raise capital by issuing tokens. Unfortunately, some ICO organizers have used exit scams as a means of enriching themselves at the expense of investors. Promising investors high returns, they convince users to purchase tokens in exchange for profits, but simply run away with the money instead.
Vietnamese crypto company Modern Tech pulled off an unprecedented hustle – raising $660 million from over 32,000 investors through the Pincoin token ICO. After receiving the funds, the team behind the project disappeared and refused to pay the investors.
4. Pump and dump schemes
Pump and dump (P&D) schemes are based on convincing people to buy a cryptocurrency at an inflated price with no regard to its fundamentals. Once the price reaches peak levels, those who promoted it simply sell their coins and walk away with their profits. P&D scams are more common than you might think, as they can often be difficult to detect.
In 2021 some investors were fooled into buying a fake cryptocurrency based on the popular Netflix show Squid Game. Despite having no official connection to the show, enthusiasm for $SQUID pushed its value from pennies to an incredible peak of nearly three thousand dollars! Unfortunately, this was short-lived as moments later it plummeted back down – leaving scammers with millions in profit and investors out of pocket.
There are many different strategies used by scammers to take advantage of unsuspecting cryptocurrency investors. If you’re interested in buying or using cryptocurrencies, it pays to know what to look out for. That way, you can protect yourself and your investment.
One of the biggest crypto scams of all time
One of the biggest crypto scams of all time was PlusToken, a Ponzi scheme mastermind by Chinese scammers who promised investors high rewards.
PlusToken provided a seemingly attractive proposition of high rates of return in exchange for depositing Bitcoin or Ethereum into their digital crypto wallet. With PlusToken being listed on several Chinese exchanges, the coin peaked at a whopping $350 USD, luring millions with the ‘opportunity’ of generating income from exchange profits and referral benefits. Unfortunately, millions were taken in by this scam, and reports have tallied up to $3 billion lost by its investors, making it one of the biggest crypto scams of all time.
Tips for spotting crypto scams
Spotting crypto scams isn’t always straightforward, but being aware of a few key details can help you stay safe. If the website or social media account of a project is riddled with spelling mistakes, if it promises sky-high returns for very little risk, or if you can’t tell who the team behind the project is, those are all red flags that should make you question whether or not to invest. Other things to look out for include fake social media accounts and a lack of knowledge about the cryptocurrency from people promoting it.
Take a good look at the community around the cryptocurrency project as well. Is it active and are people genuinely excited about the project? If not, it could be a crypto scam.
Ultimately, doing your research and using common sense should help protect you against crypto scams. But being vigilant at all times is crucial to protecting your crypto transactions. And remember, if something sounds too good to be true, it probably is!
Do your research before investing in any cryptocurrency
Anytime you’re thinking of investing in cryptocurrency, it’s important to do your research first. There are crypto scams out there, as well as other crypto investments, that seem like a great deal at first but don’t produce any returns. You should look for reviews from other crypto enthusiasts and do some basic research on the crypto project before committing any funds. Consider even talking with an expert or reaching out to people who have already made a similar crypto investment. This step can help you make smarter crypto investments.
Be careful of fake digital wallets and crypto exchanges that are designed to steal your money
With the rise in the popularity of cryptocurrencies, scammers seem to be finding more and more ways to take advantage of unsuspecting investors. From seemingly legitimate wallets to fake crypto exchanges, swindlers are everywhere it seems. Even if you encountered a crypto exchange or digital wallet that appears reliable, don’t forget that there could still be nefarious elements lurking behind the scenes. Don’t let yourself become a victim of theft – do thorough research beforehand and make sure you understand what you’re getting yourself into before investing your hard-earned money. Being aware and knowledgeable is key to protecting yourself from scams in the cryptocurrency world!
Keep your private keys safe and secure, and don’t share them with anyone
Keeping your crypto keys secure and private should be a priority if you’re investing in digital currency. If anyone else gets a hold of your keys, they have full access to your crypto wallet and can do what they please with the funds. That’s why it’s important to make sure these codes are safeguarded against theft or other misuses. Not even close family or friends should know what your crypto keys are – trust us, it’s better to keep it that way! Set up strong passwords and two-factor authentication on all accounts related to your investments, and always double-check before entering any account details that the website is legitimate. You’ll thank yourself later for avoiding any mishaps!
Final thoughts
As with any investment, it’s important to be aware of the risks and to do your research before committing any funds. Cryptocurrencies are a relatively new investment area, and crypto scammers are constantly finding new ways to trick unsuspecting investors. Whether it’s fake wallets or fraudulent exchanges, crypto scams can take many forms. But by being vigilant about your investments and doing your research, you can protect yourself from falling victim to crypto scams.
Because crypto is a relatively recent phenomenon, some unscrupulous individuals have found ways to make a quick buck off of unsuspecting investors. At the end of the day, there will always be those who attempt to take advantage of others. Scams existed long before crypto was ever invented; however, with cryptocurrency, the fact that a lot of new investors aren’t familiar with the correct steps to take in checking the legitimacy of a project makes it easier for crypto scams to occur. Ultimately, crypto remains a very legitimate investment opportunity, and it isn’t going anywhere anytime soon. So by being aware and doing your research, you can protect your crypto assets and enjoy the freedom of using this revolutionary investment!
