Common Cryptocurrency Scams to Avoid
Millions of users worldwide are embracing cryptocurrency to invest and make payments. However, the emergence of digital currencies has also allowed for many scams aimed at seasoned investors and those with little experience. To make your cryptocurrency trading experience as safe as possible in this fast-developing market, you must understand the most common forms of cryptocurrency scams to help protect your assets.
(toc) #title=(Table of Content)Phishing Scams
Among the most popular methods criminals use to steal cryptocurrency are phishing scams. Common to these scams are fake emails, websites, and messages that pretend to be legitimate, but they want to know your private keys, passwords, or if you’ve shared your wallet credentials. The imitations of legitimate websites or exchanges the scammers often create are very convincing. To avoid getting stuck in this scam, always confirm the URL where you are visiting and never click on suspicious links. At least enable two-factor authentication for extra security.
Fake Exchanges
As cryptocurrency continues gaining traction, fraudulent exchanges emerge to prey on unsuspecting users by enticing them to put money into their fake platform. These exchanges appear legitimate in many cases, but they are meant to scam depositors or personal information. They might lure unsuspecting investors with too-good-to-be-true trading conditions/bonuses. To avoid this scam, however, never deposit cash on a platform until you have researched the exchange and are using a known reputable platform with verified user reviews.
Ponzi Schemes and Pyramid Schemes
Pyramid schemes and Ponzi schemes have plagued the cryptocurrency space for many years. Paying older investors who have saved for their retirement with the money that new investors have just put into the investment, these scams promise returns of 100 percent or more to create an unsustainable cycle. Eventually, these schemes simply collapse, and investors lose their money. Always be aware of any 'investment' opportunity that promises high returns without taking on much risk — because that could be a Ponzi scam. There is always some risk involved in legitimate investments.
Pump and Dump Schemes
Cryptocurrency markets feature a form of market manipulation known as pump-and-dump schemes. This is a type of scam where many people artificially raise the value of a less-known cryptocurrency by pushing it out on social media or discussion forums. When the demand rises and pushes up the price, scammers dump their coins for a profit and dump everything onto the other investor's coins worth nothing. Look out for sudden spikes in price and investment tips from unverified persons to avoid pump-and-dump schemes. Invest only in coins after doing your research.
Initial Coin Offerings (ICOs) are false
Initial Coin Offering (or ICO) has become one of the most popular ways cryptocurrency startups raise funds. But most scammers create unreal ICOs to extort investors' funds and would not know what that is. Fake ICOs are a thing, and they are promising groundbreaking projects, and all they are is elaborate hoaxes. To avoid fake ICOs and keep your ICO investments safe, research and ensure you fully understand who is behind the project and the whitepaper and that the idea is viable. A bad ICO is a scam if it doesn’t provide transparency or at least seems too good to be true.
Malware and Ransomware
Malware and ransomware are very common threats in the cryptocurrency world. In malware attacks, hackers write malicious software that infects your device, grabbing your private keys and passwords. Ransomware, however, encrypts your file and asks for cryptocurrency to unlock it. So, to protect yourself from malware and ransomware, ensure your devices are always up to date, use good antivirus software, and never download software or files from a source you don’t trust.
Social Media Scams
You will likely find scammers using social media platforms to lure victims into cryptocurrency fraud. So, scammers create fake profiles and pretend to be famous high influencers, for example, famous investors or entrepreneurs, then promise to double or triple your cryptocurrency if you send them funds. These fake giveaways are among the most common ways to steal your digital assets. Never send cryptocurrency to whoever you don’t know, and always ensure the thing you are about to do has been promoted properly.
Fraudulent Investment Platforms
Many fraud investment platforms offer investors high returns through automated trading or arbitrage trading systems. They make a lot of money on these platforms with advanced algorithms, with no risk. In truth, these are scams that steal peoples’ money. At first, small withdrawals are possible with the platform, but ultimately, it stops paying altogether. Be careful with these scams, so whenever you see a platform that promises you guaranteed profits and promises you that it will be transparent with its trading strategies or team, run away from such a platform.
Impersonation Scams
Fraudsters impersonate customer support representatives or executors of a cryptocurrency exchange or wallet service and engage people in an impersonation scam. After that, they can contact victims via email, phone, or social media, asking for sensitive information to 'resolve an issue' with their account. The ones behind these scammers may be using official logos and convincing communication to make them look legit. There is no need to impersonate scam scams as no proper company asks you for your private keys or login credentials. Contact companies through official channels if you’re unsure whether to proceed with a request.
Exit Scams
When a cryptocurrency project that seems legitimate suddenly shuts the project down and carries away the investors' funds, that's an exit scam. It only occurs with ICOs, exchanges, or new coins. The project may seem legitimate for months or even years until the founders vanish without a trace. Therefore, before investing in any new cryptocurrency project, doing some due diligence is important to avoid exit scammers. Try to find transparency in the team’s background, the project's development progress, and the third party's reviews.
Conclusion
The popularity of cryptocurrency and the risks of scams and fraud are increasing. However, vigilance and knowledge about the common cryptocurrency scams will help protect your digital assets. Staying informed, staying secure, and avoiding scams based on too-good-to-be-true offers will minimize your risk of being unfortunate to fall prey to these. However, perhaps the most important point about cryptocurrency is that it’s always about security.
