People are obsessed with cryptocurrencies. Digital currencies like Bitcoin, Monero, Ethereum, and Dogecoin are everywhere on the internet. Their skyrocketing value promises big profits for investors (before the prices of the currencies fall, that is). The “fortunes” that can be made from virtual money mining are reminiscent of the gold rush back in the 1800s. “Or at least that’s what many would have you believe, including a long list of scammers,” says Phil Muncaster of the global cybersecurity group ESET.
In fact, if you are currently interested in cryptocurrencies, you are very likely to be at high risk of falling victim to a scam. This is the new Wild West – a lawless, unregulated world where malicious criminals often have the upper hand.
The rules for fraud prevention apply here too. Everything you read on the Internet should be examined and checked carefully. Keep your guard up against the “noise” created by publicity and you’ll have a good chance of staying safe says Phil Muncaster from ESET.
Why cryptocurrency scams Are on the rise?
Scammers are using news and popular trends to deceive their victims. And there’s nothing more topical than cryptocurrencies. Media articles and social media posts are partly to blame, as they create a feedback loop of publicity that reinforces the hysteria surrounding virtual currencies.
The result? From October 2020 to May 2021, Americans lost about $80 million ($71 million) in thousands of cryptocurrency scams, according to the U.S. Federal Trade Commission.
In the UK, the figure is even higher: British police claim that victims lost more than £146 million (€172 million) in the first nine months of 2021.
Why are these types of scams on the rise?
- There are few or no rules for investors in the cryptocurrency market compared to the traditional stock market.
- The huge media interest is a good bait for phishing and other types of scams
- The soaring prices of cryptocurrencies attract people who dream of getting rich quick
- Social media help to amplify noise, real or imagined
- There is also the lure of mining coins for money, which cybercriminals can use as a hook
What are the most common cryptocurrency scams?
If you have digital money safely stored on a cryptocurrency exchange, you may be under threat from hackers. In many cases, cybercriminals have managed to siphon funds from these businesses, sometimes even “lifting” hundreds of millions. However, usually, the compromised companies promise to compensate their customers. Unfortunately, there are no such assurances for victims of cryptocurrency fraud. If you fall victim to a scam you can lose a lot of money.
It is worth understanding what these scams look like. According to Phil Muncaster from ESET, these are some of the most common ones:
“Pyramid” investor scams: This is a type of investment scam where victims are tricked into investing in a non-existent company or “get rich quick” scheme that actually does nothing but line the scammer’s pocket. Cryptocurrencies are ideal for this type of scam, as scammers are always inventing new, unspecified “cutting-edge” technologies to attract investors and generate greater virtual profits. Data manipulation is easy when the currency is virtual anyway.
The bubble effect: by presenting false information, fraudsters encourage investors to buy shares in less well-known cryptocurrency companies. The share price then rises and the scammer sells his own shares, making a satisfactory profit and leaving the victim with worthless shares.
Fake ads featuring celebrities: Scammers hack celebrity accounts on social media or create fake accounts and encourage their followers to invest in fake schemes like the ones above. In one well-established scam, about $2 million was lost by scammers who even included Elon Musk’s name in some Bitcoin address to make the ploy more credible.
Fake exchanges: Fraudsters send emails or post messages on social media promising access to virtual cash stored in cryptocurrency exchanges. The only catch is that the user usually has to pay a small fee first. In reality, the exchange does not exist and their money is lost forever.
Dangerous applications: Cybercriminals spoof legitimate cryptocurrency apps and upload them to app stores. If you install one of these apps it can steal your personal and financial information or place malware on your device. Others may trick users into paying for non-existent services or try to steal codes for their cryptocurrency wallets.
Fake press releases: Sometimes scammers even manage to fool journalists, who republish fake information. This happened on two occasions when major news websites ran stories about large shopping chains preparing to accept certain cryptocurrencies. The fake press releases on which these stories were based were part of plans to increase the value of the cryptocurrencies held by the fraudsters.
Phishing/identity theft: Phishing is one of the most popular modus operandi of fraudsters. Emails, text messages and social media messages are spoofed to make it appear that they are sent from a legitimate, trustworthy source. Sometimes this “source” – for example, a credit card provider, bank, or government official – requests payment in cryptocurrency. They will try to pressure you to act hastily without thinking about it.
What should you do to avoid becoming a victim of fraud?
The best ”weapon” to fight fraud is suspicion. Unfortunately, we live in an age where not everything we read on the internet is true. Quite a lot of it is designed to trick and harm us. With this in mind, try the following to avoid falling victim to deception:
- Never give your personal information to someone who contacts you unexpectedly, via email, text, social media, etc. It may even appear that the sender is a friend of yours, but it could actually be a hacker who has had their email or social account hacked. Contact each person individually with some other form of emailing.
- If something seems too good to be true, it probably isn’t. Treat any investment schemes with a high degree of distrust.
- Enable two-factor authentication for every cryptocurrency account you have.
- Reject any investment “opportunity” that requires an upfront payment.
- Never use unofficial app stores.
- Install anti-malware software from a reputable provider on your computer and mobile devices.
People may have “lost their minds” with cryptocurrencies, but that doesn’t mean you should get carried away, suggests ESET’s Phil Muncaster. Keep your cool and ignore the hype.