The crypto world naturally contains a degree of risk. After all, its value is based mainly on public perception, which can change at any time.
As many savvy investors know and accept, digital coins might fluctuate from one day to the next. Unfortunately, as cryptocurrency gains exposure and popularity, there are more crypto scams today than ever. For example, in February 2022, the cryptocurrency exchange platform Wormhole lost $320 million after a cyber attack. In addition, according to a report by the Federal Trade Commission, cryptocurrency scammers have stolen more than $1 billion since 2021.
When you know what to look for, you can learn how to keep your crypto investments safe. Today, we’re sharing a few tips on how to avoid getting swindled as you grow your crypto wallet.
Crypto Scams of The Past
Before diving into how to keep a scammer at bay, let’s look at some of the most significant crypto fraud cases of the past. If you recall, the biggest blunder of 2020 was the faux Elon Musk Bitcoin “giveaway” on Twitter.
The so-called giveaway Tweet linked to a timed contest wherein Musk seemingly offered to double anyone’s Bitcoin. While it appeared to originate from Musk’s Tesla team, it was indeed a scam. One man lost 10 Bitcoin valued at around $564,000.
While hoaxes like these are devastating enough to send a chill down your spine, they’re unfortunately not as rare as you think. In fact, blockchain analysis company Whale Alert (which tracked the Musk scam) reports they’re on the rise. In 2020 alone, more than 10,000 people lost money on similar online “giveaway” scams.
Let’s look at similar deception types that hit in 2021.
Squid Game Tokens
In September 2021, Squid Game hit Netflix. It immediately sparked a viewer craze and a “new” form of cryptocurrency. Deemed the “Squid Game Token,” the alternative coin was utterly unauthorized, yet it rose in value rapidly.
When it debuted, one token was worth just a few dollars. But, in a matter of weeks, it was worth $3,000. The only issue? It was illegitimate from the very beginning.
The cryptocurrency developers were not legally permitted to use the Squid Game name in their tokens. Not only that, but they devised an elaborate anti-sell-off strategy that left early investors with tokens they couldn’t get rid of. Known as a “rug pull,” this happens when token promoters lure in buyers, stop all trading activity, and then become rich off the sales.
The scam was exposed in November 2021. Unfortunately, the token collapsed the same month, only after its developers raked in a cool $3.38 million.
Poly Network Scam
Poly Network is a smaller DeFi platform that crypto investors use to facilitate peer-to-peer transactions. In August 2021, one hacker discovered an error in the forum that allowed them to transfer more than $600 million to their account.
In an unexpected twist, the hacker reached out to Poly Network a few weeks later, explaining the reasoning behind the massive heist. First, they explained that the intent was to reveal how easily someone could hack a network like Poly. Then, they proceeded to give the money back.
Almost all of the nearly $610 million is back in Poly’s hands. While the return is admirable, many analysts predict that the hacker found it too challenging to launder such an enormous amount.
In 2021, social media influencers were unknowingly behind some of the biggest cryptocurrency scams of the year. While most of those setups were elaborate “pump and dump” schemes, some had higher stakes than others.
Take the infamous SaveTheKids token, for instance. In June 2021, four members of the high-profile e-sports organization, FaZe Clan teamed with YouTube influencer and rapper, RiceGum to promote a new form of cryptocurrency. The cryptocurrency was called SaveTheKids and marketed as a charity-based token; the campaigns were in-depth and elaborate.
As you might expect, it took off immediately. A token that can help buyers increase their income while also benefitting the less fortunate seemed like a surefire win. However, they realized this was another “rug pull” scheme in a matter of days.
That early group of promoters, who held most of the tokens, conducted a significant sell-off that left them with a profit but made the token essentially worthless. As a result, several members of FaZe Clan were terminated, After an internal review.
Different Forms Of Crypto Fraud
There isn’t a one-size-fits-all type of crypto scam. Instead, hackers will use various methods to trick unknowing investors into sharing their data or hard-earned tokens. Let’s review some of the most common ways they’ll try to sneak into your system.
It might start innocently enough. For example, you’re listening to an influencer talk about crypto or reading a reputable article. Then, you click on a link that looks equally genuine.
Suddenly, you find yourself hacked with nowhere to turn. Cybercriminals have become so sophisticated that they can replicate the look of nearly any site, prevalent ones with lots of daily visitors. So double-check any link you see, and carefully type any web address to avoid falling victim to this type of scam.
Imposter Social Media Accounts
As we saw with the Elon Musk mixup, it’s too easy for crypto hackers to impersonate anyone. So while you can never be 100% sure who’s behind the keyboard, use extra caution when engaging a celebrity or influencer.
If prominent figures advertise outlandish offers via Twitter or Facebook, then assume it’s a bot trying to steal your data and money. At the same time, look out for massive retweets or a large number of people claiming the campaign is legitimate.
Those could also be bots, and it’s always better to be safe and keep your coins than trust an online stranger and lose it.
If an app is in the Google Play or Apple App Store, it must be credible, right? Unfortunately, that is only sometimes the case, as scammers have advertised fake programs to appeal to mobile users.
While those faux apps are usually caught and removed relatively quickly, they can still do significant damage. So before downloading one onto your device, double-check the spelling, grammar, and branding elements. If anything looks off, then skip it.
Since the very first days of the internet, scammers have tried to strike through the inbox. So while you may be signed up to receive offers from an honest cryptocurrency company, always scan the subject line, email address, and spelling before opening anything.
Then, take a close look at the branding on the email. Do the fonts, symbols, and colors look the same as those you’re used to seeing? If you’re even the slightest bit unsure, avoid clicking on any links.
Reach out to someone at the company to verify that they sent the message. Be especially cautious about any email that advertises a new initial coin offering or ICO. Scammers will often use these announcements as a way to steal your funds.
Tips To Stay Safe In The Crypto Space
While those top crypto scams are sobering, they don’t have to happen to you. There are many ways to protect your earnings and investment and ensure that you aren’t doing business with a shady platform.
Let’s take a look at some of our top safety tips to keep in mind.
Resist Eyebrow-Raising Promises
You’ve heard it said that not everything that glitters is gold. This phrase is especially true in the crypto world. So as you look for new investment opportunities, repeat this mantra to yourself often: If it seems too good to be true, it probably is.
Think back to that Elon Musk scam. Of course, the idea of an ultra-rich celebrity doubling your Bitcoin is fascinating. However, ask yourself, “Why would he want to do that? What does he gain from that kind of promotion?”
It’s easy to preach common sense in hindsight, but consider the end game of any developer or promoter who promises or guarantees enormous returns for your investment. The same goes for anyone who swears that your cryptocurrency will multiply in value as long as you follow steps X, Y, and Z.
Beware Of Investment Mentorships
While the crypto space can sometimes seem like the Wild West, the basic principles are relatively simple.
The tokens you purchase are your investment. If you manage to sell them for more than you originally paid, you make money. While some strategies can help you amplify these earnings, there are no “get rich quick” shortcuts.
As such, be wary whenever someone offers to help you learn a “better way” to invest in cryptocurrency. These interactions are usually a ploy for hackers to learn more about your holdings and eventually work their way into them.
Don't Trust Requests For Crypto Payments
It’s a common tactic used by hackers around the world. They’ll call, email, or text a crypto investor, asking for a payment using specific tokens or coins. They may claim to be someone you know or use the familiar name of a local government official or public figure.
They create a convincing case for their request, and it’s easy to get trapped by their claims. However, remember that no one of absolute authority will contact you this way. Unfortunately, these types of communications are becoming more sophisticated and deceptively realistic, so it’s essential to always be on guard.
Keep Your Sensitive Data Safe
Every crypto investor should hold two crucial pieces of information close. These include their private key and the seed phrase to their cryptocurrency wallet.
Despite how legitimate a request seems, never share that data with anyone. Instead, keep it as protected and secure as possible by storing it in an offline location that a hacker can’t access.
A cold wallet is ideal, but keep in mind that it doesn’t have a backup storage option. So if you misplace that hardware, you won’t be able to access your investment until you locate it. We also recommend enabling two-factor authentication on your crypto wallet and exchange where possible for extra security.
Carefully Review URLS
In today’s fast-paced Digital Age, we’re more hurried than ever. As such, it’s easy to shift into auto-pilot when we browse the web. We click links and hop on websites like it’s second nature, and most of us fail to examine the URL in our browser’s address bar closely.
Crypto scammers are savvy, and they know this. As such, one of the ways they can convince you to share your personal information is to send you to a website that looks legit but isn’t. This tactic is prevalent in crypto-based phishing scams.
Before you visit a site, check the letters and numbers you see. Phishers are known to swap symbols that appear similar, such as the letter “O” for the number zero or the number “1” for the letter “I.”
Even if it appears to be a site you’ve seen before, it’s always wise to double-check. Make sure the number and letter combos are exact and look for the small lock icon to the left of the URL. There should also be an “HTTPS” at the front of the site address.
Buy, Sell, Trade Crypto Safely & Securely
The crypto realm is entirely digital, making it attractive to online users who are genuinely interested in learning about new tokens and exploring investment opportunities. But, unfortunately, it also opens it up to dishonest scammers who are only out to make a quick buck, no matter the cost.
By exercising extra caution and avoiding interaction with anyone or anything that seems suspicious, you can keep yourself (and your money) safe from these crypto scams. Contact our team today to learn more about Bitcoin or how to protect your investment.