Where there’s money being made, there’s money being lost, and somewhere waiting in the wings, you can bet your bottom dollar that there’s an enterprise of scammers just looking for a weak spot or vulnerability to exploit. This is a fact of life, and business, and especially cryptocurrency, which has been particularly rife with scams over the last five to ten years as the market has boomed.
Let’s have a look at some of the most famous scams, and how you can do your best to avoid getting wrapped up in them.
Ah, one of the oldest tricks in the book. Phishing scammers will send an unsolicited email that appears to be from one of your trusted service providers, especially a bank, but in this case, your crypto exchange or wallet of choice. Within the email is a link to a website that looks eerily familiar, essentially a carbon copy of the real thing, but is instead a scam page.
What they want is for you to enter your login details so that they can gain access to your real account and steal everything.
- Check the email address twice before clicking the link
- Double-check the URL too – if it seems wrong it probably is
- Most providers won’t ask you to do the things the email is asking you to do, so check their policies
- If you have any doubts, contact the real provider immediately and report the scam
- NEVER give your private key to anyone!
Fake exchanges and wallets
Do you like owning cryptocurrencies? Good! So don’t use dodgy exchanges and wallets. Easier said than done? Sure. It’s hard, especially for new traders, to know which exchanges are reputable, which ones are too good to be true, and which ones want to grab your crypto when you least expect it.
In regards to exchanges, keep an eye out for:
- Unrealistic account opening offers
- Big discounts or bonuses for depositing large amounts
- Feeling pressured to make certain actions on your account
- Exorbitant fees and difficult withdrawals
When it comes to wallets, it can be even harder to spot a scam, as they’re very sophisticated and can even be found on both the Apple and Google app store. The wallets often work exactly as a wallet should, the problem is that you’ve just handed over your cryptocurrency to someone with devious intentions. Fortunately, these bad guys get taken down quickly, however, not always quickly enough…
Research is key:
- Use the market leaders and most well-reputed exchanges and wallets
- Look at the team behind the app, read reviews, and search for social discussion about them
- Don’t feel pressured into doing anything that doesn’t feel right
- It’s not roulette, don’t make a random pick when choosing exchanges and wallets
FAKE ICOs (Initial Coin Offering)
Anyone who has lost money on an ICO scam will already feel their heart rate rising, sweat coming to the palms of their hands, and shudder as they think of how unfortunate they were to be scammed. As Bitcoin grew and grew in value, scammers saw the potential to use innovation as a tool for stealing from early-adopters and crypto-enthusiasts.
For these early-adopters, rather than day-trade and try to profit on the margins, they bought coins from projects that were looking for funding, hoping that their launch would result in mega-profits. Many were successful and took a share of the tens of billions made each year on ICOs, but others were not so lucky, falling right into the sneaky traps set up by opportunistic scammers.
With a sprinkle of good marketing, some fake hype, and an innovative-sounding white paper, most crypto enthusiasts can be conned into supporting a technology that is really just a direct route to being scammed. In 2017, some estimate that around 80% of ICOs were actually scams – ouch! However, it’s hard to say sometimes whether an ICO was a scam, or whether they just failed to materialise on the technology promised.
- The development team
- The white paper
- The technology
- The purpose of the innovation
- How long the project has been in motion
Bitcoin blackmail scams
If hackers fail to get your bitcoin through the methods above, another tried and tested method is through blackmailing people. This usually starts with an email claiming to have incriminating evidence against the Bitcoin holder, such as their internet history, or they’ve accessed their webcam and caught embarrassing images. To end the blackmail, all they have to do is send some Bitcoin over to the scammers.
Fortunately for the potential victims, it’s just a scam, there is no evidence, and nothing will happen. However, the scammers know that if they email enough unsuspecting people, they will eventually strike gold with someone.
What to do in this situation:
- If an anonymous blackmail email comes through, Google the contents and see if it’s a known scam
- Delete the email and move on
- Use VPNs or Incognito when browsing the web
Much like email scams, malware is pretty old-school, but sadly for crypto-holders, some of the oldest tricks in the book are the most effective. Malware is a huge threat because it doesn’t go for your bank details, it goes for your crypto wallet and does everything it can to empty it. If the route-one attack doesn’t work, malware can also search a computer for documents containing a crypto wallet or exchange address, change that address to their address, and do it all without being spotted.
Another malware scam is a secret mining programme, but you will learn more about that further down this article.
Be smart and savvy:
- Invest in a decent anti-virus program (and keep it updated)
- Don’t open attachments in emails from people you don’t know
- Don’t download any programs that you aren’t 100% sure are legit
Pumps, dumps, and chumps
Two words – market manipulation. Whenever a crypto-trader mentions pumps and dumps, what they are really referring to is the practised method of organised groups of traders artificially driving up the value of an altcoin by buying it en masse. As these traders start buying the coin, others get wind of its popularity and start buying it too, as they don’t want to miss out. Then, suddenly, just as the price is flying up, the pumpers go ahead and dump their coin (sell it all), making a heavy profit.
In Forex and the stock market, this is very illegal, but when it comes to crypto, it’s harder to regulate and prove, but it happens on an almost daily basis. In fact, there are websites and forums where you can join a syndicate of pump/dump traders.
How can you avoid getting caught up in this scam?
- Steer clear of cryptocurrencies with a low market cap, with a low trading volume, but a suspiciously high price rise in recent days
- Don’t believe the hype (Public Enemy can confirm)
- Research before you buy
How can you spot the difference between a team of developers starting up a crypto project and a team of con artists starting up a crypto scam? When it comes to their websites, it’s incredibly hard to tell the difference, especially when the scammers are trying equally as hard as the developers to look completely legitimate. One small piece of evidence can help though, it’s called an https lock icon, and it is a small padlock on the URL bar that gives you some security
Now, imagine the development team has created a useful and viable technology and they want to share the news on their website, but a team of hackers, scammers, con artists, or whatever you’d like to call them, has identically replicated their website? In this case, you should check the address for any dodgy letters, and be wary about their payment methods.
Ever heard of cloud mining? It’s quite straight forward. It’s a piece of cloud software that allows you to use your computer to mine cryptocurrencies without really having to do anything or invest in expensive hardware. You simply rent some server space for a fixed rate and away you go, however, this enterprise has been taken advantage of by some cunning scammers.
A scam cloud mining server includes exorbitant fees and boastful promises, none of which they can actually deliver on. But, spotting a scam from a real cloud mining company can be tricky; one way to be savvy is to make sure there are no guaranteed profits. Also, remember that by going on their server, they may be able to access your private data.
Social Media Giveaway Scams
Hey, want some free, no-hitch, crypto? It sounds too good to be true, and usually, it is, especially when you see accounts on social media offering to give you plenty of crypto in exchange for some Bitcoin or Ethereum.
Of course, it’s incredibly unlikely to find a legitimate giveaway on social media, even if there are hundreds of comments thanking them for the freebies (these are fake accounts). If you do want some free crypto, look at some crypto airdrop websites, as there are startups who give away some tokens to gain interest in their project.
- Don’t send crypto to access the giveaway
- Check out the accounts ‘giving away’ crypto and those accounts posting positive comments
- Accept that some things are too good to be true
Cryptomood’s top five tips for avoiding cryptocurrency scams
- Use a cold or hard wallet to store your cryptocurrencies when not trading
- Use established and reputable crypto companies and exchanges
- Never, ever, give anyone your private keys
- Triple-check URLs
- Use 2-factor authentication when you can
Good luck and be safe out there!