Recently, cryptocurrencies have gained more recognition and momentum. People are investing in cryptocurrencies with the expectation of big profits.
At the same time, a report by CBS News states that cryptocurrency scams have soared 1,000% since October 2020. Americans have lost more than $80 million to these scams.
But why are people falling prey to cryptocurrency scams?
Well, a substantial part of our population doesn’t understand cryptocurrency very well. They are following the hype that cryptocurrency millionaires have created. The scammers are taking advantage of this situation. It has become a cakewalk for them to con the people who are a novice in cryptocurrencies.
So, if you are interested in cryptocurrencies, you need to be aware. Here, we have listed some of the most common cryptocurrency scams and tips to avoid them.
1. Fake COVID-19 vaccine marketplaces
Experts say that vaccination will reduce the disease severity in COVID-19. So, more and more people are lining up to get jabbed. But this situation has become a golden opportunity for scammers.
Cybercriminals are posing as representatives of approved COVID-19 vaccine manufacturers by creating fake websites. They claim to provide vaccines in exchange for cryptocurrencies.
For example, many people in our country are receiving emails and texts to answer a limited-time survey about the Pfizer, Moderna, or AstraZeneca vaccine. In return, the respondents are offered a free reward, but they are asked to pay a “shipping fee.” The FTC says it’s a scam, and people should not respond to such emails or texts.
Apart from losing money, many people are becoming victims of identity theft and phishing attacks, too. So, keep the following things in mind:
- Always follow trusted sources like the official website of CDC for any information.
- Check with your local or state health departments to know about vaccination sites.
- Don’t pay upfront when signing up for a COVID-19 vaccine.
- Never share your personal information with anyone claiming to be from an insurance company, healthcare provider’s office, etc.
INTERPOL Secretary General Jürgen Stock said, “From the very beginning of the pandemic, criminals have preyed on people’s fears in order to make fast cash. Fake vaccines are the latest in these scams, which is why INTERPOL and HSI are warning the public to be extra vigilant. Anyone ordering a vaccine online rather than obtaining it from their national provider, will be buying a fake product.”
If you come across any fraudulent activities about COVID-19, mail to firstname.lastname@example.org.
2. Rug Pulls
Social media has become a powerful tool to share opinions. But it has become a powerful tool for spreading misinformation as well.
Scammers use different social media profiles to promote their cryptocurrency investment schemes. They also create fake profiles of celebrities and financial advisors to endorse their schemes.
Not only that, these scammers hack real social media handles of high-profile public figures, too. A 2020 BBC report states that major US Twitter accounts, including Elon Musk, Jeff Bezos, Bill Gates, and Kanye West, were hacked in a Bitcoin scam. Scammers used these hacked accounts to ask people to send crypto assets in exchange for a higher payout.
Once people invest in those cryptocurrencies, scammers close their accounts and vanish with their money. Eventually, the investors are left with nothing. But in the crypto world, this type of scam is known as “rug pull.”
For example, in 2021, SafeTrade, a cryptocurrency, claimed to be “rug-proof.” When people started buying it, the organizers sold their coins and fled with billions of dollars.
So, before investing in cryptocurrencies, make sure it’s what you really want to do. Don’t invest to avoid FOMO (Fear of Missing Out).
Also, make sure to do proper research. Go through the white paper created by the Initial Coin Offering (ICO) of the cryptocurrency. It will contain various information, like details of the project, how many coins the founders will keep, minimum investment amount, etc.
The values of cryptocurrencies change constantly. It can be worth a few thousand dollars today and some hundred dollars tomorrow. So, there is no guarantee that you will earn a hefty profit.
Besides, anyone with a decent knowledge of Blockchain technology can create cryptocurrencies. So, if you come across a new coin, do proper research. Avoid investing in the coins when any influencer, who rarely posts investment advice, promotes a cryptocurrency suddenly. It can be a scam.
3. Fake exchanges
According to Forbes, as of September 2021, the top 10 cryptocurrency exchanges are Binance.US, Coinbase, Kraken, Crypto.com, Gemini, Gate.io, KuCoin, Bitstamp, Bittrex, and bitFlyer.
These exchanges have proven to be trustworthy with time. But fake crypto exchanges pose as legitimate ones and contact people for investing. The scammers can show fake returns resulting in high amounts of profit. Ultimately, they steal funds and vanish with people’s hard-earned money.
For example, the BitKRX fake crypto exchange in South Korea. In 2017, the authorities exposed this fake exchange named after Korea Exchange (KRX), a legitimate trading platform in the country. Investors were lured to make huge investments in return for big profits.
So, before creating an account in a crypto exchange, keep the following things in mind:
- Reputable crypto exchanges usually have an established history among the cryptocurrency community.
- Legitimate exchanges typically don’t ask for high registration or withdrawal fees.
- Don’t fall prey to repeated calls from crypto exchanges asking for more investment. It can be a scam.
- If an exchange assures you of guaranteed returns, especially within a short period, it can be fake.
Scammers send emails to numerous people, and those emails look like the genuine ones sent from crypto exchanges or wallets. These unsolicited emails usually state that there is some problem with your account. You can fix the issue by clicking the provided link.
If you click such links, they will redirect you to a website similar to the original website of your crypto exchange or wallet. Once you enter your account information, the scammers will vanish with your money.
For example, a 77-year-old Indiana woman lost almost $12,000 to a cryptocurrency phishing scam. She received an email stating that there was some problem with her PayPal account. To solve this problem, she had to call a number. She called and was asked to invest $3,500 in Bitcoin on the popular exchange platform Coinbase.
The person on the other side also asked for access to her smartphone through a screen-sharing process. The lady shared her PayPal account details with her, and the scammer siphoned off $8,800, apart from $3,500 for buying Bitcoin.
So, to stay away from phishing scams, do the following things:
- Recheck the domain name and make sure you enter the official website of a crypto exchange or a wallet.
- Don’t click links received through unsolicited emails.
- Don’t share your private keys if you receive calls claiming to be an employee of your crypto exchange.
The bottom line is, cryptocurrency is not a bad investment option. But since it’s a new thing, you need to research before investing. Remember, cryptocurrency payments are irreversible. That means, once you make payments, you won’t get it back unless the receiver sends it back to you.
So, before making cryptocurrency payments, verify where you are making the payment.
Hopefully, after going through this article, you will be aware of the common cryptocurrency scams and won’t fall prey to such scams. If you know anyone who has become a victim of a cryptocurrency scam, ask them to visit reportfraud.ftc.gov.
About the Author
Lyle Solomon is a licensed attorney in California. He has been affiliated with the law firms in California, Nevada, and Arizona since 1991. As the principal attorney of Oak View Law Group, he gives advice and writes articles to help people solve their financial problems.
- Cryptocurrency scams have soared 1,000% since October https://www.cbsnews.com/news/bitcoin-cryptocurrency-investment-scams
- The top 3 cryptocurrency scams of 2021 https://www.techrepublic.com/article/the-top-3-cryptocurrency-scams-of-2021
- Online vaccine scams: Homeland Security Investigations, INTERPOL issue public warning https://www.ice.gov/news/releases/online-vaccine-scams-homeland-security-investigations-interpol-issue-public-warning
- Ignore bogus COVID vaccine survey https://www.consumer.ftc.gov/blog/2021/03/ignore-bogus-covid-vaccine-survey
- Major US Twitter accounts hacked in Bitcoin scam https://www.bbc.com/news/technology-53425822
- Crypto Scammers Rip Off Billions as Pump-and-Dump Schemes Go Digital https://www.bloomberg.com/news/features/2021-07-08/crypto-scams-rug-pulls-bitcoin-hacks-billions-lost-when-shit-coins-go-to-zero
- The Best Crypto Exchanges Of 2021 https://www.forbes.com/advisor/investing/best-crypto-exchanges/
- Woman, 77, Loses $12,000 in Scam Involving Bitcoin Crypto https://www.newsweek.com/woman-77-loses-12000-bitcoin-crypto-scam-coinbase-paypal-1606496#:~:text=A%2077%2Dyear%2Dold%20+Indiana,activity%20on%20her%20PayPal%20account.