Crypto Scams: How to Protect Yourself

Cryptocurrencies are currently very popular. More and more tokens are coming on the market. With the many new releases, fraudsters also have more opportunities to abuse. They pretend to be reputable providers to steal the coins from investors.

Often these scams are related to ICOs. How do you recognize crypto scams? And how can investors protect themselves against them?

Crypto not safe from fraud despite secure blockchain

Cryptocurrencies are not immune to fraud. Inexperienced investors often do not know where to be careful. They are lured in by discounts, freebies or celebrity endorsements.

From a technical point of view, blockchain technology is largely secure. Tokens are built on public blockchains and have visible transaction data. This data can be traced back to a person or bank account. However, this does not prevent fraudsters from finding new scams. Because new innovations such as cryptocurrencies are accompanied by new scams.

Social media scams

The prevalence of social media scams is huge: you can find numerous get-rich-quick get-rich-quick posts. For example, investing in cloud mining solutions or depositing 1 ETH and receiving 2 in return.

Perhaps the most well-known case of social media fraud occurred in July 2020, when the Twitter accounts of well-known individuals and companies were hacked. Some of the compromised accounts belonged to tech entrepreneurs Elon Musk and Bill Gates, investor Warren Buffett, boxer Floyd Mayweather and companies such as Apple and Uber.

The hackers gained access to Twitter’s admin console and published tweets from those accounts. In the posts, they encouraged subscribers to send money to a specific blockchain address. They promised that user contributions would be doubled and returned as a charitable donation. According to reports, 320 transactions were made within minutes of the tweets being published.

social manipulation

In this scam, hackers pretend to be agents of a well-known platform. This is how they get information and arouse interest in a special offer or a new token on the market. The target follows a link to a website that requires them to enter a wallet address, log into a platform, or provide their credentials on a fake platform. This is how the hackers get access data for the target person and can empty the wallets.

ICO Scams and Defi Carpet Pulls

New tokens are launched every day. New concepts appear every day on decentralized exchanges and defi exchange sites. The scammers’ main goal here is to get the victim’s cryptocurrencies in exchange for a worthless token. Often these schemes are promoted by paid groups of people to influence a larger audience of users. This can create a FOMO effect (fear of missing out) and artificially increase the token price very quickly. New investors to the market jump on the bandwagon and often see some short-term gains before the rug is pulled out from under them.

In this case, the token creators can cash in millions of dollars in cryptocurrencies in a matter of weeks, leaving investors with worthless tokens that cannot be traded.

Fake celebrity ads

Many celebrities have recently gotten involved in the crypto space, but which ads are legit and which aren’t? There are numerous fake websites promoting promotions and fake endorsements for unknown tokens or Bitcoin itself.

Elon Musk is a popular crypto scam candidate due to his affinity with the crypto space and his constant tweeting. There have been numerous reports of investors losing money on “Elon Musk Bitcoin Giveaways”. This is what happens when you don’t check the website you are reading the article on or research is not done.

No one, not even a famous person or company, will double an investment in Bitcoin or Ethereum with a one-time deposit.

New tokens with too big promises

Some have seen new tokens or platforms emerge with impressive branding and advertising. If you ignore the clever marketing and read the white paper carefully, you will realize that most of the tokens have already been distributed to the team. These team members are ready to get rid of tokens soon after the launch. Tokens that promise a lot rarely deliver. In addition, the founders are mostly anonymous.

recognize counterfeits

Fake accounts are easy to create and are often only used for a few days before being recreated again. If the account looks like a business account, you should check the URL and compare it to the link to the brand’s website for their official social media.

Lack of customer service or interactivity can only mean one thing: There is no one to help. If you are directed to an open Telegram channel, be careful.

Open Telegram channels are known gathering places for scammers posing as administrators or simply targeting unsuspecting investors. This happens, for example, by direct messages from people on social media with token offers, trading offers, trading signals, cloud mining or managing trading accounts.

You should never rely on a direct message offer. These should be immediately blocked and reported to the relevant social media platform.

How to stay safe online

Whether you’re banking online, investing and trading cryptocurrencies, or simply protecting your identity, there are a few basic rules you should follow to make yourself an uninteresting target.

  1. Two-factor authentication requires a 6-8 digit code from a separate mobile device to authorize a login on a website. 2FA should be implemented wherever it is available. The two minutes it takes to set up 2FA authentication can protect your entire online digital profile in the future.
  2. Links appear in our emails, text messages and social media every day. Users have developed “click before asking” muscle memory because they want to learn as much as possible as quickly as possible. Sometimes URLs are shortened to obscure their destination. These should be avoided unless they come from a reliable source.
  3. The key lies in research. One should learn to google known and unknown sources via social media, public tax records or other official public sources. You can often find out everything you need to know by typing “company name + scam” into the search engine.

The world may have gone crazy with cryptocurrencies. Get carried away, but keep a cool head.

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