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Maybe you've heard of digital currencies like Bitcoin or Ether but you have no idea what they are. The problem isn't limited to you. The best way to safeguard your finances from crypto scams and prevent yourself from becoming a victim of crypto scams is to familiarize yourself with the ways in which cryptocurrencies vary from more conventional currencies like cash.
What Is a Cryptocurrency Investment Scam?
Scammers target people who actively engage in or utilize cryptocurrencies for transactions in order to steal their money in a scheme known as a cryptocurrency scam.
Since most crypto assets aren't licensed or overseen by the government, it can be quite difficult to obtain your lost funds back from cryptocurrency scammers. It also clarifies why so many scam artists are venturing into the cryptocurrency market, where they may prey on the inexperienced without fear of consequences. It is the consumers' responsibility to ensure the security of the assets.
There are a lot of cryptocurrency frauds out there. Scammers are just as eager to steal your cryptocurrencies as they are your bank account dollars. The best way to protect your cryptocurrency holdings is to be aware of the times and methods you are most likely to be attacked, as well as the steps to take if you suspect a cryptocurrency is counterfeit.
Common Type of Crypto Scam
Con artists exploit cryptocurrency in a number of different ways. The following are some of the most common:
Scammers may create imitations of genuine cryptocurrency wallets or phony cryptocurrency trading platforms in order to defraud their victims. Most of the time, the domain names of these phony websites are somewhat comparable to the domain names of the legitimate websites that they are attempting to replicate. Due to the striking similarity between them and genuine websites, it can be quite difficult to differentiate between the two.
Online wallet details are a common target of phishing attempts in the cryptocurrency industry. Scammers are extremely interested in the private keys for cryptocurrency wallets because of the high value of the cryptocurrencies themselves. They employ a standard phishing approach whereby they email their victims with links that lead them to a fake website where they are tricked into giving over sensitive information. As a result of this information, the attackers can steal the cryptocurrency.
Pump and Dump Schemes
Email spamming and social networking sites like Twitter, Facebook, and Telegram are being used by scam artists to spread false information about a particular cryptocurrency or digital token. Market participants rush to buy the coins before they sell out, driving up the price. After they have been successful in driving up the price, the scam artists sell all of their shares, which results in a market crash since the value of the asset plummets so quickly. Sometimes this happens in as little as a few minutes.
Apps that are not legitimate but make the claim that they are affiliated with a certain cryptocurrency are one form of fraud that can occur in the cryptocurrency industry. In reality, they are fraudsters that are aiming to steal your money or your personal information from you. They may do this by guaranteeing a 400% return on your initial investment or by giving away free coins to new users.
You can avoid falling for these frauds by restricting your crypto software downloads to official app stores only, such as Apple's App Store or Google Play. If that isn't an option, verify the app's authenticity before installing it.
Scammers in the cryptocurrency industry frequently use celebrity or company name drops or claimed endorsements from influential people to get the attention of their victims. This can involve selling fake, nonexistent cryptocurrency to unsuspecting buyers. These scams can be rather complex, using techniques like fancy websites and publications that pretend to feature celebrity endorsements from well-known figures like Mark Zuckerberg.
Scammers use this tactic, known as a "giveaway scam," when they tell their victims that they will double or triple any amount of cryptocurrency they send them. Clever messaging coming from an account that, at first glance, appears to be legitimate on social media can provide an impression of legitimacy. This change, which is said to come around just "once in a lifetime," may convince some people to make a hurried transfer of funds in the expectation of receiving a return on their investment right away.
Blackmail and Extortion Scams
Blackmail is another tactic used by fraudsters. Emails are sent out threatening to reveal the recipient's private information or adult website usage unless the recipient shares private keys or sends cryptocurrency to the fraudster.
Cloud Mining Scams
When you mine using a cloud mining service, you pay a monthly fee plus a share of the revenues in exchange for using their mining hardware. This, in theory, makes remote mining possible for anyone without the need for expensive mining hardware. On the other hand, many alleged cloud mining services are either scams or inefficient at best, leaving you out of pocket or underwhelmed by your earnings.
How to Identify Cryptocurrency Scam?
If you are aware of what to look for, it is possible to detect fraudulent activities using cryptocurrencies quite fast. So, how exactly can one spot a fraudulent cryptocurrency scheme? Here are some warning signs to keep an eye out for:
There are always risks and rewards associated with any investment, and the cryptocurrency market is no exception. A red flag should be raised whenever you see a cryptocurrency deal that ensures you will make a profit.
To be legitimate, a cryptocurrency must have a whitepaper, which is one of the most vital parts of an ICO. The whitepaper should explain how the coin is supposed to work. Whitepapers that don't make sense or don't even exist should raise red flags.
Businesses of all sizes engage in self-promotion. Scammers in the cryptocurrency industry spend a lot of money on various forms of promotion to attract victims' attention. The goal is to raise as much money as possible as soon as possible, while also reaching the widest potential audience. If the promotion of a cryptocurrency offering seems too pushy or makes unproven claims, you may want to reconsider and do some additional research.
How to Protect Yourself from Crypto Scam?
There are a variety of precautions you can take to protect yourself from fraud. If any red flags appear, you should not interact with the message in any way, including clicking on links, phoning numbers provided, or giving money. Moreover:
Do Your Research
There is no need to worry about the authenticity of the most popular cryptocurrencies. But if there is a cryptocurrency you want to invest in but are unfamiliar with, you should learn more about it. Check whether or not a whitepaper is available for review, find out who the decision-makers are and how the system works, and look for independent recommendations and testimonials. Find a trustworthy and complete list of fake cryptocurrency exchanges to check for fraud.
Protect Your Crypto Wallet
The only way to store the private keys needed to buy cryptocurrency is in a wallet. If a corporation asks for your keys in exchange for an investment opportunity, you can assume it's a scam. Keep your wallet's keys secure.
Invest in Things you Understand
Before selecting whether or not to put money into a particular cryptocurrency, it is critical to step back for a while and do some extra research if you are uncertain about how that cryptocurrency works.
Download Apps from Official Platforms
You should feel comfortable downloading apps from the Google Play Store or the Apple App Store, despite the fact that some fraudulent apps may make it there.
Scams involving cryptocurrencies are particularly frustrating since it is very impossible to get money back once it has been lost. At this time, there is no regulatory framework in place for cryptocurrencies. They are essentially the equivalent of the Wild West in the financial sector.
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.