Cryptocurrency investors have seen tremendous gains in recent history.
Unfortunately, this makes the market ripe for con artists who have no problem scamming money from people who don’t understand the ins and outs of the cryptocurrency market.
If you’re concerned about the possibility of potentially falling victim to Bitcoin scams, then it’s worth the time to learn what types of cons exist.
Let’s first explore how crypto scams work.
Con artists inside the cryptocurrency industry try to get their victims to send Bitcoin to them by promising fantastic gains.
The unsuspecting victim typically sends their cryptocurrency to an outside source or invests directly into the scammer’s platform. Of course, the scammer disappears with any Bitcoin or other cryptocurrency and leaves their victim high and dry.
Here’s a key point to understand: You can’t reverse a Bitcoin transaction.
In a world where fiat-based credit cards or banks easily reverse charges, it’s vital to know that once you transfer your Bitcoin to another person, you can’t get your Bitcoin back.
Can you see why scammers love that aspect of cryptocurrency? They know that they’re free and clear once they scam you out of your funds.
Here are five of the most common crypto scams to know to help avoid catastrophe.
Hacks on Social Media
The FBI has warned about cryptocurrency scams related to COVID-19. These cases often involve people getting contacted and told that they must deposit Bitcoin to avoid their “dirty secrets” from going public.
Bitcoin scammers moved into the social media world during the summer of 2020 by hacking into the accounts of Twitter employees.
This access allowed them to pose as celebrities. Accounts that looked like they came from people like Elon Musk said that the famous personalities would match all Bitcoin deposits.
The result? Over $110,000 in stolen Bitcoin. Always wait to ensure the validity of any crypto-related messages that you might see posted on social media.
Scams Involving Crypto Exchanges
Be careful about investing in exchanges until after you’ve verified their reputable track records.
Exchange scams become quite lucrative for the con artists running them because many different investors put their funds before the process comes to completion. Fake crypto firms promise amazing profits to lure in their victims. They then close shop and run off with the profits.
Pay attention to claims made in these instances and have patience. Don’t invest until you’ve allowed the exchange to operate for a while and prove its legitimacy.
Decentralized Finance (DeFi) Rug Pulls
DeFi platforms work similarly to CDs or savings accounts. They let crypto investors earn interest after staking funds into the DeFi network. Investors can receive interest payments more favorable than the rates provided by most fiat-based banks.
Con artists have figured out how to scam investors into locking up their cryptocurrency with unreputable companies.
They promise investors big returns in exchange for lending their funds and then disappear with the money. Investigate any DeFi platform thoroughly before getting yourself involved.
The altcoin markets work like penny stocks. They’re cheap, easy to get involved with, and prices go soaring when several large players trend it that way.
Crypto scammers have turned to what’s called the Altcoin pump and dump, where a big influencer purchases a big amount. They then “pump” up how high this particular coin will go to those following them.
Everyone piles into the position, and then the con artist exits and leaves all the other victims without anything to recoup.
Non-fungible (NFT) Scams
Non-fungible tokens exist on a blockchain and might include:
- Theater tickets
- Video game skins
- Sports highlight videos
Marketplaces or users can transfer these NFTs back and forth. Someone could duplicate a video or image, of course. However, there’s a hashtag code that points to the location of each non-fungible, so it can’t get duplicated.
In an NFT scam, the con artist hacks your account, transfers the hashtag code out of your account, and you’re now out of luck when it comes to getting it back. A variation is when scammers offer buyers fake non-fungible tokens.
Your best bet is to use what’s called two-factor authentication and only buy NFTs via legitimate platforms.
Malware and Viruses
Scammers might simply use computer malware or viruses to get into your cryptocurrency wallet. They can then transfer everything out once they have access to your account.
Again, you wouldn’t have any recourse because these transfers can’t get reversed. Always keep your virus and malware detection software up to date and use two-factor authentication. Two-factor authentication might seem like a pain, but you never know when it will save you from a terrible situation.
Avoid Becoming a Cryptocurrency Scam Victim
Keep your guard up going forward when it comes to investing in crypto. Keep these types of scams in mind and research any investment before going forward.
You can keep your wallet safe if you use a combination of research, intuition, and security protocols.