According to Slowmist Hacked and Atlas VPN, cryptocurrency hackers stole over $3.5 bln in 2022. By 2025, crypto criminals will launder over $10 bln, says Elliptic Connect. Criminals benefit from the growing number of people who use cryptocurrencies to avoid banking restrictions or make a profitable investment. But crypto newbies do not think about security and become an easy prey for scams, especially given that many of those scams are quite ingenious: criminals can receive sensitive data from dating apps, steal money posing as charities, and extort bribes pretending to be government agencies. In this article, we will talk about the common and dangerous cryptocurrency scams to watch out for.
Classic crypto scams
Phishing URLs, hacked passwords and fly-by-nights are the most common traps for users. Newbies find them unobvious, thus making themselves an endless source of money for scammers.
For instance, this scheme is quite popular: a user comments on a post in a major channel devoted to investment, and the next day receives a message from someone presenting themselves as the admin of the channel or a famous person. Scammers use the admin’s photo and a similar name and suggest the user purchases courses, joins a profitable deal, etc. Credulous subscribers swallow the bait.
Another combination that has gotten popular over the past year is the promise of revenue from exchange rate speculation, that is, crypto arbitrage. Criminals promise to share the best p2p exchanges and fob the user off with a fake one. To gain the trust of the user, they can allow them to test transactions of small amounts: the user earns, say, $3 on $100. Then, they offer to raise the stakes and trade bigger amounts such as $1,000. Many people have lost their savings and the desire to recoup losses makes them careless. They agree and lose the entire sum. It is impossible to cancel the transaction, the exchange does not reply to messages and the scammers pretend that they have also lost money.
The third, very popular, scenario is the sale of illiquid tokens. Here, various schemes can be used: scammers send invites to their private channel through straw parties or advertise themselves in blogs. Naïve users believe the legendary exclusive insights such as “today is your only chance to invest in a super promising project which will enter major exchanges tomorrow and multiply your investment by 100.” So, they buy worthless play money that cannot be resold.
Scammers also earn millions of dollars through dating apps and social networks. Last month, a man swindled over $100K out of a US female he met on Tinder. He began flirting with her and convinced her to invest money in fake crypto schemes. In a similar incident, a resident of the UAE lost $60K through the same scheme, known as the ‘pig butchering scam,’ with criminals luring victims into digital relationships and eventually taking the money.
Scammers also use rather uncommon and atypical frauds schemes, which are becoming more common nonetheless.
For instance, criminals often pretend to act on behalf of regulators or corporations, and make calls or send letters asking victims to register by clicking on a link or specifying payment details. However, they manage to constantly invent new fraud techniques, such as stealing cryptocurrency using a tax scam. The swindlers pretend to be staff members of the Federal Financial Monitoring Service (Rosfinmonitoring), demanding that victims “legalize crypto income” by withdrawing money from crypto exchanges to banks, and claiming they need to pay a tax.
In another scheme, swindlers blackmail users, accusing them of supporting extremist organizations or money laundering activities. To do so, criminals find web users who accept crypto payments for their products and services. They contact a user while pretending to be a law enforcement officer, claiming their address is suspected of being involved in financing extremist organizations, and blackmail the victim into paying a bribe in order to drop the case.
Scammers may avoid contacting you personally, with fake news being enough for them to create a stir – such as the claim that the Chairperson of the U.S. Securities and Exchange Commission, Gary Gensler, resigned from his position. The news, which quickly spread across the media and prompted investors to immediately adjust their portfolios, turned out to be an AI-generated fake.
Certain new scams do not even require high tech. Moscow scammers have already gone into full swing using the ‘triangle scheme.’ They contact a currency exchange office saying they will send a cash courier, and ask to transfer crypto to their account. Then they use a fake exchange office account to contact some user, promising they will transfer crypto to him as soon as he brings the cash. The totally unsuspecting user arrives at the operating currency exchange office to give his money to operators, who take him for a courier and send the crypto to the scammers’ address.
Crypto security basics
You can protect yourself even from the most uncommon crypto scams by taking the following steps:
- Keep your crypto wallet passwords in a secure place, most preferably as an encrypted file on a computer; if you use cloud services, choose a minimum of two different hosting services. Never write down your passwords in text files or on paper.
- Never click on suspicious email links or those sent by unknown people in private messages. Never download files sent to you unexpectedly.
- Do not use unverified sites for crypto trade: most often, they lure you by offering favorable exchange rates, which are not available on major exchanges and used only as bait for inexperienced users.
It is essentially important to remember that cryptocurrency is a very convenient financial tool that indeed provides money making opportunities. Yet, do not expect a miracle and generosity: a seemingly easy and lucrative offer most likely means you are about to be deceived, regardless of whether they tell you about a huge crypto contest win or provide you with an incredible insight into exchange operations.
By Alexei Chechukevich, crypto investor, founder of the Making Money with Crypto and CryptoMaster educational projects