Cryptocurrency markets have experienced a resurgence following the presidential election, with coins such as Bitcoin, Ethereum and dogecoin leading to charge. The price of one bitcoin, for example, recently blacked out $100,000 for the first time.
Experts attribute this trend to several factors, including President-elect Donald Trump's favorable comments about cryptocurrencies on the campaign trail, renewed interest from retail investors and increased institutional adoption.
Crypto is notoriously unstable. The value of digital assets can fluctuate wildly in a matter of days or hours, making them an exciting and high-risk investment. But there is another dangerous side to the crypto-boom: the resurgence of crypto scams.
Crypto represents a golden opportunity for fraudsters. The crypto market is largely unregulated and once a transaction is made, it is almost impossible to reverse. That means if a scammer makes off with your crypto, there's not much you can do to get your money back.
If you're actively investing in crypto or keeping an eye on digital currencies, make sure you know how to spot these get-rich-quick schemes and other tricks.
Top Cryptocurrency Scams to Watch Out for
The potential high payout of crypto attracts a multitude of fraudsters. In 2023, crypto scams cost victims $5.6 billion. according to the FBI. These are some examples of common crypto scams.
Phishing attempts
A phishing scam tries to get you to reveal sensitive personal or financial information by sending you a fake email, text message, or phone call.
Crypto phishing scams take many forms. For example, it's common for bad actors to impersonate legitimate exchanges to try to trick you into sharing your private key — a unique password that gives you access to your crypto — by prompting you to click on an embedded link in a text or email.
Other examples of crypto-related phishing attempts, according to the FTCinclude:
- Celebrities contacting you with a cryptocurrency opportunity. This happens on social media, but a real celebrity is unlikely to contact you with a business or investment opportunity.
- An investment manager offers to handle your portfolio. They promise to increase your money, but only if you transfer crypto to them first.
- A new or established company is entering the crypto space. You may be contacted by a scammer claiming that a company is diving into crypto and offering a new coin or token. If this is true, it would be widely reported by the media.
Social engineering
Scammers can also build deep bonds with you and then try to manipulate your emotions to make you make a rash decision, such as getting into a new type of crypto.
“In a bull market, scammers pander to human greed, promising high returns and exploiting the fear of missing out.” .
Percoco added that investors should be wary of high-pressure tactics. “Scammers know that if you end up doing nothing, they lose.” Take your time and research the possibilities carefully.
Kilim also pulls fake tokens
Developers often create new tokens designed to look like legitimate crypto coins to entice investors to buy cryptocurrencies. Once purchased, the scammer takes your money and disappears, leaving you with nothing but a counterfeit token.
Many times this scam occurs when bad actors encourage investors to act quickly to get into a new crypto project before the price skyrockets. If you are not sure if a token is legitimate, be sure to research the asset, its website, the project founders, and the transaction activity of the digital coin. If there is no website or if the creators of the project are anonymous, this may signal a high risk.
Bitcoin ATM Scams
In this scam, a cybercriminal tries to entrap you by posing as law enforcement or a financial institution. The scammer may tell you that you have to pay a fine or that the bill is overdue. To avoid legal action, the scammer directs you to use a Bitcoin ATM to send them funds.
Legitimate subjects will never request bitcoin ATM payments. You should completely ignore such requests.
What if I fall for a cryptocurrency scam?
If you fall for a cryptocurrency scam, you are unlikely to get your money back. Part of what makes these scams attractive to cybercriminals is that cryptocurrency transactions are irreversible. Money is also difficult to track once it is sent because fraudsters can transfer it to any part of the world.
“Investors should exercise caution and conduct thorough research before engaging in any cryptocurrency platform or investment opportunity,” said Jacqueline Cooper, CEO of the Blockchain Law Institute.
However, you should still report the scam to help catch the hacker and help others avoid the same fate. To report a cryptocurrency scam contact:
- The FBI in www.ic3.gov.
- FTC in ReportFraud.ftc.gov
- your local attorney general's office.
- If applicable, the legitimate crypto exchange company you used to send funds.
While most scams aim to steal cryptocurrency, they can also compromise your personal information. Social engineering tactics often elicit sensitive details, which can lead to identity theft and wider financial fraud.
Think about it freezing your credit free with Experian, TransUnion and Equifax to prevent fraudsters from opening new lines of credit in your name.
Education is your best defense against crypto scams
If you choose to invest in crypto, you should use only verified cryptocurrency exchange. Experts suggest investing only what you are comfortable losing.
Never click on links sent to you via email, text message or on social media and do not provide your personally identifiable information willingly. If something doesn't feel right and you're under pressure to make a quick decision, consider it a red flag. Always take your time when making any financial decisions.
By staying informed, verifying platforms and protecting your personal information, you can confidently prevent crypto scams and navigate the world of crypto while minimizing risks.