While the rabid crypto frenzy in recent years has fundamentally changed the way we view money, and its role as a medium of exchange, this fringe new technology has also brought with it a slew of potential threats for users, investors, and consumers alike.
Being decentralized, and with little-to-no regulatory oversight, cryptocurrencies have long attracted cybercriminals, who’ve essentially turned it into a playground for all types of fraudulent activities, scams, and even outright thefts.
In this article, we take a deep dive into some of the most common types of frauds in the crypto ecosystem, along with ways of spotting them, and staying safe, especially for amateur users who are just exploring cryptocurrencies.
Common Types of Cryptocurrency Scams
Cybercriminals use a variety of different tactics to trick people into handing over their crypto assets, with the most common ones being phishing scams, fake wallets, and ponzi schemes.
- Phishing Scams
Although fairly common in the banking and financial services industry, phishing scams have been taken to a whole new level in the cryptosphere.
At its core, a phishing attack involves sending emails or text messages to unsuspecting users, often under the garb of a well-known, and respected source. This involves masquerading as an email from the user’s bank account, internet service provider, crypto exchange, and more.
If the user falls for it, and acts on the email by clicking on the link, they are taken to a landing page, that once again imitates an official page, asking users to provide sensitive information such as their secret keys, seed phrases and more, which can be used to steal their crypto holdings.
Phishing emails are often automatically categorized as spam, and when you click on any such emails, most modern browsers should send out an alert. However, if all these things fail, make it a point to never disclose your password, private key, or seed phrase to anyone, or on any unsecured web page.
- Fake Wallets
Another common crypto scam involves the use of fake wallets, wherein scammers create a fake wallet to resemble a real wallet, and when users transfer their money, it is then stolen by the scammer, often leaving the user with no recourse.
Wallets are key for transactions and storage of crypto assets, and as a result, it is recommended that you use only trusted and reputed wallets with millions of users. Make sure to check up on the website and developer of a wallet before downloading it.
With that said, however, if your goal with crypto is merely speculative trading, you could consider giving wallets a miss altogether.
With a closed system such as SoFi Invest, that offers a secure platform for cryptocurrency trading, with protected holdings against fraud and theft, and most other potential threats, there is no reason why you should consider anything else.
- Ponzi Schemes
The speculative nature of cryptocurrencies have given rise to innumerable ponzi schemes over the past few years.
Following the core modus operandi of most ponzi schemes, investors are promised high returns for little risk, with the perpetrators using funds from new investors to pay off old investors, in order to maintain a semblance of authenticity.
Over time, as new money flows start to dry up, the scammers pack-up their bags and escape, leaving 1,000s of investors no way of gaining access to their funds. The best way to stay clear of such scams is to live by this mantra – “If something is too good to be true, it probably is!”
Final Words
Despite the massive ground gained by cryptocurrencies in recent years, there are a lot of intricacies, particularly surrounding safety that need to be ironed out.
Innovators in the ecosystem are constantly working to address these challenges, but until then, consumers best abide by the measures discussed above in order to stay safe.
