Cryptocurrency scams: What to know and how to protect yourself – We Live Security

As you attempt to strike it rich in the digital gold rush, make sure you know how to recognize various schemes that want to part you from your digital coins

The world seems to have gone crypto-mad. Digital currencies like bitcoin, Monero, Ethereum and Dogecoin are all over the internet. Their soaring value promises big wins for investors (before the coins prices plunge, that is). And the fortunes to be made by mining for virtual money have echoes of gold rushes in the 1800s. Or at least, thats what many, including a long list of scammers, will have you believe.

In reality, if youre interested in cryptocurrency today, youre quite possibly at a major risk for fraud. This is the new Wild West a lawless, unregulated world where bad actors often have the upper hand. But normal rules for fraud prevention apply here too. Everything you read online should be carefully scrutinized and fact-checked. Dont believe the hype and youll stand a great chance of staying safe.

Fraudsters are past masters at using current events and buzzy trends to trick their victims. And they dont come much more zeitgeist-y than cryptocurrency. Media stories and social media posts are partly to blame, creating a feedback loop that only adds to the hysteria over virtual currencies. The result? Between October 2020 and May 2021, Americans lost an estimated $80m (71m) to thousands of cryptocurrency scams, according to the FTC. In the UK, the figure is even higher: police claim that victims lost over 146m (172m) in the first nine months of 2021.

Why are scams on the rise? Because:

If you have virtual money safely stored in a cryptocurrency exchange, it may be at risk from hackers. On numerous occasions threat actors have successfully managed to extract funds from these businesses, sometimes making off with hundreds of millions. However, usually the breached companies will promise to recompense their blameless customers. Unfortunately, there are no such assurances for the victims of cryptocurrency fraud. Fall for a scam and you may be out-of-pocket for a lot of money.

It pays to understand what these scams look like. Here are some of the most common:

This is a type of investment scam where victims are tricked into investing in a non-existent company or a get rich quick scheme, which in fact is doing nothing but lining the pocket of the fraudster. Cryptocurrency is ideal for this as fraudsters are always inventing new, unspecified cutting edge technology to attract investors and generate larger virtual profits. Falsifying the data is easy when the currency is virtual anyway.

Scammers encourage investors to buy shares in little-known cryptocurrency companies, based on false information. The share price subsequently rises and the fraudster sells their own shares, making a tidy profit and leaving the victim with worthless stocks.

Scammers hijack celebrity social media accounts or create fake ones, and encourage followers to invest in fake schemes like the ones above. In one ploy, some $2m was lost to scammers who even name-dropped Elon Musk into a Bitcoin address in order to make the ruse more trustworthy.

Fraudsters send emails or post social media messages promising access to virtual cash stored in cryptocurrency exchanges. The only catch is the user must usually pay a small fee first. The exchange doesnt exist and their money is lost forever.

Cybercriminals spoof legitimate cryptocurrency apps and upload them to app stores. If you install one it could steal your personal and financial details or implant malware on your device. Others may trick users into paying for non-existent services, or try to steal logins for your cryptocurrency wallet.

Sometimes the scammers even manage to fool journalists, who republish fake information. This happened on two occasions when legitimate news sites wrote stories about big-name retailers preparing to accept certain cryptocurrencies. The fake press releases that these stories were based on were part of pump-and-dump schemes designed to make the fraudsters shares in the mentioned currencies more valuable.

Phishing is one of the most popular ways fraudsters operate. Emails, texts and social media messages are spoofed to appear as if sent from a legitimate, trusted source. Sometimes that source for example, a credit card provider, bank or government officialrequests payment for something in cryptocurrency. Theyll try to hurry you into acting without thinking.

The best weapon to fight fraud is incredulity. Unfortunately, we live in an age when not everything we read online is true. And quite a lot of it is explicitly crafted to trick and harm us. With that in mind, try the following to avoid getting scammed:

The world may have gone cryptocurrency-crazy. But you dont need to join in. Keep a cool head and ride out the hype.

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Cryptocurrency scams: What to know and how to protect yourself - We Live Security