As you can imagine, scammers are always devising new ways to steal money and the world of cryptocurrencies does not escape this maxim. Cryptocurrency scams peaked in 2021, with cybercriminals estimated to have made off with $14 billion worth of crypto, according to a Chainalysis report. But how can you spot these kinds of cryptocurrency investment scams? What should you do if you are a victim of one? Can you invest in cryptocurrencies without risk? We answer these and other questions throughout this blog.
The most typical types of Cryptocurrency frauds
The following highlights indicate the most common kinds or schemes of frauds that have been uncovered.
Pyramid Schemes
This is a form of financial fraud in which victims are duped into investing in a non-existent project or a "get-rich-quick scheme" that accomplishes nothing except fill the scammer's pockets. Scammers are always inventing "cutting-edge" technologies that are not completely defined in order to tempt investors and increase virtual earnings, and cryptocurrency is a good example of this.
Pumping and dumping
Scammers use fake information to induce investors to acquire crypto assets in unknown cryptocurrency ventures. The value of the assets increases as a result, and the fraudster sells his own shares, earning a tidy profit while leaving the victim with worthless shares.
Fraudulent celebrity endorsements
Scammers take over famous social media profiles or construct phony accounts to attract followers to invest in bogus schemes such as the ones described above. Scammers who placed Elon Musk's name on a bitcoin address to make the fraud look more authentic lost up to $2 million in one example.
Fraudulent trades
Scammers promise access to virtual money housed on a cryptocurrency exchange in emails or social media posts. The only disadvantage is that the user must generally pay a modest charge upfront. The Exchange does not exist, and your money is gone for good.
Fake applications
Cybercriminals impersonate reputable bitcoin applications and distribute them via app stores. If installed, it has the ability to steal personal and financial information as well as install malware on the device. Others may attempt to trick users into paying for non-existent services or steal logins from cryptocurrency wallets.
Bogus press releases
Scammers may sometimes trick journalists or opinion leaders into replicating bogus information. This occurred twice when credible news outlets published reports about well-known "retail" enterprises prepared to take certain cryptocurrencies. The false press releases that served as the basis for these stories were part of pump-and-dump schemes designed to increase the value of crypto assets held by fraudsters.
Identity theft or "phishing"
"Phishing" is one of the most common methods of deception employed by scammers. Emails, text messages, and social media messages are spoofed to make it appear as though they came from a legitimate and trusted source. Occasionally, this "source"—such as a credit card provider, bank, or government official—requires payment in cryptocurrency. It will always attempt to convey a sense of urgency so that the user will act immediately and without deliberation.
How to recognize a cryptocurrency scam
Keep your eyes wide open because there are always signs that someone is trying to scam you. We leave you a list with some frequent signs:
Guaranteed profits: There is no investment that can guarantee you profits, because this is part of the future and the future is uncertain. If the project in which you invest promises you huge profit, start to doubt.
Brief or non-existent documentation: Any cryptocurrency should have accompanying technical documentation. If this documentation doesn't exist or doesn't make sense, be wary.
Lots of marketing: While marketing by itself shouldn't be a bad thing, scammers often overuse it to advertise their deceptive schemes. It is recommended that you always check that what they promise is 100% true.
Part of the team is anonymous: In all companies it should be possible to know who are in charge. If this is not the case in the cryptocurrency project in which you plan to invest, start to be wary.
How to protect yourself against cryptocurrency scams
We leave you some measures that you can implement to protect yourself against these frauds in digital currencies:
Protect your wallet: Never share your cryptocurrency wallet keys with anyone, even if they tell you that it is mandatory to invest.
Control the wallet app: Transfer a small amount of money first and test it thoroughly before putting more money in. If you see any suspicious behavior, get your money out and delete the app.
If you don't understand it, don't invest: If you have a hard time understanding how a cryptocurrency works, keep your money away from it.
Do not rush your investment: Cybercriminals usually pressure you with the times to invest so that you move your money quickly and can commit fraud in a short time. Take your time to investigate if what is behind it is true or not.
Be wary of everything you see on social networks: Scammers often use the networks to promote their hoaxes. They use false images, promise gifts, talk about offers, etc. Always research.
Do not access investments by phone calls: if you are contacted to invest in cryptocurrencies and you do not know who is calling you, it is surely a scam.
Download apps from official sites: Google Play and the Apple App Store should be the only places you download from.
In general, everything that is too good to be true is possibly a lie or a scam.
What to do if you are a victim of cryptocurrency scams
The impact of a crypto scam can be minimized if you act quickly and report to relevant authorities as soon as possible.
Notify your bank if you made a card payment, a bank transfer or shared information about your positions in the entity. Communicate the facts torelevant authorities which are in charge of collecting complaints about cryptocurrency scams in UAE.
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