Over the years, we’ve experienced a surge in interest and growth in the use of cryptocurrency. The meteoric rise of digital currency has attracted a lot of people’s attention and potential investors. Unfortunately, this surge has also seen an increase in opportunistic crypto scammers and fraud cases.
Cryptocurrency owners are more susceptible to hacking scams due to the use of online wallets to store digital coins. Scammers have also realized smart ways to infiltrate software storage devices like desktops and mobile phones.
The increase in fraud cases is sometimes attributed to the lack of regulation of crypto assets by centralized institutions. Its decentralized feature is usually seen as a benefit until scammers use it to skirt the law and commit fraud. Furthermore, a lack of a governing body makes it difficult to account for the total number of cases of fraud that take place.
The general public is already somewhat aware of the typical online scamming schemes. This has forced the scammers to find smarter ways to steal from unsuspecting individuals. Let’s look at some of the ingenious ways these scammers are using to drain your digital wallets.
- Fake ICOs
An initial coin offering (ICO) is the equivalent of a company going public and is initiated as a way for companies to raise capital. An ICO occurs when a company first starts selling its cryptocurrency and allows the public to back their favorite companies.
It is one of the best results of cryptocurrency development, but ultimately scammers found a way to use it to commit fraud.
With the thousands of blockchain-based companies entering the market every year, all the scammers have to do is create a fake website resembling ICOs. They then separate investors from their money by instructing them to deposit coins into compromised wallets.
A more advanced scammer then pretends to be an already existing real cryptocurrency-based organization willing to start sharing their ICOs. They go as far as portraying fake team members, paying celebrities to promote their venture, and lying about products.
- Fake Cryptocurrency Exchanges
The decentralized nature of cryptocurrency doesn’t exclude it from being bought and sold at exchanges. An exchange platform makes it easier for investors and new cryptocurrency users to find coins. Unfortunately, scammers have discovered ways of creating fake cryptocurrency exchanges.
Without a regulatory body overseeing the exchanges, scam platforms are becoming a problem for investors.
Scammers trick users by offering extremely competitive market prices and inflated traction metrics. They create flashy websites that boast of a large following in the crypto world.
This is to force the investor to feel like they are missing out on a big opportunity if they don’t invest.
Scam coins often use the word Bitcoin to insinuate their legitimacy and connection to the real coins. Furthermore, they present themselves as part of a broader trading platform, acting as affiliated branches to respectable, legitimate organizations.
- Hardware Wallet Theft
Scammers are proving to have the ability to circumvent a lot of security measures put in place, and hardware wallets are no different. Hardware wallets are physical devices that store user private keys offline. They are a measure of protection that is getting increasingly popular among investors who are concerned with their security and privacy.
So how do scammers possibly compromise a hardware wallet?
These wallets, usually as small as keychain USB drive, may come with a built-in vulnerability that makes them susceptible to hacking and the user being robbed.
Another way the scammers compromise a wallet is by selling them to a user with a ‘preconfigured’ seed phrase hidden under a scratch card. Scammers advise the user to set up the Wallet with the seed code on the scratch card. Thus the user unwittingly activates a backdoor for the scammer to drain their funds on the Wallet.
- Fake Cryptocurrencies
As popular as Bitcoin is, it’s a known fact that there are other alternative cryptocurrencies in existence. Scammers have taken advantage of this and pretend to present a new cryptocurrency to buyers as an alternative to bitcoin.
They convince buyers and investors that they need to invest in this new and upcoming cryptocurrency before it blows up in revenue. To seem legitimate, they mislead investors by claiming the faux coin is being actively traded on several platforms. Once an investor buys these scam coins, the scammer quickly transfers the funds to personal accounts.
- Fraudulent Wallets
Expert scammers often create websites that look legitimate or closely mimic legal organizations to fool the public. In this scam, they convince users to grab a once in a lifetime opportunity to generate a unique cryptocurrency wallet.
With their close resemblance and supposed affiliation to a legitimate organization, buyers assume everything offered is real. They then proceed to share their private keys and seeds on the website to get access to their new wallets. This opens the door for scammers to drain their funds.
Protection From Scammers
The more widespread cryptocurrency continues to be, the harder fraudsters will work to scam people. We’re still at a point where cryptocurrency is a volatile investment, and losing more money to scams is not an option.
There is no one specific way to protect yourself, but if you do your research and trust legitimate platforms, then you’re on the right path. Services like Samourai Whirlpool, Bitcoin Mixer or Wassabi wallet are available to protect you from scams and identity theft.
The service works by mixing your funds and giving you new coins while at the same time confusing any hacker observing you. Your identity is kept safe as the whole process keeps you completely anonymous, further preventing hackers from stealing it.
Without any human assistance and completely automatic services, you’re assured no one is handling your funds with nefarious objectives. Furthermore, the service doesn’t save transaction information once a mixer is complete, so there is no log tracing back to you.
At a minimal fee, you can protect yourself and your cryptocurrency from these malicious scammers who are out to get you.
With the growing popularity of cryptocurrency and the road towards mass adoption, we can only expect scammers to be more vigilant. They are bound to come up with new ways to con people out of their digital assets.
Remaining vigilant is not enough. Besides doing your thorough research on the cryptos and exchanges or wallets that you interact with, it helps to have some extra protection. Platforms such as BitcoinMixer or Samourai Whirlpool, therefore, come in handy. Soon, bitcoin tumblers will not only be a precautionary measure but a necessity as well.