The following is a guest post by Josef Moser, co-founder of Cryptoradar.
Crypto scams are getting more and more sophisticated. As more retail investors get on the crypto train, it’s not surprising that malicious actors try to take advantage of new traders and unsecured crypto accounts.
If you are new to the crypto scene, it is important that you watch out for all the gimmicks and traps. But even seasoned investors should pay close attention to some of the newer and more sophisticated scams that are floating around right now.
The Rise of Guest Article Phishing
Articles by guest authors like this one are a great way for industry professionals to share their insights with a wider audience. If you need more evidence to back this up, consider the e-Krona scam.
Sweden planned to launch a digital version of its currency called e-Krona, but someone beat it by launching a fraudulent version of the coin before the government even had a chance.
Whoever started this project managed to get an article published on a well-known business website before the Swedish government revealed that they had nothing to do with the fraudulent e-krone coin.
The website was not registered by the Swedish government but by a private institution in Reykjavik, Iceland. e-Kronas have also been sold through a fake website that mimics a financial advisory service to make the scam appear more trustworthy.
Unfortunately, the article had already been promoted on Facebook before it was removed from publication. As a result, people have been led to believe they could buy e-Krona – but only through an “official” website and only by transferring money directly to the website’s e-Krona brokers.
If that’s not a red flag, the e-Krona site claims that every € 1 investment in “several months” may be worth € 4,307. Despite the fact that no one on the internet would publicly offer a deal that suggests an ROI in excess of 4000%, there are still people who fall for this scam. So much so that the Swedish central bank stepped in to tackle the problem head on.
Social media – a constant source of disinformation
Twitter crypto scams have been common for years, despite the platform’s best attempts to regulate scammers. Someone creates an account, gets a blue verification badge, and then changes the account name and information to look like a famous person.
There have been Barack Obama crypto scams, Bill Gates crypto scams, and – of course – Elon Musk crypto scams, and they usually follow the same format. The famous person will announce that in order to start the widespread use of cryptocurrencies, or to “give back to the community”, they will return double any amount of crypto sent to them – usually within a timeframe of around 30 minutes.
This scam is so widespread that the Federal Trade Commission issued a statement stating that from October 2020 through May 2021 alone, consumers lost an estimated $ 80 million to cryptocurrency investment fraud. As interest in cryptocurrency grew during this time, so did the opportunities for scams – with a more than ten-fold increase over the previous year, resulting in an average loss of $ 1,900 per consumer.
Famous for his commitment to digital currencies, Elon Musk’s imitators seem to have had the greatest success, securing around $ 2 million from crypto hopefuls.
The final result? Nobody on the internet is ever going to give you free money (especially not a celebrity), so try to use your common sense. If it sounds too good to be true, it probably is.
If they caught you doing something online
Scams in which you are accused of being caught in the act are a classic form of extortion. Most of the time, the scammer will claim something like, “We have your browsing history and we know what explicit material you’ve viewed. We have accessed your webcam and we have a video that we certainly don’t want the world to see. Pay us $ 1,500 in BTC as we will let you off the hook. Here is our wallet address. “
The best strategy is to just ignore these emails. If you are unsure whether an email is a hoax, remember to never click on any of the links. If you click a hyperlink, hackers can install malware on your computer so that they can spy on your webcam and microphone, or launch a ransomware attack. A common ransomware attack consists of encrypting your computer and, for example, asking you to pay a fee to decrypt it.
Daily backups provide additional protection against ransomware attacks. If you fall victim to an unfortunate ransomware attack, a backup can remove the ransomware by performing a factory reset and reinstalling the operating system before restoring your data.
When using cryptocurrency as the actual currency
Falling victim to this scam is the crypto equivalent of falling at the final hurdle. Now that you’ve successfully bought your crypto, it makes sense that you next look for ways to spend it. Paying with cryptocurrency, however, is not like paying with PayPal and carries a much higher risk as there is less safety net to make sure you get what you pay for in a purchase.
Crypto transactions are final. So if you want to buy something like a car, exchange it in person or only pay once you have the keys in hand. Still, there are some software subscriptions that can be paid for in crypto and are generally considered secure. For example, buying a VPN service for one year as a BTC transaction can make sense.
Legitimate companies doing crypto transactions want to protect their reputations in order to have good customer service. Some merchants who accept BTC are happy to help you make sure the wallet address is correct so you can pay the right person. Finding user reviews from various reviewable sources and forums can help you decide if you want to conduct a transaction. Remember, these types of transactions are currently the safest, if possible, in person.
Good old fashioned hacking
Of course, people have tried to hack crypto exchanges since their inception. Robbing a bank is the 21st century version with the added benefit of potentially being able to steal a plethora of personal information at the same time.
The best way to protect your cryptocurrency from hackers is to take your assets offline using a “cold” wallet. Cold wallets are supplied in the form of a USB stick and, unlike their “hot” counterparts, are not connected to the Internet. If you set it up correctly and keep the passwords safe, it will be almost impossible to hack into these pieces of hardware.
Cold wallets cannot be accessed without a PIN code, which keeps them particularly secure. In order for them to work, you need to type in a series of preset starting words, and putting all 24 words in the correct order gives you access. Some wallets also offer the option to insert a customizable 25th word. Adding 24 words + 1 random selection makes it virtually impossible to hack a crypto wallet.
Scams have been around for as long as people interact with other people, and the best way to avoid them is to stay tuned. Keeping track of cryptocurrency news from different websites will help you stay up to date and make comparisons on the information you are getting.
Ultimately, it’s important to use your judgment and seek multiple reliable sources – and our handy guide to crypto wallets can be a good place to start.
Guest contribution by Josef Moser from Cryptoradar
Moser is a co-founder and board member of Cryptoradar.
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