The world seems to have gone “crypto crazy”. Digital currencies like Bitcoin, Monero, Ethereum and even Dogecoin can be found all over the internet.
Carey van Vlaanderen – CEO ESET South Africa
Their rising value promises investors big gains (that is, if you “buy the dip”). And the “fortune” that can be earned by mining virtual money is reminiscent of the gold rush that formed the first mining towns in South Africa in the 18th century. Or at least, many, including a long list of scammers, would have you believe so.
In reality, if you are interested in cryptocurrency today, you may be at great risk of fraud. In many ways, in this new unregulated world, bad actors often have the upper hand.
In 2021, South Africa-based company Africrypt was reportedly hacked, effectively wiping out a staggering R51 billion of investor money.
While the apparent hack made global headlines, the founders of Africrypt disappeared as international investigators scramble to uncover what happened at what is believed to be a completely fraudulent cryptocurrency investment platform.
The good news is that normal fraud prevention rules apply too. Everything you read online should be carefully scrutinized and fact-checked.
Don’t believe the hype or buy something that seems too good to be true and you have a great chance of staying safe.
Why are cryptocurrency scams on the rise?
Scammers are masters at using current events and vibrant trends to trick their victims. And they don’t come much more “zeitgeisty” than cryptocurrencies. Headlines and social media posts are partly to blame, creating a feedback loop that only fuels the virtual currency hysteria.
- Compared to the traditional stock market, there are few if any regulations for the cryptocurrency market for investors
- The enormous media interest makes it a regular target for phishing and fraud
- Rising cryptocurrency prices are attracting consumers who dream of get-rich-quick schemes
- Social media helps drive the buzz, real or fictional
- There’s also the lure of mining coins for money, which phishers can use as hooks
What are the most common cryptocurrency scams?
If you have virtual money safely stored in a cryptocurrency exchange, it can be vulnerable to hackers. On numerous occasions, attackers have managed to extort funds from these companies, sometimes making off with hundreds of millions. Usually, however, the injured companies promise to compensate their innocent customers. Unfortunately, there are no such assurances for crypto fraud victims. Fall for a scam and you may end up paying a lot of money out of pocket.
It is worth understanding what these scams look like. Here are some of the most common:
Ponzi Schemes: This is a type of investment scam where victims are tricked into investing in a non-existent business or get-rich-quick scheme that actually does nothing but line the scammer’s pockets. Cryptocurrency is ideal for this as scammers continue to invent new, unspecified “cutting edge technology” to attract investors and generate larger virtual profits. Falsifying the data is easy when the currency is virtual anyway.
Pump and dump: Scammers are encouraging investors to buy shares of little-known cryptocurrency companies based on false information. As a result, the share price goes up and the scammer sells their own shares, making a tidy profit and leaving the victim with worthless shares or coins.
Fake Celebrity Recommendations: Scammers hijack celebrity social media accounts or create fake accounts and encourage followers to invest in fake schemes like the ones mentioned above. A trick lost about $2 million to scammers who even put Elon Musk in a bitcoin address to make the trick more trustworthy.
Bogus and knockoff exchanges: Scammers send emails or post social media messages promising access to virtual money stored on cryptocurrency exchanges. The only catch is that the user usually has to pay a small fee first. The exchange does not exist and your money is lost forever. Copycat sites offer seemingly legitimate wallet services. Users are encouraged to download wallets, which then install malware on the user’s device. In these cases, iOS devices were compromised where the problem was limited to Android in the past.
Scammer Apps: Cyber criminals fake legitimate cryptocurrency apps and upload them to app stores. If you install one, it could steal your personal and financial information or inject malware into your device. Others may trick users into paying for non-existent services or try to steal logins to your cryptocurrency wallet.
Phishing: Phishing is one of the most popular tactics used by scammers. Emails, texts, and social media messages are spoofed to appear as if they are being sent from a legitimate, trusted source with an urgent cryptocurrency payment request.
How to avoid becoming a victim
The best weapon against fraud is a healthy dose of skepticism. With that in mind, try the following to avoid scams:
- Never give your personal information to anyone who will contact you unsolicited via email, text message or social media. It may even appear as if it is your friend, but in reality it could be a hacker who has hijacked their email or social media account. Check with them separately for another contact method
- If something is too good to be true, it usually is. Take any investment concept with a pinch of salt
- Turn on two-factor authentication for every cryptocurrency account you have
- Reject any investment opportunity that requires upfront payment
- Never use unofficial app stores
- Download anti-malware software to your PC and mobile devices from a reputable provider
The world may have gone cryptocurrency crazy. But you don’t have to participate. Keep a cool head and survive the hype with good returns.
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