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Last Updated on March 12, 2023
In 2020, the FBI reported that cybercriminals stole cryptocurrency worth over $1.3 billion between January and March. Given that by mid-2022, the market capitalization of all cryptocurrencies combined was just under US$1 trillion, it is a considerable sum.
This article describes the most typical scams, how they operate, and preventative steps you may take to save yourself.
The Phishing Scam
In a phishing scam, the scammer contacts a Bitcoin user through various means such as email, SMS, instant messaging apps, social media, or phone calls. They use convincing tactics to impersonate a reputable platform or one of its representatives, making it difficult for the user to identify the scam.
The scammer’s goal is to convince the user to click a link or provide their credentials, allowing them access to the user’s accounts and funds. They may use tactics such as offering promotions or creating a sense of urgency by claiming that somebody has compromised the user’s account.
To protect yourself from this scam:
- Use anti-phishing codes set by reputable platforms like https://thequantumai.app/ to confirm the legitimacy of communications.
- Do not click any links in SMS or emails unless they are confirmed legitimate.
- Do not enter your credentials anywhere besides official apps and websites; visit the website directly.
- Assume that anyone reaching out to you via instant messaging, social media, or phone is not a legitimate representative, and do not provide them with sensitive information or PII.
Transfers of Money or Withdrawals Scams
In this scam, the scammer falsely claims they cannot withdraw or remit funds and asks the victim for assistance in exchange for a share of the funds. They may request help to withdraw actual funds in a wallet they control, giving the victim access and claiming difficulty transacting.
But the withdrawal will not be possible due to a lack of funds for gas fees. The victim then sends crypto to the wallet, but the scammer has a bot that quickly withdraws any transferred funds. Another tactic is to claim to be in a crypto-hostile country and ask the victim to buy crypto on their behalf, but the remittance claws back or is never received.
To avoid being a victim:
It is essential always to conduct business ethically and legally, even if the opportunity seems highly profitable.
Avoid engaging in illegal or shady activities, which can result in financial loss or legal repercussions. If the offer looks too good to be true, such as someone giving you a wallet’s seed phrase and telling you to take the funds inside, it is best to exercise caution and consider the potential risks before proceeding.
Scammers create rug pulls in the form of new crypto projects, such as De-Fi platforms or NFT projects that appear legitimate at first glance, with professional-looking websites, white papers, roadmaps, and online communities. They start promoting the project as the next big thing and artificially inflate the price by using their funds to make purchases.
FOMO drives victims to buy in, but once there is enough exit liquidity in the project, the scammers sell their assets, leaving the victims with tokens or NFTs of little or no value. The term ‘rugpull’ refers to how quickly this happens, as if the rug pulled out from under the unsuspecting buyers. In many cases, the development team abandons the project and disappears.
You can avoid this scam if you:
- Research all Bitcoin investments you undertake.
- Check the project’s white paper to make sure it is original and not a copy of one from another project.
- Take the time to find the project team and determine whether the members’ identities are known.
- Take caution with investments that make unrealistically high returns.
- Verify any stated affiliations or agreements with credible organizations, and be sure there is proof to back them up.
Bitcoin scams are a real threat to investors and traders. Many people have lost money to crypto scammers. Nevertheless, you can follow these tips to avoid falling victim to Bitcoin scammers.