The cryptocurrency world is a hotbed for scams. Just like phony gas and oil wells, bogus promissory notes and overseas investments, fraudulent crypto offerings use the same hooks to lure unsuspecting victims: get in on the ground floor, guaranteed returns and low risk. But unlike other types of scams, crypto scams often offer an element of legitimacy by impersonating trusted sources. Criminals will fake financial advisers, company reps or even celebrities to make their scheme seem more believable.
The decentralized finance (DeFi) space is especially rife with fraud. Scammers create and launch new coins and tokens that look very similar to existing ones, then trick investors by promoting them through social media ads, news articles or a slick website. These scams can cost you your hard-earned money and cause significant losses.
Many people have also fallen victim to phishing attacks that try to steal their digital wallets. Criminals can use social media or Google search ads to target people with cryptocurrency wallets, posing as a legitimate site that will "multiply their investment." If you click a link or give your digital keys away, your funds are gone for good and there's usually no way to recover them.
Some victims have been targeted by scammers who pretend to be a known company such as Amazon, Microsoft, FedEx or their bank. These cybercriminals will send text messages, calls or emails and put a pop-up alert on your computer telling you there is fraud on your account or that your wallet is at risk. The scammers will then ask you to buy crypto and transfer it to them or Cryptocurrency scam hand over the private keys so they can take control of your wallet.
Scammers can also take advantage of a feature of crypto that allows you to be anonymous when making transactions. When you send or receive crypto, it goes into a wallet that has your public key and private key. The only way to get your crypto back is to recover your keys, which can be very difficult or impossible.
In addition to phishing, stealing your crypto by hacking is another major problem in the industry. Criminals may use malware to access your computer and steal your wallet information, or they could just copy the private keys from your wallet. The best way to avoid these kinds of scams is to use a cold wallet for storage that's not connected to an exchange or a third-party service.
If you want to invest in crypto, be careful not to follow anyone's advice or rely on "experts." Crypto prices are volatile and speculative, so don't invest more than you can afford to lose. It's also a good idea to use secure devices for storage, such as reputable hot wallets (such as Exodus or MetaMask) and Ledger, Trezor or Bitbox for cold storage. You can also help protect your wallets by keeping them on a private server that's not connected to the internet. You can do this by using a password-protected computer or phone.
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