Crypto Fraudsters, their ways and How to Protect Yourself

Fredrick Awino
14.06.2022
274 Views

Everyday, a case of attempted crypto fraud or a successfully executed crypto scam is reported globally. In fact, the scamming reported on the cryptocurrency scene is a true testament to the common statement that criminals of this century do not come armed with guns anymore, they stay and operate quietly behind computers.

WARNING: Investing in crypto, or other markets, can be of a high risk for your savings. Do not invest money you cannot afford to lose, because there is a risk for losing all of your money when investing in crypto, stocks, CFDs or other investments options. For example 77% of retail CFD accounts lose money.

The increasing cases of crypto scammers is in fact one of the reasons that critics of cryptocurrency put forth. Alarming as the cryptocurrency cases are, it is in order to come to terms with the reality that even the established fiat currency financial system is often infiltrated by cybercriminals who make away with humongous sums of money. Without falsely  creating an impression that crypto fraudsters are here to stay, it is shallow to use it as a reason enough against proliferation of cryptocurrency.

It is not a surprise that netizens are defrauded into investing in cryptocurrency. Crypto theft is on the rise; thus, you have to understand the way the crimes happen and the best ways of protecting yourself. The main two ways in which the scammers can defraud you include direct theft and scams.

Reasons behind Increased Crypto Theft

Lack of regulation in the crypto industry as it uses a decentralized system in which third parties such as banks and the government are not involved. The fact that there is no government regulation makes it challenging for law enforcement to track the people involved in the theft. Also, the investment funds and exchanges do not follow any rules and guidelines that may result in theft and fraud.

The value of crypto, including Ether, Bitcoin, Dogecoin as well as Steller, is rising. In 2017, the cost of Bitcoin was around $ 1000, but currently, it is over $30,000. This issue makes people believe that it is a good investment where they can get good returns.

There is a lack of education in the crypto sector. People do not seek knowledge first before investing in crypto. Cryptocurrency is a new technology, and most individuals do not understand the way it works. Inadequate knowledge and understanding can result in netizens making mistakes that allow criminals to steal their funds.

Currently, there are several ways of scamming people through cryptocurrency, including creating a fake crypto exchange. The other way used to scam people is by hacking wallets and exchanges. They do this by hacking your cryptocurrency account and stealing funds.

The way cryptocurrencies are anonymous makes it difficult for even the authorities to trace the criminals. There is no personal identification required when sending or even receiving cryptocurrencies. This issue makes it difficult for any authority to track the individuals involved in the theft.

Theft from the Exchanges

People can steal crypto through the use of a scheme that tricks people into handing it over and direct stealing. However, another way is through the crypto exchanges. Most of the crypto exchanges takes place through an exchange. The crypto exchanges that we recommend include eToro and Binance. It is through the exchanges that one opens an account and deposits currency. They can be done in the form of US Dollars, Pounds, Euros, or even the Australian dollars. You have to do this before converting them to certain crypto.

Cryptocurrency is normally held in a custodial wallet. It means that even though it is assigned to a trader, private keys controlling the crypto are held by the crypto exchange. Remember also bank does not make you deposit all your cash; thus, the exchange also just holds some amount in the hot wallets. These are connected to the internet to facilitate consumer transactions. Otherwise, the other ones are helpful in cold wallets not connected to the internet. So, people can steal from the hot wallets. For instance, last year, BitMart was defrauded $ 150 million from the hot wallets.

Types of Crypto Scams

The following are the main ways scammers use to defraud crypto investors. Therefore, you need to know them in order to be more vigilant about your investment.

Investment Scams

In this type of scam, the scammer develops a website resembling a legit trading platform. It can be a bogus or fraudulent copy of a business that is real. Some of the websites even go as far as posting fake advertisements and celebrity endorsements on social media platforms. The platforms include Facebook, TikTok, and Instagram.

The operators can also have multiple scammers. Through this, they can call or email the victims with the impression that they are legit organizations. After making a deposit on such a platform, you can be able to trade but not withdraw your money. The platforms can use delay tactics such as asking you to make more deposits in order to withdraw. Others may also require you to refer more people before withdrawing your money.

Email phishing

In email phishing, the scammer sends you unsolicited emails. In the emails, the person asks for personal login details, which they will use in stealing your crypto. Others offer rewards and prizes in exchange for deposits.

Romance Scams

In the romance scam, the scammer opens a fake profile and then matches with a victim on a dating website or application. Later, they ask for money to help with a crisis, such as medication. Others can lure you that they are also trading in crypto. Therefore, they will ask you to join as it is a good investment. In case an individual does not have a crypto account, they will offer guidelines on how to open one.

The best Ways of Protecting Your Crypto Investment

As a trader, you may not know all the scam methods used in the industry. Even as an experienced individual, there are evolving and new risks in the crypto world. Therefore, passive investors should keep their holdings to be under 5% of their portfolios. Moreover, you should not invest in crypto at the expense of paying off the high-interest debt or saving for emergencies.

As an investor, you also need to be aware of the crypto red flags:

  • Vague details regarding where your money goes
  • Free money promises
  • Promises of multiplying your money
  • Obvious misspellings in emails, typographical errors during communication, and social media posts
  • Psychological manipulation such as extortion or blackmail
  • Obligations locking you to holding crypto without having the ability to withdraw or selling
  • Fake influencers claiming to be celebrities

Some of the recorded cases of cryptocurrency fraud

The ambitions of some of the  crypto investors hit a dead end in the hands of scammers who pose as genuine dealers or use various approaches already listed above to defraud. Crypto investors across the world have lost different amounts of investments to scammers. However, there are a few cases which have stood out and almost made a prominent case for the complete stoppage of cryptocurrency proliferation.

Some of the greatest losers in the hands of crypto scammers include;

  • Pincoin and iFan
  • Plexcoin
  • Savedroid
  • Bitcoin Doublersv
  • Thodex
  • Pincoin and iFan
  • Quadriga
  • Bitclub Network
  • Bitconnect
  • Onecoin

Author Fredrick Awino