Cryptocurrency Scams

(7 of 10)

Cryptocurrency Scams

The world of crypto barely got off the ground when comparisons to the lawless Wild West started, and for good reason. Cryptocurrency is already a huge market and scam losses are in the billions of dollars and likely to go much higher.

Most crypto scams work on the same premise as traditional scams: a con artist tries to develop a rapport with you, tricks you into believing what sounds like a great opportunity, and then convinces you to either send crypto funds or give up your password, security code, or other means of access to your account. Because the crypto world is so new, we should expect to see novel varieties of scams develop over the next several years. Learn to see the signs and know what to do.

How do they work?

Normally, cryptocurrency is secured through a blockchain, which is a transparent ledger of transactions that anyone can view. Blockchains were considered unhackable until they weren’t, with billions of dollars in theft. Most scammers will not attempt blockchain hacks because they require immense sophistication and resources. You’re more likely to encounter the old-fashioned, fast-talking swindlers trying to get you to send them your crypto funds for some hot new investment idea.

To make it worse, cryptocurrency payments to others typically are not reversible.

Types of scams

Crypto scams occur in many ways, many of which may look familiar:

• Phishing. Phishing involves tricking visitors via texts, emails, pop up ads, Websites or other means into providing sensitive information such as login credentials.
• Technical support. You may have gotten calls from people claiming to know about a problem with your computer and offering to fix it through remote access to your computer. The scammer wants to steal sensitive information.
• Blackmail. Sometimes a scammer sends you a blackmail email that claims to have damning information about you, or some of your passwords, or other information, and they threaten to expose you if you don’t share your credentials or send them money.
• Investment scams. These scams seek investors for some new opportunity such as an initial coin offering (a new offering of crypto) or a new mining operation.
• Romance. Scammers look for victims on dating sites and other social media, seeking to develop trust and rapport before sinking their teeth in.
• Giveaways. Scammers may promote giveaways of crypto, offering links to fake Websites. When you respond to them, another scammer "verifies" the opportunity as real, then asks you to send crypto.

What are the signs?

Look for signs such as these:

• Pressure to send money or provide access to your account.
• A guarantee that you will make big returns.
• A lack of supporting information about these big returns.
• A promise of free money.
• Someone calling you and telling you that your account has been hacked.
• Bad writing or plenty of grammar and spelling mistakes.

How to avoid them, what to do if you are caught in one

If it sounds too good to be true, it probably is. Cryptocurrency is a difficult investment to understand, with jargon that is not familiar to many of us. Learn how cryptocurrency works. If you don’t understand an investment product, don’t buy it! Buy your crypto through well-known, legitimate sites such as Coinbase or BlockFi. The site where you buy your crypto may have scam information as a courtesy to users. Read it. If you need customer support for a crypto issue, use contact information provided by the company you bought it from. Report suspicious emails to your email provider, and change your passwords frequently. Report blackmail attempts to the FBI.

And now for a list of don’ts. Don’t share your private information, such as passwords, private keys (secret numbers used to sign transactions), or seed phrases. A seed phrase is a series of words generated by a cryptocurrency wallet that provides access to the cryptocurrency in it. Don’t give remote access to your computer unless the other person is known and trusted. Don’t give your login information to anyone. Don’t provide your passwords or security codes to third parties.

For investments, be skeptical of any opportunity offering high returns and/or low risk. You can report investment scams to the Securities and Exchange Commission, the Federal Trade Commission, or your state’s securities regulator.