How to Spot and Avoid Common Cryptocurrency Scams

How to Spot and Avoid Common Cryptocurrency Scams

June 1, 2018.
Learn about common cryptocurrency scams and how to spot and avoid them

The inception of blockchain and cryptocurrency have greatly altered the financial industry and the way common people exchange money in the digital space. This emerging and disruptive technology has paved the way for faster and cheaper transactions, without the need for a central governing entity. However, blockchain’s very nature of being decentralized and the lack of proper regulation have somehow become its weakness to some degree—this has attracted the attention of shady opportunists who target both experienced and first-time cryptocurrency enthusiasts.

The popularity and adaptation of cryptocurrency has been steadily increasing over the past few years, and with it comes the widespread prevalence of malicious activities by individuals and groups taking advantage of the blockchain community. Here we’ve listed some of the most common cryptocurrency scams that you should be aware of so you can avoid falling victim to any of them:


1. Impersonators of cryptocurrency influencers

Social media, being the main platform for digital socialization among seasoned and newbie cryptocurrency enthusiasts, has its own specialized share of scammers. Prominent cryptocurrency influencers on Facebook, Twitter, and YouTube are being impersonated by malicious groups. Among the targeted cryptocurrency influencers on YouTube that are being impersonated by scammers are Box Mining, Ivan on Tech, and Suppoman. Some scammers also pretend to be Roger Ver, Vitalik Buterin, and Charlie Lee on Twitter and Telegram.

These fake accounts directly contact you, asking you to buy discounted Bitcoin or Ethereum as part of a giveaway promo—for example, they promise to send you 5 ETH if you first send them 0.5 ETH. Once they’ve taken your payment, they disappear; and since payments are made in crypto, there’s nothing you can do to get them back.

How to avoid: Most authentic influencer accounts have a small check mark right after their username, usually in blue though the color varies per social media platform. This signifies that it’s a verified account. Another rule of thumb to remember is that if the offer sounds too good to be true, it probably is a scam. It may also be a good idea to check their profile. A fake account usually has fewer than a thousand followers with spammy and irregular status updates.


2. Spoofed cryptocurrency exchange platforms

These scammers take the extra mile and create their own fake cryptocurrency exchange sites that are almost identical to popular and legitimate exchange platforms, such as Binance and Bittrex. If you’ve been duped by these fake sites, once you’ve entered your credentials and password, they will have access to your account and could possibly steal your crypto.

How to avoid: The easiest way to spot a fake crypto exchange is to check if it has “https://” at the beginning of the URL. However, scammers are going the extra mile to obtain an SSL certificate in order to make their malicious site look rather authentic. This is why it’s best for websites which are responsible for millions of dollars to get what’s called an EV SSL certificate. These certs are not easy to obtain as you have to go through a thorough process of verifying company details by submitting legal documents and showing proof of your business address and phone number. Scammers have also made it more difficult to spot spoofed sites by adding only subtle differences to the domain name, such as putting dots below the letters of the URL or using unicode character substitutions that are hard to detect if you’re not paying close attention.

The best way to avoid falling for this scam is to manually type the URL into your browser’s address bar. It’s also good practice to never trust URLs being shared on forums, emails, and from social media by anonymous and dodgy sources—most likely, these URLs lead to fake websites. If you use the Chrome browser, you can download the Cryptonite extension, which automatically detects cryptocurrency phishing sites.


3. Fake cryptocurrency wallets

Although Google Play and the Apple App Store have very stringent app review processes, scammers still found ways to develop fake cryptocurrency wallets masquerading as genuine online wallets. These fake wallets use the same name as trusted and legitimate wallets such as Coinbase, BreadWallet, and Green Address; some may even go as far as using the same logo as the original. Once you’ve started using the app, it may work really well in the beginning; however, if the amount stored in your wallet reaches a certain threshold, your funds will have vanished.

How to avoid: Make it a point to download cryptocurrency wallets directly from the link provided by the wallet provider’s official website. However, you must still stay vigilant, as scammers may also go as far as creating a fake website that’s almost identical to the official ones. If you want to go directly to the app store, take time to check the app reviews and ratings. The higher the number of people who have downloaded, used, and reviewed the app, the better.


4. Fraudulent ICOs

Initial coin offerings (ICOs), while one of the most efficient ways for blockchain-based startup companies to crowdfund money, have become laden with controversy and backlash, what with so many ICO scams running rampant. The scammers behind these fraud ICOs parade themselves as legitimate companies, create a serious-sounding whitepaper, and even team up with fake experts to further persuade people of their supposed authenticity. When they’ve raised the amount of cryptocurrencies they need, they disappear, together with your “investment.”

Some of the most recent fraud ICOs ever recorded are the PlexCoin ICO ($15 million raised) and Benebit ICO (over $2.7 million of investor funds).

How to avoid: ICO scammers often get away with what they’re doing because it’s difficult to spot fraud, considering that startup companies, as the term obviously suggests, are new to the scene and may not have been heard of by the blockchain community. There are, of course, red flags that you should be aware of, such as lack of substantial information in their whitepaper or missing public profiles of founders and team members on LinkedIn.


Closing notes

The prevalence of scams in the blockchain community signifies both good and bad news: Because of the uncertainty and the still-young technology behind cryptocurrencies, it has become an easy target for malicious groups. However, as the community grows stronger and blockchain technology being actively developed to perfection, there’s no telling how far cryptocurrencies will go in the future.

Serious investors and those who simply like to dabble in cryptocurrencies should always practice careful vigilance when making transactions. While there’s no surefire way to avoid all means of scamming, the best defense is to stay informed through various forums on the Internet, such as Reddit and Bitcoin Talk.


– Article written by Tinny

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Categories: Cryptocurrency