Spot and Report Five Most Common Cryptocurrency Trading Scams

Red Flags of Cryptocurrency Frauds: Expert Tips on Bitcoin Scams

Cryptocurrencies are attractive investment options, and many investors and traders are making millions and billions through cryptocurrencies. But this is not only limited to traders and investors as scammers are also making an opportunity to build their wealth through crypto scams. According to the Federal Trade Commission, in February 2022, a crypto exchange platform named Warmhole lost about $320 million in a crypto scam. In January 2021, over one billion were stolen through an attack on cryptocurrencies.

As no central authority regulates cryptocurrencies, scammers take advantage of the situation and create opportunities to scam.

Key Highlights

  • Digital currencies like Bitcoin attract illicit players as they offer potential investment gains to various investors and traders. Similar to traditional scams, cryptocurrencies are also prone to theft, Ponzi schemes, etc.

  • Crypto Scams target individuals to obtain confidential information like security codes or indirectly force them to transfer cryptocurrency to a compromised digital wallet.

  • Poorly articulated white papers, aggressive marketing efforts, and greed to build wealth rapidly increase the percentage of crypto scams.

  • The Federal Trade Commission and the crypto exchange through which you trade or invest in cryptocurrencies are the best places to contact if you find that you have become the victim of a crypto scam.

Types of Common Cryptocurrency Scams

Cryptocurrencies are evolving rapidly, and most people are falling after them. At the same time, crypto scams are also taking place rapidly. Here are a few common crypto scams in which most people get trapped.

1- Cryptocurrency Investment Scams:

Investment scams happen when illicit people convince other individuals to send their cryptocurrency. They promise big profits in return. These scammers act as investment managers or even pretend to have a love interest in that individual. If you mindlessly follow them, you will probably lose your crypto.

Such an investment scheme includes a pump-and-dump scheme in which these scammers ask you to buy an unknown cryptocurrency at a low price by promising that its price will grow in the future. When many people buy the currency, it creates demand and shoots up the price of the currency. When the price touches its highest, these scammers sell their part. This causes its price to fall and leaves you with a currency with no value. Protect yourself against such scams, and be cautious about such deals.

2- Cryptocurrency Phishing Scams:

Phishing scams are the traditional yet most successful technique scammers use to gain authorized access to your account. It also includes cryptocurrency keys—those with a cryptocurrency key control the entire cryptocurrency holding.

Watch Out: Scammers send fraudulent links to a website and get account details and other information that must be confidential. Anyone can be a victim of such scams.

3- Cryptocurrency Fake Exchanges Scams:

Scammers also create counterfeit crypto exchanges, apps, wallets, or other platforms to victimize people and steal their funds. They create fake websites that seem similar to legitimate ones. This makes it difficult for users to differentiate between them. These websites are so identical to the original ones that they permit the user to withdraw a small amount of money. As the user increases the investment, the website suddenly shuts down and rejects the withdrawal request.

4- Rug Pull Scam Type:

Rug pull scams happen when people trick and create a new and fake project, non-fungible tokens, or coins to get funding. They receive a large amount against such projects and disappear suddenly. In such investments, people are persuaded to sell a portion of their Bitcoin against a worthless investment.

Be Careful: People must be careful before investing in a new project when cryptocurrency is concerned, as they are not centrally authorized and controlled.

5- Cryptojacking (Illegal Crypto Mining):

Cryptojackers secretly install mining software on your device and use your computer to mine cryptocurrencies like Bitcoin and Ethereum. Mining requires higher energy and computing power, and cryptojackers use that energy that certainly depreciates computer power.

Expert Tips on Avoiding Cryptocurrency Scams:

Crypto scams are rapidly evolving, and taking precautions and avoiding them is very important. 

1- Don't Respond to Unsolicited Contacts

No matter who reaches out to you, your crypto broker, or any other financial institution, it's always a good choice not to reply immediately. Find the institution's official contact number and contact them personally. This will assist you in maintaining the security of your financial transactions and personal information.

2- Think Before You Click

Double-check whether it is safe or fake before clicking on any unknown link or opening an attachment. If you find an attachment from an unknown person, you better avoid opening it. Unfamiliar attachments may trap you, leading to phishing or other security threats. Before opening or clicking any link, verify the legitimacy of the sender.

3- Keep Your Accounts Detached

Never link your crypto brokerage account and traditional bank account. Don't establish a permanent link. This can provide an additional security layer. If your one account is compromised, your other account remains safe.

4- Hold Immediately

Suppose you feel that your account has been compromised or you suspect any fraudulent activity, hold all your future transactions. This can prevent unauthorized access to your account. It can also help you mitigate financial losses.

How to Report Cryptocurrency Scams and Protect Your Investments

It is advisable to report a scam whether you have been a victim or witnessed one. It helps investigators investigate fraudulent companies. As cryptocurrencies are not bound to any boundary, they do not fall under U.S. jurisdiction, making law enforcement agencies helpless. 

If you have fallen prey to Crypto Scammers or Bitcoin Hackers, For all such cryptocurrency scams, report directly to:

  • The Crypto exchange or wallet you use to send the money.

  • Securities and Exchange Commission

  • Federal Trade Commission.

  • Internet Crime Complaint Center.

  • Commodity Futures Trading Commission.

Don't Fall for These Cryptocurrency Fraud Red Flags

Look out for warning signs of cryptocurrency scams, such as high-pressure sales tactics where you're constantly pressured to act quickly or risk missing out. Another red flag is when you're told you don't need any trading experience or knowledge. 

Final Words: 

Investing in cryptocurrencies is already a highly volatile investment, which not everyone can handle the pressure of. If you are somehow tricked into crypto fraud or bitcoin scams, it will be an even more onerous burden. Be Careful before allowing anyone to access any information or device. However, If you suspect you've fallen victim to a scam, contact federal regulatory agencies like the Federal Trade Commission (FTC) or your crypto exchange for help.

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Win Harrison 30 Nov, 2023


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