Cryptocurrency Scams: How to avoid cryptocurrency scams?

The issue of fraud in crypto isn't something that will happen in 2020/2021. Even though the market value of the cryptocurrency has increased dramatically in recent years there have been scams since the inception of the bitcoin (BTC) and scammers have recognized the opportunity of this emerging investment class to deceive investors that keep looking for what will be the next big trend within the ever-growing crypto market.

One of the most significant frauds in the cryptocurrency industry that have occurred in recent times was the demise of the founders of Africa's biggest cryptocurrency exchange known as AfriCrypt and a total of $3.6 billion believed to be missing as a result of an enormous hack attack on the exchange is believed to have been hit by.

It's not an isolated event within the history of the cryptocurrency market. In addition, there are lesser-known but more frequent instances that happen to unsuspecting investors, like phishing emails and social media frauds.

According to Bolster's report on cryptocurrency scams, the number of scams increased 40percent to reach 400,000 instances in the year 2020. Bolster predicts that the number will increase as high as 75% by 2021 Based on the present level of criminal activities that could signal the possibility of fraud.

As per Shashi Prakash who is co-founder and CTO at Bolster: "Among all the various types of scams Crypto scams are the most prevalent and we're only starting to see the first signs of this new wave of digital fraud campaigns. We continue to witness fraudsters being creative and creating campaigns that are based on real-time rapid trends that are happening which means that people are less likely to be aware because it's new".

To ensure that you don't fall victimized by these scammers The following article outlines the most prevalent cryptocurrency coin scams, as well as the common modus method' employed by crypto fraudsters so that you can safeguard yourself while navigating the unregulated, yet inexperienced market for crypto.

How can scams using cryptocurrency be avoided?

The security that transactions in the blockchain can provide is one of the factors that make it easier for scams involving cryptocurrency investments since scammers can convince victims to pay the scammers a certain sum of tokens and then vanish without any trace within the cloud of complex codes.

There are a variety of crypto-related scams through the market, ranging from "rug pulls" which mostly are found in the decentralized financial (Defi) area to social engineering and social media scams that make use of the power of mass psychology to lure investors into buying promising tokens, only to increase their value in order to then sell a huge part of the total supply. This is sometimes referred to as pump & dumps.

Despite the various schemes that criminals usually follow, however, the main motives behind these scams is primarily these:

The value of a particular token, only to dump much of the holdings to unwary investors.

Request that people transfer their tokens to a specific account with the promise of the return of a bigger amount.

Use a wallet to withdraw all funds it has.

As the cryptocurrency ecosystem is evolving the tactics employed by fraudsters will evolve, but their primary purpose will be the same: to strip investors of their hard-earned cash.

How can you spot cryptocurrency scams?

The most effective way to spot possible fraudulent scenarios involving cryptocurrency is to be familiar with the most commonly used warning signs of scams involving crypto.

Based on the security company Kaspersky The following situations are likely to be a trigger for investors to issue an alert who are offered an offer that is based on cryptocurrency:

The site you're visiting does not have the security credentials that are usually required for safe data transfer. This could include but isn't restricted to, having a Secure Sockets Layer (SSL) certificate as well as displaying HTTPS rather than HTTP which is the insecure version of a site.

Receiving an email containing an incentive or other form of compensation from a firm even when the email comes from an unknown address which is different from the official website of the company.

Someone on social media or by email sends you a hyperlink to sign up or open your crypto wallet. However, the link is found to be different from the official site of the service provider.

A reward for persuading your family and friends to purchase, invest in or make transactions with a business or person who is promoting investment or blockchain-related projects.

Being asked to join one of the first coin offerings where supporters and investors are not known individuals who have no online profiles on social networks, any references, or any track record.

You will be asked to supply your wallet's PIN as well as private keys as well as other information similar to purchase a specific item or service purchased on the internet.

These are just a few of the numerous warning signs that can help you spot the potential scams and strategies employed by criminals to defraud investors, you'll likely be able to stay clear of many scams simply by declaring NO whenever any instances of these occur.

The Securities and Exchange Commission's Office of Investor Education and Advocacy (OIEA) warns investors and traders to be cautious when they examine investment opportunities offered by websites advertising their cryptocurrency offerings. Certain of them could contain "red flags" of fraudulent activities, such as promises of high yields and low risk.

How can you avoid scams involving cryptocurrency?

Knowing how the most popular crypto scams operate and what are the most commonly used techniques used by criminals to extort cash away from their investors are the initial step in avoiding them.

But, there are additional ways investors can employ to ensure that they are not a victim to these types of activities:

Avoid engaging with people on social media who could be in the process of promoting a specific project without checking their identities and confirming that they really are who they claim they are.

Block and flag all messages from unknown addresses that ask for information about your wallet's details or asking you to log in to your crypto exchange account via an untrusted link.

Do your due diligence regarding any project you'd want to take part in, whether new or existing. This includes researching:

Who are the people on the team in development?

Who is funding this project (institutional or participation)?

What are the experiences of the most senior developers?

Take a look at joining in the CEOs, or initial exchange offering (CEOs) These are initiatives that are promoted through official and licensed exchanges.

Make sure your wallet details are securely kept (private keys) and don't share the information you have with anyone else as it could make it easier to access your wallet's contents.

You should only invest money you are able to afford to lose. Even if making investments or trading in legitimate businesses it is important to bear in your mind that the cryptocurrency industry is in its early stages and the volatility is extremely high. This means that you may lose a substantial portion of your investment when you don't take the proper risk management measures to safeguard your investment funds against massive drawdowns.