The Basics of Cryptocurrency Scams
The increase in popularity of cryptocurrency in recent years has caught the attention of scammers. Bad actors prey on the public’s lack of knowledge about how cryptocurrency works. That, with the ever-evolving state of cryptocurrency, makes this type of payment method even more appealing to scammers.
Cryptocurrency is a virtual currency and accounting system that is decentralized. This means that there are no banks or other centralized authorities that manage transactions and funds. In addition, crypto is not federally protected against bank failure or theft like money in the bank.
Types of Cryptocurrency Scams
Here are some common types to watch out for:
- Crypto Investment Scams: Scammers pitch investments in a new or developing cryptocurrency claiming large returns for a small, short term investment. Once you provide your investment share they steal the investment money for their own use. When confronted, scammers hide behind the complexities of cryptocurrency to explain where the stolen funds are.
- Crypto Government Imposter Scams: Scammers pose as a government authority, utility company, or law enforcement agency. They claim that you need to pay fees, fines or taxes using cryptocurrency or you will face major consequences. If you pay, the scammer vanishes and, because crypto has no safeguards, you can’t get your money back.
- Crypto Prize Scams: The scammer, posing as a legitimate company such as Coinbase, will contact you claiming that you won a prize, a free vacation or a crypto jackpot. In order to receive the prize, the scammer says you must pay a fee using crypto. Once you pay the fee, the scammer disappears with your money and you never receive your prize.
- Phishing: Similar to any run-of-the-mill phishing attack,scammers send emails posing as legitimate companies to steal your login credentials and private keys for your crypto wallet.
- Social Media Impersonation: Scammers impersonate someone you know or an account that you follow on social media promoting fake cryptocurrency giveaways. Sometimes, they may ask you to pay a fee to receive your free cryptocurrency. Other times, they might ask you for your login credentials or private key to your crypto wallet so they can deposit your free cryptocurrency. Once they have that information, they can empty your crypto wallet.
- Extortion: Scammers will claim that they have embarrassing or inappropriate information or photos of you. They threaten to share these with the public unless you pay in cryptocurrency.
- Malware: Scammers will install malicious software on your devices to gain access to information and accounts, including your cryptocurrency wallet.