Cryptocurrency scams & frauds you should watch out for

While the cryptocurrency industry is on the rise, so are the many frauds who seek to extort innocent investors who simply want to grow their crypto tokens. Fortunately, there are many solutions to this invasive problem surrounding the cryptocurrency market and you’ll find them all here at BTC Post. 

Continue reading below to learn not only the different schemes you should watch out for, but also the precautionary measures that will keep you away from these pesky scams. 

Prevalent cryptocurrency scams in 2021 

Below are some of the most prevalent scams in the industry today:

Fake identities and anonymous pseudonyms 

If you’re transacting with someone online and they won’t disclose their name, you should immediately take it as a red flag. But even if they provide a name, you still have to check if they’re legitimate since it’s easy to give a fake name and get away with it in today’s online landscape. After all, not all sites follow a Know-Your-Customer (KYC) protocol.

The lack of KYC mandates in blockchains everywhere is a huge disadvantage that circles the cryptocurrency space, commented Jonathan Padilla who formerly worked at PayPal as the head of blockchain strategy and is currently the CEO at blockchain security company Snickerdoodle Labs. 

With the decentralised nature of blockchains, there’s no saying who you’re dealing with especially when going outside of the trading operations and buying from unknown sites with no clear identification.

Fortunately, the blockchain is transparent and all records are publicly available so coders and developers can create tighter security measures or at least track the fraudulent parties in case of scams. As Padilla said, ‘There’s transparency built in [to blockchain], and now with the tools [coders are developing], you can use sophisticated software to do an on-chain analysis and track where these things go.’

Additionally, financial institutions and crypto exchange sites follow strict KYC protocols to protect people against scams and fraudulent transactions, as well as corruption and money laundering schemes. That’s why you should only use platforms requiring KYC verification since this process assures you that they already verified the identity of every user you’ll come across on their site.

Gaming currency scams

Have you run across and clicked an ad when streaming videos or music online only to get prompted to the app store asking you to download a particular gaming app? And when you open it, you’re met with a digital paywall asking you to jot down your information and pay using cryptocurrencies to proceed. 

Afterwards, you come across so many notes and ad materials stating that you can earn a million times your investment while having fun with this simple game. If you reach this point, you should immediately delete the said app for it’s a scam that will extort your hard-earned crypto tokens.

An example of this is the ‘rug pull’ scam made by the developers of the Squid Game token based on the popular Korean Netflix series of the same name. The play-to-earn coin became available for purchase before the supposed launch of the game where it was made to be used. Many joined the hype and bought the coin to the point that its price skyrocketed to more than $2,000.

However, those who bought the token weren’t allowed to sell and profit from their bought assets. Later on, the developers sold all SQUID and profited millions, leaving all owners hanging. 

How you can protect your crypto tokens

Today, the risks involved in trading and using cryptocurrencies are at an all-time high with scammers taking advantage of its popularity and the increase of crypto beginners.

Below are ways you can do to avoid these scams from coming your way:

Develop a good scam radar 

In the crypto industry, you should always stay vigilant since your funds are not insured by any institution and you’re in full control and responsibility of their security. Fortunately, there are obvious red flags you should be wary of including the ones below:

• Typographical errors in the branding
• Unrealistic promises 
• Obligations that won’t allow you to sell your tokens after buying them
• Get rich quick schemes 
• Social media and influencer schemes 
• Vague information on where your tokens will come from and go
• Blackmail or extortion  

By bearing these in mind, you can be confident of spotting scams and preventing yourself from getting involved.

Keep your private keys safe offline

Private keys allow you to transfer your assets to whichever address you want to. This means that it should only be accessible by no one else other than you. To keep it away from malicious attackers, your private keys should never be stored or kept online, even in note-taking apps connected to the internet. Instead, write them down on a piece of paper or notebook where no one but you can see them.

Aside from this, you should also be wary of custodial hot wallets since they, not you, hold the private keys to your account. This means if their data gets compromised, your funds become vulnerable to theft. 

Though this type of wallet is the most convenient in terms of transacting instantly, it comes with a large risk. To lessen this, always safeguard your transactions and make sure you’re using a trusted wallet with efficient security measures. You can also search for those that offer insurance in case of robbery.

Report fraudulent activities 

If ever you get scammed, report it immediately to the following authorities to prevent others from being victimized: 

• Federal Trade Commission
• Commodity Futures Trading Commission
• U.S. Securities and Exchange Commission
• The crypto exchange platform you traded your crypto tokens 
• The Financial Conduct Authority

Update yourself on cryptocurrency scams in 2021 here at BTC Post!

Prevent yourself from getting involved with these fraudulent activities that can drain all your investments in mere seconds by being always on the know. To learn the latest updates on cryptocurrencies, check out BTC Post’s other blogs and articles!