5 Common Cryptocurrency Scams & How to Avoid Them


With cryptocurrency markets looking bullish once again, investment in altcoins, like bitcoin and ether, have become increasingly popular. Unfortunately, digital investment frenzies have become irresistible targets for con artists determined on swindling legitimate traders from their assets. Despite the fact that altcoin transactions are traceable, the anonymity afforded by blockchain technology has enabled an explosion of devious scams and tactics that target unsuspecting investors in cryptocurrency markets. This post will reveal 5 of the most common cryptocurrency scams while also providing a list of 10 checkpoints that you should review before doing business with any online cryptocurrency company.

1. Fraudulent ICOs

An ICO, or Initial Coin Offering, is a fundraising method in which start-ups sell cryptocurrency tokens in exchange for altcoins like bitcoin. In essence, ICOs are the cryptocurrency community’s equivalent of an IPO in the conventional investment world. ICOs have become increasingly popular as a tool for new businesses to finance their growth. In the first half of 2018 alone, ICOs raised over 11 billion dollars. This rapid growth has led to the rise of fake ICOs. With some creative marketing ingenuity and plenty of fabricated hype, unscrupulous fraudsters can convince the public to back a company and purchase cryptocurrency tokens that don’t actually exist. One report found that 78% of ICOs in 2017 were scams, while another report put that figure at above 80%.

2. Fake Exchanges and Wallets

If you’re familiar with cryptocurrencies, you’ve likely heard of Coinbase, Coinmama and Kraken. These are established and well-known altcoin exchanges. At their core, they are digital marketplaces where traders can buy and sell a variety of cryptocurrencies using different fiat currencies or altcoins.

Once you purchase a cryptocurrency, you need somewhere to store it. Like a conventional wallet, cryptocurrency wallets permit users to store and retrieve their digital assets whenever required. They can be a physical device, a program or a service which safeguards your public and private cryptocurrency keys.

Due to the lack of oversight in many jurisdictions, fraudulent cryptocurrency exchanges and wallet providers abound. Fake exchanges will often charge outrageous commissions and make it difficult to withdraw funds, or worse, they will simply steal your money and remove their website. Likewise, tech-savvy scammers can easily create sophisticated fake wallet apps that, once downloaded to your smartphone, can be used to steal critical account details.

3. Phishing Scams

Phishing is the fraudulent attempt to obtain sensitive personal information from an individual by posing as a trustworthy entity. The information that swindlers attempt to procure can include usernames, passwords, credit card details and cryptocurrency wallet ID numbers. The classic example of a phishing scam is receiving an unsolicited phone call or email from someone claiming to be an employee of a formal tax collection agency such as the IRS or CRA. The individual will attempt to convince you that you owe money and will face legal action if you do not transfer a predetermined amount of bitcoin to their agency as soon as possible.

4. Viruses and Trojan Horses

Virus attacks and trojan horse scams are relatively new to the cryptocurrency community due to the fact that to properly execute them, they require advanced programming knowledge and skills. Nonetheless, they are increasingly becoming more common as con artists devise ever more sophisticated ways to defraud their victims.

These attacks often rely on social media and popular forum sites like Facebook and Reddit. A con man will post a file to the chat room or forum with a name that suggests it is an official document of great interest to the group’s followers. The file will conceal a seemingly harmless extension. For example, a recent attack made use of the .SCR file extension, which is designated for screensavers. The file will harbour viruses and malicious code designed to locate and extract sensitive data from your smartphone or laptop that hackers can use to gain access to your cryptocurrency wallet.

5. Giveaway Scams

“Congratulations! You’ve won a car, valuable jewelry, bitcoin, or some other great prize!” No, it’s not your lucky day. This is yet another way that con artists can defraud you of your valuable cryptocurrency. To claim your prize, you will be asked to pay a fee. According to the scammers, these fees are for insurance costs, government taxes or courier charges. Fraudsters profit by continually collecting these fees from you and stalling the release of your prize. A legitimate sweepstakes company will never ask for your cryptocurrency wallet ID, your credit card number or your personal banking information.


How to Evaluate a Cryptocurrency Website’s Authenticity 

If you are unsure whether a particular cryptocurrency website was created by scammers or is a legitimate service provider, use this convenient 10-point checklist to evaluate the site’s trustworthiness.

1) Does the website connect securely over https and not http? If the address starts with “http” instead of “https,” the data you send to the website is not secure.

2) Can you see the word “Secure” or an image of a padlock in your web browser’s address bar? This indicates that a website is SSL protected.

3) Does the website’s URL have any noticeable spelling mistakes or errors? If so, it could be fake.

4) Does the site feature poor grammar, awkward phrasing and spelling mistakes? If it does, this is an indicator that you should proceed with caution.

5) Does the website promise abnormally high returns? For example, does it claim you’ll be able to double your investment? This should raise a large flag and is a common indicator of a scam.

6) Is there an “About Us” page? Does it show the real people behind the company? Does it provide any details about where the company is located and registered? If there’s little or no information about who the company is and what it does, you could be dealing with a scam.

7) Do legitimate, reputable websites link to this site? This could indicate that the site is trusted and respected.

8) What do other users say about the website? Are there any negative reviews and, if so, what do they say? The cryptocurrency community is usually very quick to spread the word about scams.

9) Who is the registered owner of the domain or website? Is the owner hidden behind private registration? Has the domain been registered for less than six months? You can find this information by searching for the platform’s URL registration details on a site like WHOis.net. The more information you can find about the people or company behind a website, the better.

10) Is there anything else about the website that raises red flags or just seems too good to be true? If there’s something that just doesn’t seem right, trust your intuition.

Checklist Source: finder.com/bitcoin-scams

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