Scams in the Cryptocurrency Industry: How to Prevent Frauds in 2023

The first cryptocurrency was made with good intentions, and it’s a great way to make payments that are safe, private, and decentralized. But, as in any industry, scammers popped up quickly, casting a shadow over the crypto industry as a whole.

The Most Frequent Frauds in the Cryptocurrency Industry

Fake wallets

With a non-custodial wallet, the developers can’t get your money back if it gets stolen. This is technically impossible because they don’t have access to your keys and transactions. Because of this, you need to be very careful. If you only lost some of the money, make a new wallet right away and move the rest into it. Write the seed phrase down on paper and keep it somewhere else.

Fake ICOs

ICO stands for “the first coin offering.” One of the most common ways for cryptocurrency startups to get their first round of funding. This is like an initial public offering (IPO) in traditional finance, except that IPOs are usually used by well-known and long-standing companies, while ICOs are new and risky. Some ICOs made investors a lot of money, but many of them turned out to be scams. Follow a few rules to stay away from such projects. Read the white paper every time (it is also advisable to check it for uniqueness). The document should list the goals and ways to reach them, as well as the financial model, an analysis of the situation, and a timeline for implementation. Think about how realistic the promises are.

Social networks scams

One type of hack that is not unique to the blockchain industry is putting false information on the social networks of projects. For example, the hacking of the Bored Ape Yacht Club Instagram account cost investors $3 million at the end of April 2022. Scammers put up a link to a fake website that users connected their wallets to in order to (what they thought was) launch the NFT. In fact, they let their money be stolen in this way.

Fake exchanges or exchangers

The creation of fake trading platforms that look like real exchanges is one of the most common types of fraud. In May 2022, soon after entering the Turkish market, Binance warned users about fake banner ads in Istanbul and other cities. This was done to avoid a disaster. The attackers put up a fake ad for Binance and listed the phone number where scammers can be reached. People who call are given false promises in exchange for their information, such as seed phrases from personal crypto wallets.

Fake services of help

You should contact the exchange’s (wallet’s or other service’s) technical support directly from the exchange’s website using a special form or an email address listed on the website.

If you post questions on social networks, it’s possible that a con artist will send you a personal message and say he works in technical support. Under this guise, it will ask for information from the wallet, the login/password for the account, or other private information.

This happens not just in the cryptosphere but almost everywhere else as well. Technical support probably won’t write to people in private messages on social networks. On the other hand, they will probably tell you to make a ticket on the site.

Phishing scams

Phishing has been used as a form of fraud since the mid-1990s, long before the cryptocurrency industry. The main goal of this kind of attack is to trick an inexperienced (or sometimes even an experienced) user into giving up their data or money on their own. One of the most important things you can do to protect your crypto assets is to learn about phishing attacks. These risks are called “non-trading risks,” and you have everything you need to keep yourself safe from them. Everything is much more complicated when you trade, but that’s a whole different story.

Malicious files

Stealth miners are one of the main types of malware  linked to cryptocurrencies.

In 2014, the first piece of malware was found that used the Odyssey computer cluster at Harvard University to mine Dogecoin. In the same year, it was found that supercomputers from the National Science Foundation (NSF) were being used illegally to mine BTC.

In 2017, this kind of software was all over the news because it had become popular. Cybercriminals have done everything they can to take over computers, servers, and browsers that don’t have enough security and get cryptocurrency into their wallets.

Conclusion

Most cryptocurrency scams can be avoided by always being careful and suspicious. Every letter or text message you get without asking for it should be thought of as a scam. Every project or investment scheme you are asked to put money into should be carefully and thoroughly looked at for its value, its chances of success, and its technical solutions. You can only use your bookmarks to get to the exchanges you know and trust. Install a good antivirus program and keep its database up to date.