Here are four ways you may be scammed while investing in cryptocurrency.
Risks of fraud pose a threat to any kind of investment, and cryptocurrency-related investments are no exception. Ponzi schemes, fake social media accounts and phishing are the most widespread traps among hundreds of others. Just clicking on ads can make you vulnerable to cryptocurrency scams, not to mention actually investing in ICO (initial coin offering) tokens.
Let's take a look at some warning signs that may indicate a potential threat.
1. Social media fraud
Hackers can attack anyone, even legitimate coin issuers. You cannot trust Facebook or Twitter accounts, especially if they are unverified. If someone claims to belong to an ICO or to be its founder, think twice before you reply to their offer and make a contribution.
One common way to make fast and easy money is to pose as a famous person. Scammers use the real person's profile picture and leave a comment on their original tweet, announcing a giveaway. Such a scam took place on Elon Musk's Twitter account. According to the fake comments, anyone sending 2 or 3 ETH to the initial address would receive up to 20 ETH in return.
This seems like a rather obvious scam strategy, and you might think there are zero chances of you falling for this fraud. Unfortunately, people have fallen for it numerous times. If someone is promising you a tenfold reward, be realistic – it is too good to be true. Before you actually send money to someone, make sure the source is real and trustworthy. Look through the company's website, read comments about it from reliable sources, and, most importantly, try to touch base with real employees on Telegram or other social media channels to figure out what is actually going on.
2. Fake websites
Top advice for protecting your own security is to watch out for fraudulent websites. You can identify a fake webpage by the appearance of tiny dots beneath the URL characters. Also, the absence of "Secure" and "https" markers before a website's URL could be a warning sign of a fake site.
Phishing attacks are quite common among cryptocurrency scams. Their main strategy is to imitate popular exchanges by purchasing web domains and Google ads. The fake website may look almost identical to the original, but with one major difference: Once you type in your credentials, it directs you to a special platform to proceed with your contribution.
To avoid being scammed, it is important to type the exchange URL directly into the address bar. Also, make sure to enable some sort of multifactor authentication for all of your accounts. Adequate security demands extra measures.
3. Unreliable mobile applications
Fake "twins" are widespread among the mobile apps of popular exchanges. Fraudulent applications are often available in stores, despite the fact that they are routinely deleted and banned once identified by the original stakeholders.
The safety of online app stores like Google Play and Apple is guaranteed by the accurate testing and verification of applications before they are made available for user downloads. Unfortunately, fake cryptocurrency applications may still appear in an online store, as was the case in the Poloniex scam. Android users lost their investment funds thanks to shady developers who created the Poloniex ® Offical [sic] App, which had nothing to do with any real cryptocurrency exchange.
Before you install any cryptocurrency exchange, ICO or wallet applications, make sure the links come from official websites. Clicking on a crypto app in an online store is not advisable, because chances are this app is fake. In fact, clicking on legitimate links could also have unpleasant consequences due to the imperfect security of crypto mobile apps.
4. Fraudulent emails
Some scammers prefer to send emails announcing fake ICOs, helping them to steal a significant amount of money. It is not very difficult to impersonate a real cryptocurrency issuer, so bear this in mind and remain skeptical of any emails that mention an ICO.
If you do receive an email, pull up any previous emails you may have received from the company and compare the layout and signatures. Also, look for grammatical errors and double-check that the email address has been verified by the official website. Carefully scrutinize all data before submitting a payment.
Stay focused and safe
Implementing cryptocurrency can benefit your business as long as you keep security measures in mind. Fraud is sure to break out wherever big money is involved. Scammers tend to use more or less the same tricks, adapted to fit each new scenario.
Safety measures are quite basic: Trust only reliable and acknowledged websites and cryptocurrency exchanges; and be skeptical about crypto mobile apps and all emails promoting an ICO.
These criteria define an authentic digital cryptocurrency company:
- It's powered by blockchain.
- It has a business plan/model.
- It solves a real problem.
- It features digital currency liquidity.
- There are real people behind the company.
- It specifies ICO rules and conditions.
Finally, stay informed by reading news about the latest scams to detect potential dangers in the future.