The number of people who want to earn money in crypto is higher every day. Some of them are looking for shortcuts on how to become millionaires. Unfortunately, this field is also tempting for cheaters. According to a blockchain analytics firm Chainalysis, with the increased transaction volume in 2021, the rate of cyber criminals increased simultaneously. The Chainalysis report says that “cryptocurrency-based crime hit a new all-time high in 2021, with illicit addresses receiving $14 billion over the year, up from $7.8 billion in 2020”. Therefore, in this article, we are covering the topic of the most common illegal activities and dangerous practices in the crypto world you should be aware of.
Phishing and fake websites
These are probably the most common types of cryptocurrency scams. Just imagine that somebody is asking for your key phrase to your wallet. This activity is usually accompanied by phishing. It means that the scammer sends you an email encouraging you to write a wallet address and a key phrase back while pretending to be your family member or friend. If you do so, fraudsters will have access to your funds. Blackmailing is equivalent to this method – to obtain needed information, fraudsters have several traps in their arsenal. For example, they proclaim that they have a record of your naked body and threaten you that they will expose it unless you will send cryptocurrencies to a certain wallet address.
On the same basis are created fake cryptocurrency trading platforms or other types of projects. Their domain names sound almost the same as the official websites, but they are slightly different just to mimic them. If you connect your crypto wallet to the website network and enter the crypto wallet’s password and recovery phrase, in this case, you will probably lose your money as fraudsters will have full access to your private data.
Some websites tempt their visitors to pay a small amount of cryptocurrency, let’s say, 0.001 BTC, to generate the whole Bitcoin that will be sent back to your wallet address. Similar sites you can find on such places as the dark web. If you do not want to be scammed, run away from this suspicious kind of Ponzi scheme.
A Ponzi model, named after Italian businessman and impostor Charles Ponzi, is a type of fraud that lures investors and pays profits to earlier investors (victims) with funds from more recent investors. The fraudulent actors divert some of these “invested” funds for personal use. Take a closer look at how the Ponzi scheme works in a practice. On the one hand, there is a cheater, on the other hand, there is a group of people who will lose their money soon. Imposter asks people for a certain amount of money to invest into some project or fund and promises high returns with little or zero risk. The same scenario is told to new investors. The model works till people are willing to pay money. They do not have a clue that other investors are the source of funds. The problem appears when people refuse to invest, so the fraudster does not have funds for paying out. This is usually the last stage of the process – criminals will realize the situation, pack up and disappear with the rest of the money, or in this case, with cryptocurrency.
The secret of this scam lies in persuading, gaining and abusing other people’s trust.
Services accepting only crypto payments
Bitcoin and other cryptocurrencies are established as a means of payment method among the other possible ways of committing transactions. We especially stress that part “among the other possible ways of committing transactions”. We know that many organizations are trying to adopt virtual currencies, but traditional means of payment are still in the game.
Any seemingly credible person or retail establishment should not require you to pay just in cryptocurrencies. If to do so, it is probably a scam. Trustworthy institutions should not accept only crypto, but they should accept also U. S. dollars, checks, credit and debit, and cash.
Now, you are maybe asking yourself: Why should anybody want me to pay just only with crypto? Here is an explanation:
Blockchain doesn’t require KYC (know-your-customer) protocol – you do not have to present your ID, social security number, contact information and address – so payments can be more anonymous. This aspect can turn into a disadvantage as for the scammers it is easier to be incognito while stealing money.
Fake projects and crypto tokens
These are good launder machines – nothing more than good marketing and spreading the word. Developers hype the community to invest in something that will one day skyrocket to the Moon. The thing is that while people pump the coins, developers grab money, and leave the project to crash. This phenomenon is also known as “rug pull”. It happens not only with crypto tokens but also with NFTs and other digital blockchain assets. The best practice seems to be sticking to the two most popular cryptocurrencies (Bitcoin and Ethereum). They are more conservative and have a higher value than other altcoins, so there is a lower risk of crashing compared to emerging virtual currencies.
As you can see, crypto can be stolen in many possible ways. Fortunately, you can still protect yourself against those manipulative tactics. Try to keep an eye on related topics like this to stay in the picture. You will prevent the harm and won’t become a victim of spelt above frauds. It will always be a hot topic as impostors use the latest innovation, technology, product or growth industry to lure people to earn extra money.