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Cybercriminals take advantage of the low understanding surrounding this type of digital asset to attract potential investors and make off with their money. They promise high returns on investments, with little-to-no risk. Some of the techniques most used by scammers include social media ads and fake endorsements by celebrities. Below, we tell you how this type of fraud works, and give some useful tips on how to avoid becoming a victim.
Cryptocurrencies are, generally speaking, digital currencies that use cryptography to secure transactions, ensure authenticity and prevent copies from being made. They work through blockchain technology and are stored and managed through digital wallets.
Unlike traditional money, i.e., the cash you carry around or the money in your bank cards or mobile phone, digital assets are not backed by central banks or other public bodies. Cryptocurrencies are also not regulated by any other institutions and do not require intermediaries to carry out transactions. One of blockchain's features is that data in its records cannot be deleted or altered. Therefore once you make a transaction, like buying or selling cryptocurrency, you can't intervene or cancel the operation. In a nutshell, there's no way out of transactions if you get caught in a scam.
How are cryptocurrencies used in scams?
Criminals trying to scam you by using cryptocurrencies as bait can impersonate financial advisers, company representatives or celebrities. They even go as far as creating fake social media profiles or bogus dating profiles. They use social engineering techniques to weave an investment web through which they try to show that they are completely legal and legitimate. Their goal is for you to use your money to buy cryptocurrencies and then have you transfer the crypto to them - or handover control - under the guise of helping you multiply your investment. Since another feature of these virtual assets is payment anonymity — once the transaction is complete, it's virtually impossible to trace the funds and recover the money.
We'll use an example to tell you how one of the most used scam techniques works: Natalia loves music. While browsing online one day, she finds an ad by her favourite artist where they supposedly recommend an investment in a cryptocurrency. This grabs her attention and she decides to click on the ad link. She's then redirected to another website where she must enter her personal details to receive more information. This website was designed by a cybercriminal to appear genuine and not raise suspicions.
After providing her details, the scammer contacts Natalia by phone (but she could also just as well be contacted through social media, text messages, email, etc.). The scammer impersonates a financial adviser to offer her high returns by investing in said cryptocurrency. In some cases, the criminals typically use sales tactics to pressure victims to complete the transaction there and then.
Because Natalia doesn't have much understanding on how digital assets work, the investment seems like a good idea to her and she accepts. Next, the scammer asks her to download and install a software program onto her personal computer and, without knowing, Natalia gave the scammer access to her computer. When she starts to deposit her money into the cryptocurrency platform, the criminal blocks access to the accounts and the money invested, and makes off with the funds.
How to prevent cryptocurrency scams
The best defence against fraudulent crypto investments is to remain on high alert to spot any possible signs of scam. Following are some advices to bear in mind:
It's always a good idea to study the accuracy of the information at hand, on the authenticity of websites and platforms, and even on the celebrity or individual supposedly endorsing the investment. This way, you create your own criteria to help you make decisions. There's no better way to safeguard your money than taking all the time you need to find the answers you're looking for. It's vital that you don't download anything without first checking that it really is a legitimate investment opportunity.
Pay close attention to any offers or promotions you receive out of the blue by email. Furthermore, be wary of investment opportunities featured in ads or on your social media.
As obvious as this recommendation might seem, swindlers invent all sorts of guises to ask you to transfer your funds. They contact you by SMS or social media channels to convince you they're a friend or a family member who needs urgent help. Always check and compare the information to make sure that the name of the profile or user is actually who they claim they are.
A seed phrase is the sequence of words you use to prove that you are the owner of a cryptocurrency wallet should you need to recover access if your computer or smartphone breaks or is lost, for example. By sharing this information, you may be putting your funds and control over your account at risk.
Beware whenever you come across supposed investment opportunities offering more attractive returns than normal. Remember, if it's too good to be true, then it probably is, and it could be a ploy to lure you in and flee with your money.
The digital environment is so dynamic, so it's important that you stay up to date and understand the different types of fraud popping up so you can recognise the warning signs of investment scams.
Your assets and savings are too valuable to risk investing without the security of knowing you're making a well-informed decision. All precaution you take is a good idea and can make the difference between keeping your money safe or falling victim to a scam.
