There are several Bitcoin scams involving cryptocurrencies in the blockchain space. The most common ones include extortion, fake exchanges, fake giveaways, phishing on social media, copy-and-paste malware, phishing emails, Ponzi and pyramid schemes, and ransomware.
Let’s briefly dwell on each of them so that you can learn how to avoid the most common Bitcoin scams and how to hedge your cryptocurrency holdings.
As long as new technologies are introduced into the world, scammers will continue to look for a way to pursue their activities. Unfortunately, Bitcoin offers interesting opportunities to crypto-scammers, since it is a cross-border digital currency.
The decentralized nature of Bitcoin allows you to have full control over your investments. However, it also complicates the establishment of an appropriate regulatory and law enforcement framework. If scammers manage to trick you into making mistakes when using Bitcoin, it may happen that you end up stealing your BTC, and there is practically nothing you can do to get your cryptocurrency back.
Still, it’s important to understand how scammers work and to learn how to spot potential warning signs. There are many Bitcoin scams to be wary of, but some are more common than others. That’s why we’re going to take a look at eight common Bitcoin scams and learn how to avoid them.
Common Bitcoin Scams (and How to Avoid Them!)
Extortion is a well-known method by which fraudsters threaten others with the publication of sensitive information if they are not somehow paid. This payment is usually made in the form of cryptocurrencies, in particular, Bitcoin.
Extortion works by scammers who either find or fabricate sensitive information about you and use that information to put you in the undesirable position of sending you Bitcoin or other forms of money.
The best way to avoid scammers blackmailing you for your Bitcoins is to be careful when choosing your login details, the pages you visit online, and who you give your information to. It is also advisable to use two-factor authentication whenever possible. If the information you are being blackmailed with is wrong and you know it is wrong, you should be on the safe side.
Fake Stock Exchanges
As the name suggests, fake exchanges are fraudulent copies of legitimate crypto exchanges. Usually, these scams are offered as mobile applications, but you can also find them as desktop applications or fake websites. You need to be careful because some fake exchanges are very similar to the original operations. They may look legitimate at first glance, but their goal is to steal your money.
As a rule, these fake exchanges attract crypto traders and investors by offering free cryptocurrencies, low prices and fees, and even gifts.
To avoid getting scammed on a fake exchange, you should bookmark the real URL and always check it before signing up. You can also use Binance Verify to check the legitimacy of URLs, Telegram groups, Twitter accounts, and more.
If we are talking about mobile applications, be sure to check the developer information, the number of downloads, ratings, and comments. For more information, see Common Scams on mobile devices.
Fake Promotional Gifts
Fake giveaways are used to scam you out of your cryptocurrencies by offering you something for free for a small deposit. Usually, scammers will ask you to send money to a Bitcoin address first so that you get more bitcoins in return (for example, “Send 0.1 BTC to get 0.5 BTC”). However, if you make these Bitcoin transactions, you will not receive anything and will never see your Bitcoins again.
There are many variants of fraud with fake freebies. Instead of BTC, some scammers will ask for other cryptocurrencies like ETH, BNB, XRP, and many others. In some cases, you will be asked for your private keys or other confidential information.
Fake giveaways are most often found on Twitter and other social media platforms where scammers access popular tweets, viral messages, or announcements (for example, a protocol upgrade or an upcoming ICO).
The best way to avoid scams with fake giveaways is to never get involved in giveaways where you have to send something valuable first. You will never be asked for money for legitimate giveaways.
Phishing in social media
Social media phishing is a common Bitcoin scam that, like fake giveaways, you will most likely find on social media. The scammers create an account that looks like someone with a high level of authority in the crypto space (this is also called imitation). Next, they will offer fake giveaways via tweets or direct chat messages.
The best way to avoid scams through social media phishing is to verify that the person is really who he claims to be. On certain social media platforms, there are usually indicators for this, such as the icons with a blue checkmark on Twitter and Facebook.
Copy and paste malware
Copy and paste malware is a very sneaky method for scammers to steal your money. This type of malware changes your data from the clipboard, and if you are not careful, you will send money directly to scammers.
Let’s say you want to send a BTC payment to your friend Bob. As usual, he will send you his Bitcoin address so that you can copy and paste it into your Bitcoin wallet. However, if your device is infected with copy-and-paste malware, Bob’s address will be automatically replaced with the scammer’s address as soon as you paste it. This means that after sending and confirming your Bitcoin transaction, your BTC payment has been sent to the scammer, and Bob will not receive anything.
To avoid this kind of fraud, you need to be very careful about the security of your computer. Be wary of suspicious messages or emails that may contain infected attachments or dangerous links. Pay attention to the websites you visit and the software you install on your devices. You should also consider installing an antivirus and regularly checking your device for threats. It is also important to keep the operating system (OS) of your device up to date.
There are several types of phishing. One of the most common is the use of phishing emails, which are used to try to trick you into downloading an infected file or clicking on a link that will lead you to a malicious website that seems to be legitimate. These emails are especially dangerous if you are imitating a product or service that you use frequently.
Usually, scammers insert a message asking you to take urgent measures to secure your account or balance. You may be asked to update your account information, reset your password, or upload documents. In most cases, your goal is to get your login details to try to hack your account.
The first step in avoiding phishing email scams is to verify that the emails are from the original source. If in doubt, you can also contact the company directly to confirm that the email you received was from them. Secondly, you can hover your mouse over the email links (without clicking) to check if the URLs have spelling errors, unusual characters, or other irregularities.
Even if you can’t detect warning signs, you should avoid clicking on the links. If you need to access your account, you should do it in other ways, for example, by entering the URL manually or using bookmarks.
Ponzi and pyramid schemes
Ponzi and pyramid schemes are two of the oldest financial scams in history. A Ponzi scheme is an investment strategy that pays out returns to older investors with new investor funds. If the scammer can no longer attract new investors, the money will stop flowing. OneCoin was a good example of a crypto-Ponzi scheme.
A pyramid scheme is a business model in which members are paid based on the number of newly accepted members. If no new members can be accepted, the flow of money stops.
The best way to stay away from either of these two systems is to research the cryptocurrencies you are buying – be it an altcoin or Bitcoin. If the value of a cryptocurrency or Bitcoin fund depends solely on new investors or members participating, then you have probably found a Ponzi or pyramid scheme.
Ransomware is a type of malware that either locks victims’ mobile or computer devices or prevents them from accessing valuable data – unless a ransom is paid (usually in BTC). These attacks can be particularly destructive when targeting hospitals, airports, and government agencies.
As a rule, the ransomware blocks access to important files or databases and threatens to delete them if the payment is not received before the deadline. But, unfortunately, there is no guarantee that the attackers will keep their promise.
There are some things you can do to protect yourself from ransomware attacks:
Install an antivirus and keep your operating system and applications up to date.
Avoid clicking on ads and suspicious links.
Be careful with email attachments. For files that are on .exe, .vbs or .scr ends, you should be especially careful.)
Back up your files regularly so that you can restore them in case they get infected.
Useful advice on ransomware prevention and free recovery tools can be found at Block Chain Recovery Center.