Cryptocurrency scams on the rise – How to protect yourself
For the past several years cryptocurrency has caught the eye of both; investors and scammers alike.
What is cryptocurrency?
Cryptocurrencies, often known as digital currencies or tokens, are not the same as traditional currencies such as dollars or euros.
Rather than being issued and supported by a government or a financial institution, cryptocurrencies are digital assets secured by cryptography used as a medium of exchange. A blockchain system usually provides legitimacy, including an open, distributed ledger that records transactions.
How to identify cryptocurrency scams?
Whether you're an investor or not, everyone should be aware of and recognize cryptocurrency frauds to protect themselves. A few possibilities are as follows:
- Fake currency: This is a way to defraud people. Scammers create illegal coins to attract new investors. They are then heavily marketed to attract customers. As a result, investors fall under the trap.
- Virtual Ponzi and Pyramid schemes: This is yet another standard method of defrauding people. Scammers make fake renditions of websites, apps, and exchanges, and unsuspecting investors invest through these bogus platforms. Always ensure that you download the app or use the website from a reliable source and check the platform's details, such as trading volume.
- Fraudulent social media groups: Some people create fictitious telegram channels and social media groups and claim to be the support team for well-known cryptocurrency companies and exchanges. They will take your login information for support purposes and then bang! Your money has vanished.
Although, remember that even if you have been scammed, many firms will help you in fund recovery. They will help you get your money back from a cryptocurrency scam. These firms consist of experts who have a track record of solving such scam cases. They will ensure that your money reaches you safely.
The do’s and don’ts of cryptocurrencies
There are no guidelines on how to protect yourself against cryptocurrency scams. So, maintaining control over your cryptocurrency falls totally on you. Many safety precautions can range from time-tested fundamentals to crypto-age preventive measures. Still, the following are some general do’s and don’ts to protect yourself from cryptocurrency scams:
- Recognize the risk. Even if you are not a scam victim, the virtual currency trade is unpredictable and risky.
- Resist the urge to buy right away. The scammers frequently attempt to instill a false sense of urgency around a hot cryptocurrency.
- Make sure to check the broker and the website before you check. Check the Commodity Futures Trading Commission (CFTC) website as it provides an online background check tool such as the RED list, which entails the list of fraud brokers and platforms.
- Do thorough research of the virtual currency platform or the digital wallet or whichever broker you get a call from before making any investment or providing any of your details, such as credit card data or cryptocurrency.
- Ensure to read the agreement (if any) of the crypto website or digital wallet provider before accepting the terms. Unlike banks and credit card companies, these fraudsters may refuse to acknowledge responsibility for having to replace your money if stolen.
- Don't invest in virtual currency if you don't fully understand how it works.
- Don't invest more into cryptocurrencies than you can afford to lose.
- Do not invest in cryptocurrency just because a friend, an online chat partner, or your spouse told you to invest. Understand thoroughly and then only invest.
- Never invest in crypto just because your favorite actor is promoting it or has said they are also investing in it. Because chances are they are paid for promotions.
- Never share your passwords and number codes of crypto account passwords with anyone. Always store them securely.
Ways to tackle crypto frauds
Following are a few things that help you identify and keep the crypto scams at bay:
- Some offers turn out to be too good to be true. Therefore, it’s better to check and double-check such requests before committing to them. For example, if someone is offering you ten times the return in exchange for your crypto, you are probably buying into a scam.
- Do not invest in cryptocurrency under peer pressure or the fear of missing out (FOMO). Remember that rushing for support out of fear of missing out will only sidetrack an investor's portfolio.
- Several phony trading apps are designed to look just like the real thing. Never fall for a scam like this. Always keep an eye out for client feedback. Usually, there is a minor difference between the original and the app's fake logo. However, make sure you give it a thorough look.
- Always double-check and recheck the URLs of websites. Spoofing is so common these days, even in the world of cryptocurrency. Always make sure that you are only engaging and transacting on well-known platforms.
- Analyze and research the potential opportunity before investing. If there aren't many shareholders and only a small group of people stand to benefit, it's a possible red flag.
- Another common method fraudsters use to dupe users is to send phishing emails that appear to be official communications from a reputable cryptocurrency site or exchange. To entice users, such emails frequently include enticing offers and deals. If you are being redirected to a website you did not intend to visit, note it. Also, do not click unnecessary links that appear in your email.
- Don’t invest in one thing only. Instead, expand, even if you are highly confident in your abilities. Diversify your money among several 'asset classes,' such as equities, real estate, gold, fixed deposits, and now cryptocurrencies.
- Another method fraudsters use to defraud users is to masquerade as tech support. So always double-check the contact details, social media handle, or email address used to contact you – or the one you are getting – for technical support and troubleshooting.