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How to Protect Yourself from Common Cryptocurrency Scams

Around $4 billion in crypto was stolen in 2022 In 2022, the cryptocurrency market experienced a significant loss of around $4 billion due to theft and security breaches.





An illustration of an individual wearing an anonymous face mask using a laptop and committing a Cryptocurrency scam

Cryptocurrency scams have become increasingly common as the use of digital currencies has grown in popularity. While the technology behind cryptocurrencies offers many benefits, it also presents new opportunities for fraudsters to take advantage of unsuspecting victims. In this article, we will discuss some of the most common scams in the cryptocurrency space and provide tips on how to stay safe.


Exit Scams


One of the most prevalent scams in the cryptocurrency world is the "exit scam." This occurs when a fraudster sets up a fake cryptocurrency exchange or investment opportunity and encourages people to deposit their funds. Once a sufficient amount of money has been deposited, the scammer disappears and the victims are left with no way to recover their funds. To avoid falling victim to an exit scam, it is important to thoroughly research any cryptocurrency exchange or investment opportunity before depositing funds. Look for reviews and testimonials from other users, and make sure that the exchange or investment opportunity is properly licensed and regulated. An example of an exit scam is the collapse of Mt. Gox exchange in 2014, where 850,000 bitcoins worth $450 million at the time were reported missing from its customers' accounts.


Ponzi Scheme


Another common scam in the cryptocurrency space is the "Ponzi scheme." This type of scam promises high returns on investments, but instead of generating returns through legitimate business activities, the scammer uses funds from new investors to pay returns to existing investors. Ponzi schemes often collapse when the influx of new investors dries up, leaving the vast majority of investors with significant losses. To avoid falling victim to a Ponzi scheme, be wary of any investment opportunity that promises unrealistic returns and be sure to research the company and its management team before investing. A Ponzi scheme example is PlusToken in 2019, which collapsed and caused an estimated $2 billion loss for investors.


Phishing


Phishing is another common scam in the cryptocurrency space. This occurs when a fraudster sends an email or message that appears to be from a legitimate source, such as a cryptocurrency exchange or wallet provider, and asks for personal information or login credentials. Once the fraudster has this information, they can access the victim's account and steal their funds. To avoid falling victim to a phishing scam, never click on links in emails or messages from unknown sources and always double-check the URL of any website that you are directed to. In 2018, a phishing scam was carried out by hackers who posed as the Binance exchange and directed users to a fake website to steal their login credentials.


Overview


Finally, it's important to stay informed and aware of new scams as they emerge. This includes staying up-to-date on the latest news and developments in the cryptocurrency space, as well as being vigilant about any suspicious activity or requests for personal information. It's also important to use secure and reputable cryptocurrency wallets and exchanges that have built-in fraud detection and prevention systems.


While cryptocurrencies can be a valuable investment opportunity, it's important to be aware of the potential risks and to take steps to protect yourself from scams. By being informed and vigilant, you can help ensure that your experience with digital currencies is a positive one.


In 2022, the cryptocurrency market experienced a significant loss of around $4 billion due to theft and security breaches.

 
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