Bitcoin and other cryptocurrencies are currently in high demand. Everyone wants a slice of the action, but many people can’t afford to buy and invest with their own money due to rising rates.
But they resort to the next best thing they can think of: scamming and stealing other people’s valuable digital coins. We’ll show you how to defend yourself against some of the most popular scams perpetrated by these con artists in this guide.
Bitcoin and other cryptocurrencies are not a rip-off.
Before we get into the key scams to be aware of, it’s important to note that all of these scams are perpetrated by outside powers, not by cryptocurrencies themselves. Some people might claim that cryptocurrencies are nothing more than a massive scam, but this is completely false, and we’ll explain why.
The blockchain is the technology that underpins cryptocurrencies. It’s an incorruptible digital ledger that keeps track of all network transactions. It is not under the jurisdiction of any central authority. It is open, and everyone can view the history of any transaction that has ever taken place.
No one may change any transaction on the blockchain because doing so will necessitate changing all subsequent transactions or blocks, which is a near-impossible job.
Because of how well Bitcoin and cryptocurrencies operate, many banks and startup companies are now experimenting with and implementing blockchain technology.
Let’s talk about the most popular scams that many people fall for now that you know you can trust the technology behind cryptocurrencies.
The First Scam – Fake Bitcoin Exchanges
There are numerous reputable bitcoin exchanges available today. Coinbase, Kraken, CEX.io, Changelly, Bitstamp, Poloniex, and Bitfinex are the largest and most popular sites that have been around for a few years. As a result, even though a company is well-known in the market, we can not recommend it.
You must conduct due diligence by studying the company’s past and customer feedback before deciding whether or not to spend your hard-earned fiat money with them.
Exchange Rates That Are Too Good To Be True
Due to the extremely volatile existence of cryptocurrencies (prices may fluctuate by a large range in only a few hours!), many unscrupulous Internet characters are profiting from this uncertainty. They prey on unsuspecting beginners who are unable to distinguish between a genuine and a fraudulent trade.
These phony bitcoin exchanges can easily create attractive websites and impress visitors with their ostensibly sophisticated appearance. People are drawn to them.
With their promises of lower-than-market-rate rates and guaranteed returns, they drew people in with their promises of lower-than-market-rate prices and guaranteed returns. To put it another way, they prey on people’s greed.
Consider how happy you’d be if you discovered a website that sells bitcoins for 10% or 20% less than Coinbase or Kraken. Wouldn’t you leap at the chance if these big sites offered $15,000 for 1 bitcoin and this other site offered it for $12,000?
You’d save a lot of money ($3,000 per bitcoin!), and you might use the money to buy more bitcoins. They’re preying on greed, as you can see! They are well aware that people want to buy more bitcoins for a lower price. Who can blame those unfortunate victims? We could fall for the same con if we didn’t know any better.
You’ll get paid for your bitcoins right away if you use PayPal.
Another tactic used by these fake bitcoin exchanges is to try to purchase your bitcoins at higher-than-market prices and then send the equivalent dollar sum to your PayPal address.
The unwary bitcoin owner thinks he’s getting a good deal because he’ll get more money for his bitcoins and the money will be sent to his PayPal account right away.
So he types in the number of bitcoins he wants to sell, confirms the corresponding dollar sum, enters his PayPal address so the money can be sent to him, and then waits. And then he waits. And then she waits some more.
He’ll contact the website, but they’re unlikely to react because they already have his bitcoins (remember, all bitcoin transactions are final and irreversible once validated).
He’ll know he’s been conned at this stage. He has the ability to report the site and leave negative feedback, but who is he kidding? These astute con artists would simply register a new domain name and wait for their next victim.
The main takeaway here is to avoid ‘exchanges’ that offer prices that are too good to be true. If something seems too good to be true, it usually is.
Phishing Scams (Scam # 2)
Today, there are a plethora of phishing scams to choose from. Have you ever got an email from your ‘bank’ asking you to check or update your account information in order to ensure that your information is up to date? And you have to update your information by clicking on the email link?
Many people are aware that these emails are nothing but a ruse. Nowadays, most email providers send spam emails to the junk folder, so you don’t see them very often.
Scammers are trying to find a way to steal your bitcoins by gaining access to your digital wallets, but with Bitcoin and cryptocurrencies being so fresh and trendy in the news right now, scammers are scrambling to find a way to steal your bitcoins by gaining access to your digital wallets!
Phishing Email Scams
Scammers will send you an email that appears to come from your online wallet service (which is why we don’t recommend holding large amounts of virtual currency in exchange wallets).
They will ask you to click on a link in the email that will take you to a fake website. It will have the same appearance as your exchange or wallet page. Of course, the domain name will be different, so it won’t be the same.
If you use Coinbase, for example, they’ll use a misspelled domain like:
- Coinbase-Client-Update.com, or
- Something similar…
It will also most likely lack a security feature known as SSL, meaning the domain will begin with HTTP rather than HTTPS (modern browsers such as Chrome and Firefox can alert you whether the site is safe or not).
If you fall for this phishing scam and log in to the fake wallet account, the scammers now have access to your real wallet login details! They can easily lock you out of your account, giving them the power to pass all of your bitcoins to their own wallets.
Scams involving malware
Scammers will ask you to click on a link sent to you via email, banner ad, forum ad, or anywhere else they can post a link that will download malware to your device.
These malwares are frequently keyloggers, which record everything you type on your device and send it to scammers. So, if you log in to your online wallet, such as Coinbase, they will be able to see your username and password, and they will be able to easily log into your account and steal your coins!
The most important thing to remember when it comes to avoiding these forms of scams is to never click on links from untrustworthy sources.
If the sender is unknown to you or the website’s domain name is misspelled, you can immediately report the email and/or leave the phishing site.
Consider using offline storage methods like paper wallets or hardware wallets so that even if scammers gain access to your online wallet, they won’t be able to steal something.
Cloud Mining Scams (Scam # 3)
A common method of becoming a bitcoin miner is through cloud mining. To solve complex cryptographic hash problems, you don’t need to buy your own supercomputer or enter a mining community. You won’t really have to be concerned with high energy bills.
All you have to do is sign up for a cloud mining service (also known as a mining farm), rent mining equipment, and get paid proportionately to your subscription.
Although some cloud mining companies are legitimate, there are several dubious websites that offer unreasonable returns for small amounts of money with the sole purpose of stealing your money.
It’s also possible that they don’t have a stable domain (no HTTPS before their domain name). These details are crucial in determining which website is a fraud and which is not. You can look up feedback on Google and look over their website to see if they’re trustworthy. Most of the time, these sites are anonymous, with no names or faces associated with them.
Some may seem legitimate at first glance, but take a closer look at what you’ll get for your money. You will ultimately pay for a contract that will cost you a few thousand dollars per year, but what will you get in return? You’ll have to do the calculations yourself to see if you’ll come out ahead.
The main lesson here is that before you spend any of your hard-earned fiat money, make sure you’re dealing with a legitimate business rather than an anonymous scammer who will leave you in tears.
For information on the best and most trustworthy cloud mining firms, do a lot of analysis, read feedback, and browse the crypto-mining communities.
Ponzi Schemes (Scam # 4)
Ponzi schemes are likely to be more obvious than the other scams we’ve discussed so far in this guide. This is due to the fact that Ponzi schemes are notorious for promising astronomical returns on investments with little to no risk to the investors. People fall for these types of scams all the time because they want to know that their money will be safe.
With Bitcoin and cryptocurrency, any company that guarantees exponential returns on any investment should be viewed as a potential scammer. The cryptocurrency market is highly volatile, and one minute the price could be at an all-time high and the next, it’s down by a few hundred or a few thousand dollars.
Because of this uncertainty, you can never believe someone who claims you’ll get a 10% return on your investment every day, or whatever the scammer’s words are.
Ponzi schemes normally provide rewards for members to attract new people to join their network because they rely on new members, also known as victims, to pay off their early investors.
Scams like this are notorious for offering some kind of affiliate compensation. You are paid for your efforts if you refer anyone to invest in the ‘company.’
Some Ponzi schemes promise daily profits in perpetuity. This is, without a doubt, impossibly difficult. Nobody knows if bitcoins will last so long, so promising regular returns is absurd. An astute investor would immediately recognize that such deals are nothing more than ruses intended to defraud you of your money or bitcoins.
Many of these scam sites favor bitcoin payments because they know they can’t be reversed or canceled after they’ve been sent! Know who you’re sending your money to first, if they want fiat or cryptocurrency.
The main takeaway here is to flee in the opposite direction if you suspect the company’s deals are too good to be true. When it comes to scams like this, it’s often pointless to look up feedback on the Internet because most “reviewers” are those who got in early and therefore have already gotten a return on their investment.
And, in most cases, when these users leave reviews, they provide an affiliate connection, indicating that they have a vested interest in leaving glowing reviews for a business that they may or may not be aware is a scam.
How to Recognize Signs of Identity Theft
Identity theft can affect you in many ways, and there are various ways to identify it. Knowing the warning signs that signal fraud is developing or is happening already can help you more quickly take action to stop it. Here’s what to look out for:
You no longer get your household bills in the mail. An absence of bills in the mail could mean your personal data has been compromised, and the identity thief has changed your billing address to try to keep you from seeing your statements.
You’ve been turned down for a loan or credit card. If you’re rejected for credit but have a solid credit history, you might have been targeted by an identity thief. If you’re approved for a loan or credit but at higher interest rates than you expect, that’s also a sign you may have been victimized by identity theft.
Monitoring your credit can help prevent this.
You’re being billed for items you didn’t purchase. If you receive an invoice for a purchase you don’t recognize, or you’re being billed for overdue payments for credit accounts you don’t own, that’s a sign your identity’s been compromised.
Your financial accounts show charges you don’t recognize. If your bank, credit card or other financial account show unauthorized transactions, those accounts may have been breached.
Your tax return was rejected. If you filed your tax returns and received a rejection notice from the IRS due to a duplicate return, that could indicate a return has already been fraudulently filed in your name.
Small test charges appear on your credit card statement. It’s common practice for identity thieves to “test” that a stolen card is still active by making low-cost purchases of under $5. If the credit card is approved, the fraudster knows that the path is clear for larger transactions.
Your creditors alert you to suspicious activity. You may get a call or text from a company you do business with that tells you fraudulent activity has been detected. For instance, the company that issued one of your credit cards might tell you a suspicious transaction has been attempted with your card. Take care of the immediate issue, and take steps to prevent it from happening again.