November 29, 2022

If you’re an investor looking to try something new, cryptocurrency may be the answer. Unfortunately, some businesses offering cryptocurrencies are fraudulent, and could run away with your money if you’re not careful.

Before investing your hard-earned cash in crypto, check out this guide prepared with inputs from the Internet 2.0 Conference on how to avoid being scammed by crypto fraudsters. The good news is that it isn’t too difficult to weed out the bad players, provided you know what red flags to look for and where to look for them. When you think of the most significant risk to your money, getting it into a virtual wallet usually doesn’t come second. However, this is a genuine risk. Widespread in recent years, Cryptocurrency has attracted the attention of criminals because of its nature as an untraceable medium of exchange. As a result, numerous online fraud cases have involved virtual wallets and other money-storing methods.

The What Of Crypto Fraud

Internet 2.0 Conference discusses crypto fraud as a fraud when an individual or group of individuals attempt to obtain money or other assets dishonestly by using false information, like fake identities and false claims. Crypto fraud is the act of using cryptocurrencies for illegal or malicious purposes.

It is a type of online fraud that involves the use of cryptocurrencies, such as Bitcoin. Crypto fraudsters typically use fake Bitcoin wallets or exchange platforms to trick victims into sending them money. They may also use phishing techniques to obtain victims’ private keys or passwords. Once they have access to victims’ funds, they can quickly transfer them to their wallets or exchange them for other assets. Crypto fraud can be challenging to detect and prosecute due to the anonymous nature of cryptocurrencies. The most common form of crypto fraud is using legitimate fake websites. Crypto scams occur in various forms; let’s focus on the structures elucidated in the Internet 2.0 Conference.

Types Of Crypto Fraud

There are many types of crypto fraud. Some of the most common ones are:

  • Phishing Scams: These scams try to steal your information by sending you an email or other message that looks like it comes from a legitimate company. They might ask for your password, credit card number, or other personal information.

  • Fake ICOs: These scams try to get you to invest in a fake cryptocurrency. They might offer you a high return on investment with little risk, but they’re just trying to steal your money.

  • Pump and Dump Schemes: This one involves artificially inflating the price of an asset before dumping it and leaving investors with worthless coins.   

  • Malware and Ransomware Schemes: These scams involve installing malicious software on your computer. It can lock up or encrypt all your files until you pay a ransom in Bitcoin (or another cryptocurrency).
  • Traditional Scam: Scammers can hack accounts and set up a transaction you might not know. Scammers can take all the currency either in a go or gradually sneak small amounts without the owners’ knowledge, and in the latter, the chances of them being caught are extremely low.

The Why Of Crypto Fraud

Crypto fraud is not new. Scams have been detected over the decades, but the rise in popularity of Cryptocurrency led to an increase in crypto fraud cases. Cryptocurrency fraud is a significant concern for many investors. The speakers at the Internet 2.0 Conference aimed to impart knowledge of why crypto scams happen; here are the four reasons:

  • Irreversible Transactions
    Cryptocurrency transactions are irreversible and are not monitored by any authority, making it easier for scammers to commit crypto fraud without being caught. There is no way to stop or reverse a transaction on the blockchain, which means that once you send your funds, they are gone forever. Irreversible transactions are one of the loopholes which have made it easy for scammers to commit crypto fraud.
  • Untraceable Identities
    Cryptocurrency wallets don’t have any identifying information associated with them, and because of this, it’s hard to track down the person who owns the wallet. Criminals can use multiple wallets and cryptocurrencies to make it harder for authorities to identify their real identity and location.
  • Increase Demand for Crypto Assets
    The hype around cryptocurrencies has led to a surge in demand for crypto assets, resulting in more people being exposed to crypto-related risks. Even the rise of Initial Coin Offerings (ICOs) has led to increased fraudulent activities such as phishing.
  • Lack of Regulation
    No regulatory body governs cryptocurrency transactions and no formal legal system to enforce contracts. Crypto Fraud also includes the factor of greed; some people only care about getting money, be it from any fraudulent source. Monetary desire leads to scams, fraud, and other illegal activities.    

Keep Safe From Crypto Fraud

Users should protect their assets against fraud and ensure their funds are accessible without delay when using any digital wallet for personal or business purposes. Users need to understand that, unlike a traditional bank account where access can be restricted by authorization from the owner or withdrawal limits imposed by a transaction fee schedule, cryptocurrencies like Bitcoin and Ethereum allow holders to store their wealth without interference from outside parties. Since these currencies are decentralized (i.e., not controlled by any central authority), cybercriminals look at them as a target species instead of something they can outright seize. That being said, here are some ways suggested by the speakers at the Internet 2.0 Conference to protect your currency while still interacting with cryptocurrency wallets:

  1. Disclose Your Wallet Address Before Use
    It is the first step to ensuring that a potential hacker does not gain access to your account by forging your identity. You should disclose your wallet address before use either through an online form or in a more secure method, such as a password-protected text message.

  2. Only Have Wallet Payments Occur Via SMS
    Due to the nature of Bitcoin and other cryptocurrency transactions, they are prone to fraud and are often accompanied by scams. The best way to avoid being scammed while making payments in virtual currencies is by never making payments that don’t have to occur via SMS or another readily available means of communication between parties (i.e., email).

  3. Set Up A PIN
    Almost all modern digital wallets allow users to set up a PIN that has to be applied before making any transaction from their wallets. A PIN can make it more difficult for unauthorized people to access your money.

  4. Keep An Eye Out For Annoying Beeps And Meters
    When you first start using a cryptocurrency wallet, you may not even know what kinds of notifications mean what and when. That’s why it’s helpful to set up some alert mechanisms, so you don’t miss out on important messages about your money. You can do that by going to Settings and choosing alerts and notifications.   
     
  5. Trust
    Be careful who to trust; only send coins to people you know and trust. Beware of the risks, and don’t invest more than you can afford to lose. Another trust aspect is not to give your credentials to anyone. Make sure not to add/save your credentials online; secure them offline.

The good news is that most cryptocurrencies have built-in security features designed to protect your funds against theft. Bitcoin, for example, comes with robust wallet software. This software allows you to securely store your money and manage multiple accounts with one login.

The bad news is that some fraudsters also love targeting these digital wallets. They often try hard to get into these wallets using fake logins and passwords. There are many ways to protect your money when using a cryptocurrency wallet. However, it’s vital to remember that no two people have the same experience using a digital wallet. There is no telling what will happen if you use a different wallet than someone you know. The only way to be safe is to use the same wallet you use for daily transactions.


Conclusion

There has been talk about crypto fraud lately. With the recent price hikes and the general rise in the popularity of cryptocurrencies, it is no surprise that some people are looking for ways to take advantage of new and less experienced users.

Internet 2.0 Conference proposes that regardless of how much you earn or what kind of car you drive, it’s essential to protect your money from thieves and fraudsters. Cryptocurrencies, like traditional money, are not guaranteed and can lose a lot of value in a short amount of time. As a result, you need to be on an alert when using these digital wallets. Creating a budget, putting away money regularly, and keeping your digital wallet password safe are crucial steps you can take to protect your funds.

This blog was created per the discussions at the Internet 2.0 Conference to help our audience stay informed about crypto fraud. We hope that this article has been knowledgeable for you and that you will spread the word about how to keep your currency safe from crypto Fraud. Visit our website regularly for updates and information on tech-related blogs and articles.

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