The cryptocurrency industry is susceptible to scams and hacks – often the result of lacking regulation. You’re responsible for the security and protection of your own assets, so building knowledge around the different types of cryptocurrency scams and attacks in the industry is paramount. In this guide, we take a look at a variety of scams, how they could impact you, and what you can do to protect your funds from vulnerabilities.
The most common online virus is malware: a harmful program that’s installed onto your device that damages, disrupts or gains access to sensitive information. In some instances, a scammer may even be able to take unauthorised and complete control of your device. Simply put, malware is any malicious program that is harmful to your systems. While it won’t impact your physical network, it could steal and encrypt your sensitive cryptocurrency details. Fundamentally, this cryptocurrency scam could lead to the theft of your funds — a transaction that’s irreversible once it happened.
There’s also a new type of malware known as ‘riskware’. It targets devices and utilises its spare processing power to mine for cryptocurrency. You might not necessarily know that your device has been infected by malware with some symptoms being as simple as your device slowing down. If you’re a serious investor with large volumes of cryptocurrency, you should take extra precautions online. Refrain from clicking on links and sources that you don’t recognise or trust.
Derived from traditional phishing scams, the cryptocurrency industry has been susceptible to spam emails. The senders will present themselves as a provider within cryptocurrency-related services. These can include web wallets, exchanges, creators of new projects and so on. Some scammers will even go as far as replicating existing exchange websites so it looks entirely legitimate. These cryptocurrency scams encourage traders to put in their sensitive data – such as their keys – into the website. This information is easily cloned and stolen by the hacker.
Phishing emails can vary from security alerts about your cryptocurrency accounts through to invitations to cryptocurrency events. Most phishing emails will ask for sensitive information such as your e-wallet credentials. There are a number of ways you can guard yourself against cryptophishing scams. You should:
- Question any service that is offering cryptocurrency for free
- Check any links carefully and don’t click on any links within your email server
- Use an antivirus solution that offers anti-phishing protection
- Never give out your cryptocurrency information online or over the phone
Pump and dump schemes
Pump and dump schemes see groups of dedicated organisers publicly gather support for a particular coin or event, stirring up interest from a wide audience of traders. Pump and dumpers will artificially inflate the price of an asset, encourage unsuspecting investors on a chosen exchange to buy the coin, and then offload it for a profit. These investors who keep driving the price up will eventually record a loss as the organisers dump the coin.
There are a number of ways to spot a cryptocurrency pump and dump scam:
- Pay attention to a cryptocurrency’s trade volume. A pump and dump group would struggle to fake true trading volumes.
- Only use trusted sources and cross reference information before making any investment decisions.
- Don’t give in to the fear of missing out. Just because everyone else is investing, doesn’t mean their investing for the best.
Avoid illegitimate brokers and exchanges
Only use an exchange that is highly reputable. There are a lot of exchanges out there that are legitimate, such as Coinbase, Coinbase Pro, Kraken and so on. Scam brokers and exchanges will try to get people on board by offering a promotion or promises of getting rich quick. Be sure to thoroughly research any exchanges or brokers you are considering using. Read customer reviews and keep up with the latest news about any vulnerabilities or attacks.
Beware of fake wallets
As cryptocurrency continues to grow so do the methods of deceiving investors and traders. The amount of apps, wallets, and exchanges has grown – giving users more choice than ever before. With so many options on the market, it can be easy to fall victim to fake wallets. A few have even been found and removed from Google’s Play Store. Fraudulent wallets allow you to put in your details and make transactions, but any cryptocurrency moved into the wallet is being moved into somebody else’s pocket.
Before making any decisions about trading your cryptocurrency or investing in a new coin, make sure you complete thorough research. Keep on top of the latest news and trends as reports of scams begin to increase. Most of all, don’t forget to apply everyday digital best practices to your activity. Cryptocurrency scams and vulnerabilities will continue to evolve as the industry grows and it’s your responsibility to stay protected.
To find out more about how to stay safe in within the cryptocurrency industry, read our latest insights.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.