Trust us, in a bull market, you'll want to know all these little things. It gets wild for scams in cryptocurrency.
This one is for everyone, especially anyone new to crypto, as many people want to get hold of your crypto. Anonymity is a crucial aspect of Bitcoin transactions, as it ensures that your personal information is not linked to your crypto holdings.
Anyone in the crypto space should be aware of the scams that go on in the crypto space, including Ponzi schemes. This is an area of frustration for many of us in the space, and hopefully, an article like this will reduce the chances of you getting caught out yourselves.
What kind of scams are there?
There are many different types of scams, but they all seem to have a familiar modus operandi of how they action the strategies on other platforms.
Very simple to more complex higher-end techniques are generally utilised, but there are usually ways of spotting these scams and not falling for them.
Having spoken to the team at learning crypto, we all said that at some point, we had been contacted by someone in some way with the sole purpose of trying to steal crypto assets… we've all learnt lessons along the way to help us and others avoid these attacks. But, fundamentally, the trick is to create a sense of urgency and not to get caught out for all investors. So let's look at different ways these operators work.
Will banks refund crypto scams?
It depends on the specific circumstances and policies of the bank. If a customer falls victim to a crypto scam and loses money, it is important to report the incident to the bank as soon as possible. Some banks may have fraud protection measures in place that can help recover lost funds in certain cases, including from a compromised bank account. However, it is important to note that cryptocurrencies are often decentralized and unregulated, which means they do not offer the same level of protection as traditional financial systems. It is always recommended to exercise caution when dealing with cryptocurrencies and to research and verify any investment opportunities or platforms before participating. 9 times out of 10, banks will not care if you have been scammed via cryptocurrency.
Social platforms, like Telegram, Discord and Reddit:
Many crypto projects use these platforms for their projects as a way to build communities, communicate news and make announcements. Sadly They can be a hotbed for scammers to prey on unsuspecting investors.
A straightforward rule is if someone contacts you directly on any platform, always question why they have done this. No admin or principal of any quality project will contact you directly. They are far too busy.. so it's more than likely someone with an ulterior motive, such as investment scams.
What happens is scammers copy a profile of an official group admin and start a conversation with you, offering help or striking up a conversation in some way. They then gently lead you to a point where you start giving away personal details, sensitive data (seed phrases etc.) or sending crypto somehow or someway. It is important to keep in mind that you should never share your private keys with anyone, as this can lead to the loss of your cryptocurrency.
It's usually via a link of some sort. This will give access to your crypto wallet, and they will clear your account out. The wrong advice can be compelling, for example, advising that you must bridge an asset when you are struggling to send it or stake it. Below is a convincing example of a real and fake account, which a hacker can use to gain access to your funds.
Be careful when asking for help on projects or social groups. This can trigger scammers to act and use the above techniques, such as phishing scams. You should always check with a search engine or someone you trust in a crypto community for any links you are sent.
The example below is from Reddit, and you can see a question about an automation test... there is no such thing! However, it is important to be aware of fake websites that claim to offer automation testing services, as they will most likely be a scam.
Presales and ICOs
I have experience with a scammer trying to disrupt a presale, and I know many people who have been caught out. I was lucky enough not to fall into the trap... it's something to be aware of If you are in a presale or any initial offering. Be cautious of rug pull scams, which involve a sudden and deliberate withdrawal of liquidity from a project, causing investors to lose their funds. Remember to stay vigilant and do your research before investing in any project.
In a first come, first served type ICO, time is of the essence and purchase information such as token address may be released at a specific time via social platforms. Scammers will copy the project page exactly and secretly add you to a group which looks identical.
They can then send you an authentic-looking message with an address to use to purchase the tokens. This is usually at the exact time or a minute or two before the sale is due to start. If you send your payment here, you will use an incorrect wallet address that the scammer has set up, giving them your hard earnt crypto.
I know these seem very simple ideas you would never fall for, but worryingly, people do. They can catch you out if you aren't aware of them (I still see people in telegram groups getting caught out by these fake admin accounts offering airdrop, for example.)
Are there any warning signs that an initial coin offering (ICO) might be a cryptocurrency scam?
Yes, there are several warning signs that an initial coin offering (ICO) might be a scam. It is important to be cautious and do thorough research before investing in any ICO. Some warning signs to look out for include:
1. Lack of a clear and credible project: If the ICO lacks a clear whitepaper or roadmap outlining their project goals and plans, it may be a red flag.
2. Unrealistic promises: If the ICO claims to offer extremely high returns or guarantees without providing sufficient evidence or explanation, it could be a sign of a scam.
3. Lack of transparency: If the team behind the ICO is anonymous or does not provide adequate information about themselves, their experience, or their qualifications, it may indicate a lack of credibility.
4. Pressure tactics: If the ICO pressures you to invest quickly without giving you enough time to research or consider your options, it could be a sign of a scam.
5. Negative reviews or warnings from trusted sources: If reputable sources such as financial regulators or industry experts have issued warnings or negative reviews about the ICO, it is important to consider them.
Remember always to exercise caution when investing in ICOs and consult with professionals if you have any doubts or concerns about the legitimacy of an offering.
The above techniques can work more effectively for the scammer by catching you when you are mentally vulnerable.. by this, I mean you might be busy doing something else whilst involved with these interactions.
Your brain is too busy to engage properly in what you are doing. Or you are in a stressed state, such as a first come, first served sale of some type; this means you either don't have time to check information or you are rushing and in a bit of a frenzy, and you fall into the trap. I witnessed this successful scam in the HERO presale and others; I have heard of it used in many NFT releases.
How to avoid crypto scams: Metamask
Another common method is depositing random unexpected coins or nfts into your meta mask wallet… Please DO NOT touch them, don't move them and don't sell them. This can be scammers depositing the coins. If you try moving or selling them, you are allowing access to your wallet information. This allows access to your details and the ability to remove your holding from your metamask.
Seed Phrases
The most simple and fundamental rule as a crypto investor is NEVER give out your seed phrase to anyone. However, convincing the person's argument is that no one will ever ask for your seed phrase if they offer legitimate help.
Cryptocurrency Scams Via Emails
Everyone has received a spam email at some point if they have an email account.
In crypto, you can receive emails ranging from wallets saying your account has been locked or needs to be updated to a transaction of 12 BTC has failed; these always rely on you clicking a link embedded in the email. I'd hope the latter is obviously a scam, but the ones pertaining to wallets or exchanges can be a bit more convincing.
So if you ever get an email from a wallet or exchange, I advise you never to click the link in the email. Instead, it is much safer to log in to your account and check for notifications or contact the customer service team to confirm the action required in the email. When I've done this with exchanges, they are more than happy you've taken the time to ask and check rather than dive into clicking links, even if they are legitimate.
Cryptocurrency Scams Via Whatsapp
While writing this article offering a signals group, I received a message and deleted it immediately. So, hopefully, ignore any unsolicited messages on WhatsApp. These are getting more popular with Binance-themed group chats popping up.
Is it possible to recover lost funds from a cryptocurrency scam?
It is possible to recover lost funds from a cryptocurrency scam, but the process can be challenging and there are no guarantees of success. If you have been a victim of a cryptocurrency scam, it is important to take immediate action. Here are some steps you can consider:
1. Report the scam: Contact your local law enforcement agency and file a complaint. Provide them with all the relevant details and evidence of the scam.
2. Gather evidence: Collect any documentation, emails, or communications you have with the scammer. This information may help build a case against them.
3. Contact your bank or credit card company: If you made any payments to the scammer using a credit card or bank transfer, notify your financial institution immediately. They may be able to help you dispute the charges or freeze the funds before they are withdrawn.
4. Seek legal advice: Consult an attorney specialising in cryptocurrency scams and fraud. They can guide you through the legal process and advise you on the best action based on your situation.
5. Report to relevant authorities: Inform regulatory bodies such as the Financial Conduct Authority (FCA) or Securities and Exchange Commission (SEC) about the scam. They may be able to investigate further and take action against the scammers.
While recovering lost funds can be difficult, it's important not to lose hope and to take proactive steps to protect yourself and seek justice.
Summary
People fall for These basic and frequently used techniques when new to crypto. But more experienced people can also fall into one of these traps. For example, last month (March 2023) saw an influencer fall for precisely one of these strategies above and reportedly lose around $28000.
Please stay safe out there and look after your assets, and if you are ever in doubt about anything, take the time to check the information you have been given is genuine. It is better to not act on and miss out than jump into something you haven't reviewed and lose everything.