The latest report from Chainalysis, a blockchain data and analysis firm, shows that 2023 was the worst year ever for crypto scams. The firm tracks the flow of funds to illicit crypto wallets by monitoring the blockchains behind major cryptocurrencies. Their 2023 findings show that over $14 billion flowed from innocent victims to crypto scammers.
That’s nearly double 2020’s total of $7.8 billion, although 2019 saw a closer value of $11.7 billion. These funds include proceeds from many illicit activities, including direct theft, money laundering, and even terrorism. However, the largest category by far is the income from the countless crypto scams that are found across the web today.
Crypto Scams to Watch Out for Today
Crypto scams are the largest category of illicit crypto transactions but can also be divided into different types of scams. While scams can vary widely in their exact details, most fall into a few key categories that anyone online should take the time to understand so that they can identify them before they become victims of scams like the latest Immediate Edge which was exposed here by industry watchdog websites.
Crypto Investment Scams
Many scams claim to offer investment opportunities. There have been many successful crypto projects over the years that have made anyone who got in on the ground floor rich. This leads many investors to seek out these kinds of opportunities. However, scammers understand this and are always ready to take advantage of unwary investors.
Most of these types of operations make outrageous promises. They might say that they offer guaranteed returns or returns of 1,000% or more. Many of them focus on technology, claiming to have perfect algorithms that predict markets or other advantages. The prevalence of these scams makes investing in early crypto projects incredibly risky and best left to those with the experience and knowledge to tell the difference.
Another common thread among many crypto scams is the use of falsified identities to convince victims. Scammers will pretend to be a well-known celebrity or a representative of a promising crypto project. For individuals who aren’t very savvy with social media, fake profiles can be incredibly convincing.
Of course, anyone would jump at a personal invitation to get in on the ground floor of Elon Musk’s next crypto plan. The scammers know this and use his likeness and that of other prominent celebrities to convince individuals to send them crypto. There’s no way to reverse crypto transactions, so the victims have no way to get their money back once they uncover the scam.
Phishing scams predate cryptocurrencies by a lot, but this classic technique is seeing a lot of use targeting this relatively new technology. Phishing refers to the act of deceptively obtaining someone’s private information. This could be account names and passwords directly or the personal information that can be used to falsely recover those account details.
With cryptocurrencies, a wallet’s owner gives complete control of the wallet to anyone with their private key. If they give out the private key to the wrong person, they can transfer all cryptocurrencies, tokens, or NFTs out of the wallet.
Most people are unlikely to accidentally divulge their 64-character private key, but they can be tricked into giving access through spoofed websites. Many crypto projects request access to wallets through their websites to allow users to carry out transactions. A fraudulent website can take that opportunity to steal control of the wallet and transfer anything inside it to themselves.
Crypto Faucet Scams
A crypto faucet is a type of scheme where you are offered a certain amount of money in the form of digital currencies to perform a task. It could be sending personal emails, drafting text messages, or clicking on links. Faucets also offer you bonuses. For example, if you complete a certain task you qualify to receive a bonus of 50% according to a set of terms and conditions.
The problems start when victims need to be paid for their services but are not. In many cases the website behind the scheme simply disappears, along with the crooks who operate it. The way to protect yourself in this case is to use an intermediary service that guarantees the payment, or alternatively insist to get paid up front.
Fake Initial Coin Offerings (ICOS)
An initial coin offering or ICO is the first time a cryptocurrency is offered for sale. Many ICOs are designed from the start to take advantage of uneducated or uninformed individuals. The con artists create fake bios of team members that don’t exist, as well as fake product roadmaps. There is also the issue of technical whitepapers. These are usually recycled and moved around according to requirements.
Fake ICOs use the massive media hype which Bitcoin as well as other digital currencies have been receiving. They prey on the FOMO or fear of missing out people have. In other words, greed is a very highly motivating factor, and scammers know exactly how to use it in order to promote their schemes.
How to Protect Yourself From Crypto Scams
Even when it comes to perfectly legitimate crypto opportunities, there are still many risks. Most financial advisors very strongly recommend against investing large amounts in cryptocurrencies, generally 5% or less of any portfolio.
Individuals should also watch out for some common red flags online. If you see a post on social media that claims to be from a celebrity or organization, make sure that it’s actually from them. Most social media websites have some form of official verification. In other cases, you can look up the official account and see if the post is found there.
Watching out for common scam tactics is another good idea. Any opportunity that features overly aggressive tactics, unreasonable claims, or unrealistic promises is probably too good to be true. Taking the time to think things through carefully could save you from falling victim to online crypto scams.