Keep your crypto safe: Here’s how to spot scammers
Investing in cryptocurrency inherently means taking on some risk and reports by the Federal Trade Commission indicate that since October 2020, reports of scammers luring people into bogus investment opportunities have skyrocketed, with nearly 7,000 individuals reporting losses amounting to well over $80 million. Individuals typically experienced a median loss of around $1,900.
Cryptocurrencies have become a popular target for scammers and hackers with the market ballooning in value over the past year. Yet, despite crypto dominating the headlines of financial news outlets for the greater part of the year, the realm of cryptocurrencies remains a relatively foreign concept. “All of this plays right into the hands of scammers,” Emma Fletcher, a program analyst with the Federal Trade Commission said. She continues: “They blend into the scene with claims that can seem plausible because cryptocurrency is unknown territory for many people.”
The lack of global crypto regulations has helped crypto innovate freely and at a fast pace, but at the same time it means there is no standardization when it comes to security. As a result the user needs to be vigilant to keep scammers at bay. Let’s take a look at some security measures users employ.
First line of defense: A secure password and device
Using strong passwords to login from a clean smart device or laptop from a secure network is a vital first step in keeping scammers and hackers at bay. This will help to ensure that the user’s data is not being leaked or logged to the wrong people. A clean device that is not infected with malware or is otherwise security impaired. In addition to using a secure network and uncompromised device, enabling two-factor authentication (2FA) can help to improve security even more.
Be wary of ransomware and phishing
Predicting how a scammer could get hold of your data is difficult, but the golden rule is to never supply more information than what is needed. Phishing emails generally have one purpose: to get the user to download an infected file or to redirect the user to a malicious website. Some scammers will try to impersonate existing, reputable companies. Recently, Hodlnaut warned of scammers impersonating the company.
Crypto ransomware encrypts all or some files on a computer or device, demanding a ransom from the victim in exchange for a decryption key. Some newer variants can also infect shared, networked and cloud drives. The 2017 crypto worm, WannaCry, had the world reeling as it demonstrated how dangerous self-replicating and self-propagating crypto worms can be. The ransomware attack has hit hundreds of thousands of computers worldwide, effectively shutting down over a dozen United Kingdom hospitals.
The red flags of ‘pump and dump’
A pump and dump scheme is a type of fraud in which offenders accumulate a commodity over a time period, then inflate the price by artificial means through the spread of misinformation, before selling off the commodities at a higher price. Since the price was inflated artificially, the price usually drops afterwards leaving buyers at a loss.
The easiest way to spot a potential pump and dump scheme is when an unknown coin suddenly rises substantially without real reason to do so. This can be easily viewed on the coin price chart. Another red flag that could warn of a potential pump and dump scheme is when paid news articles about a small cap coin appear in combination with a surge in social media activity surrounding that particular crypto project.
Before making an investment, research and evaluate the prospective opportunity. If there aren’t too many investors and only a small pool of individuals stand to gain from it, it can be considered a potential pump and dump red flag.
Make use of cold wallets
Wallets come in two main types: exchange-owned wallets and private (cold wallets). The former are normally fine for beginners who are testing the digital waters, however these wallets can be compromised by hacking attacks. For added security many crypto owners make use of cold wallets. Simply put, cold wallets are not connected to the internet, therefore pose a smaller risk of being compromised. Individuals who accumulate a lot of crypto tend to make use of cold wallets to enhance security and gain control over their assets.
In closing: Be suspicious
The old adage: “if something looks too good to be true, it usually is,” rings true here. For example: if an opportunity is offering crypto investors a tenfold return on their investment it would behoove the crypto investor to examine the opportunity thoroughly and not take it at face value. Scammers often revert to “get rich quick” schemes posing as self-anointed “bitcoin analysts” whose only goal is to divorce investors from their hard-earned crypto.
Story by Giuliana Speranza