What Is A Cryptocurrency Scam? How To Protect Yourself
I recently talked about some of the latest phishing scams that are appearing in email inboxes these days that are designed to trick you and steal your hard-earned money or even your identity. Some of the phishing scams have to do with fake invoice scams, email account upgrades, advance-fees and more. I talked about how to spot them and what to do if you receive anyone of these scams. Today though I want to talk about another type of scam happening out there that involves people losing hard-earned money through the theft of a newer asset class that you can invest in. That asset class is cryptocurrency and you may be asking yourself what is cryptocurrency and what is a cryptocurrency scam?
I am a big believer in cryptocurrency these days and I definitely have invested in cryptocurrency over the years and there are a lot of people who have made some big money with crypto especially if they got in early with the most well-known one which is Bitcoin. Unfortunately, cryptocurrency isn’t heavily regulated like traditional stocks, bonds, and other securities are and so it is very easy to lose the cryptocurrency you have and never get it back. I’m going to tell you about the different cryptocurrency scams circulating online today and include some that have even surprised me.
What is Cryptocurrency?
Even though cryptocurrency has been around for over a decade, there are still a lot of people who don’t understand what it is or how to even acquire it even though they may have heard of the most well-known crypto which is Bitcoin. Cryptocurrency is a digital type of currency that uses blockchain (which is a virtual ledger) to record all transactions that prevents double transactions. There’s also more than that which can be done with it, but that’s the basic definition of cryptocurrency.
Why was cryptocurrency created in the first place? Well, let’s take a trip back in time to the year 2008 when the US economy, followed shortly by the global economy, basically collapsed in what is called The Great Recession. Some of the largest banks, and companies such as Ford and GMC, nearly completely collapsed. If it wasn’t for the bailout of a lot of those companies from the US government, they would’ve fully collapsed and went bankrupt.
Some people were not happy that such a large control of money was used to bailout these companies that were largely responsible for bringing on the collapse of the economy in the first place, especially when so many people ended up losing their jobs and didn’t know how they were going to pay their bills and wouldn’t get any kind of money from the government to ensure that they would be able to pay their bills and stay in their houses especially when the housing market collapsed.
In comes the creator of Bitcoin who was tired of seeing the main supply of money controlled by a central organization and so Bitcoin was born which would not be controlled by any single person or entity in what is known as decentralization. Basically, it’s an alternative form of currency made to try to prevent things like what happened back in 2008. Since that time there has been many different kinds of cryptocurrency created with specific purposes and a lot of people purchase them as a way to use them as an investment tool and for different transactions.
People were able to make a lot of money when the value of Bitcoin skyrocketed over the years and the highest Bitcoin has ever been is almost $70,000 a coin. It’s now worth $26,000 a coin which shows that crypto does have its ups and downs similar to stocks in the stock market. This is where things can get dicey. While anyone can get into cryptocurrency and it’s a newer asset class of investment, so to speak, there are no protections or regulations like there are when it comes to stocks, securities, and bonds although segments of the government are trying to change that. Because there is a lack of regulation, sadly there are lots of cryptocurrency scams out there designed to steal as much of your cryptocurrency as possible and it’s virtually impossible to get any of it back. I’m going to talk about some of the cryptocurrency scams happening today.
Fake Celebrity Endorsements
There are some celebrities who have endorsed certain cryptocurrency exchanges and crypto businesses and companies over the years, but there is a crypto exchange that made headlines after its spectacular collapse and it was even endorsed by some celebrities such as Matt Damon and Tom Brady.
Scammers are, unfortunately using celebrities to make it appear that their cryptocurrency offers are legitimate when they really are not and celebrities themselves never gave permission to use their likeness for these purposes. They will use pictures of celebrities and create fake websites or social media posts to make it seem like these celebrities have given their ok to use these sites that are really scams. It’s a way for scammers to try to show that what they are showing is trusted by some of the most well-known people out there.
The problem though is that if they say to invest in these so called opportunities by sending any cryptocurrency that you have, over to them using an address they provide (it’s a cryptocurrency address from a digital wallet that is used to store cryptocurrency), your cryptocurrency will be gone. They could also create fake websites resembling legitimate cryptocurrency exchanges such as Uphold or Binance and if you enter your real login credentials, you’re giving them access to your real account where they can steal your cryptocurrency and potentially use your financial information to try to buy more.
If you already own cryptocurrency and you’ve bought it from a reputable source, don’t fall for these scams claiming to be endorsed by celebrities. It’s more than likely too good to be true and you always want to do your research. Don’t let emotion cloud your judgment because that’s what scammers are hoping you end up doing and won’t think logically.
Fake Airdrops
This is an interesting scam, but I have seen these before especially on YouTube videos in the comments section of cryptocurrency videos. Cryptocurrency scams or getting so prevalent in the comments areas of these videos that the creators of some of these videos have to warn viewers to be wary of anyone promising certain things with your cryptocurrency as they are likely scams.
If you’ve been heavily involved in cryptocurrency, you’ll more than likely know what an airdrop is. For those who are not heavily involved with cryptocurrency, an airdrop refers to the distribution of free cryptocurrency tokens if you hold a certain kind of cryptocurrency. I can give you an example. I hold a certain kind of cryptocurrency on a crypto exchange called XRP. A crypto company that created another kind of cryptocurrency used the XRP ledger for its use and creation and anyone who holds XRP will get a certain amount of that new cryptocurrency in what’s called an airdrop. That is a legitimate airdrop.
Sadly, a lot of scammers are trying to take advantage of this by creating comments, like I mentioned above, in YouTube video comments section or on social media posts. They promise large amounts of cryptocurrency given to you either for free or in exchange of something.
A lot of people tend to fall for them and usually end up losing all their crypto as either there’s a link that leads to an address that scammers will ask you to send a small amount of cryptocurrency to or a link to website that looks like an authentic crypto exchange website where you’re supposed to receive an airdrop, but you’ll give the scammers your login credentials and then the scammers will get in and take your crypto on the real exchange. This is where you want to do extensive research and find out where the legitimate airdrops are and avoid the scams promising you the same thing, but usually want something else in return or access to your crypto wallet.
Promises of Return of Lost Cryptocurrency
This is one that is relatively new to me and has also surprised me and angered me at the same time. Why has this angered me? Well, the purpose of these type of articles that I do is to try to prevent people from becoming a victim of the many scams that are out there. Unfortunately, people fall victim to them every day and this scam preys on the victim of a scam with another scam.
The cryptocurrency scams I’ve talked about above usually cause the victim to lose all of their crypto if they fall for it. The bad thing here is, other scammers try to prey on the victims of these scams by promising that they can get the cryptocurrency back that has been lost. The problem is, they’ll lose even more as they usually require a fee in order to get reported crypto loss back.
As I said before, I want to share with as many people as possible about the dangers of scams and so I do try to join groups on social media related to warning others of scams or to those who have been victims of scams. What has surprised me is that on some of these groups on Facebook, all I see are posts of someone asking if you’ve been a victim of a crypto scam and how they can help recover what was lost. They usually leave some kind of information about how you can contact them or a link to click on.
Nearly all those posts consist of that and that’s extremely worrisome. If there are any comments to those posts, they pretty much talk about the same thing, either how the original poster helped them or how someone else helped recover their crypto funds and how you should contact them. It just shows that scammers will stop at nothing to try to take your valuable stuff away. If someone contacts you claiming that they can recover your crypto funds, you run for the hills. Now it’s time to talk another cryptocurrency scam that….is very difficult to protect yourself from and is one that I actually was a victim of a couple of years ago.
Keeping Your Cryptocurrency Safe
The cryptocurrency scams I talked about above are ones that you can truly protect yourself by knowing what to look for and then staying far away from or turning back from. The next and final crypto scam I’m going to talk about today is one that unfortunately is no full proof way to fully protect yourself from because it has to do with your cell phone company.
This scam is called SIM swapping scam and this happens when a scammer or hacker is able to take over a person’s phone number by convincing the victim’s cell phone carrier into giving them yours or someone elses SIM card/number. What they then can do is port out your number to another carrier and then gain access to your cryptocurrency exchange login information by resetting the password as the authentication would be sent to the cellphone number which the scammers now have full access to.
This actually happened to me 2 years ago and for legal purposes, I cannot say what cryptocurrency exchange this happened off of, but I will tell you it was unnerving when it happened and I lost over $1,000 worth of crypto because of it that was never recovered. The scammer even tried to buy more crypto using my financial information that was stored on my account, but thankfully I was able to warn my bank and got the money back from that.
I certainly gave my mobile carrier an ear full for letting someone port my phone number out without my authorization and so my advice to you is to contact your mobile carrier and make absolutely sure that there are safeguards in place to keep unauthorized people from getting access to your phone’s SIM card information so that they can’t port your number out and gain access to any crypto exchange accounts you might have.
Crypto scams are now just as prevalent as other phishing scams designed to steal your identity or money. If you’re heavily invested into cryptocurrency, it’s imperative you keep up with the crypto scams happening online. As I mentioned earlier cryptocurrency is not regulated like stocks, securities, and other forms of investments are thus the reason there are so many crypto scams out there. The SEC is trying to clamp down hard on the crypto industry issuing a number of lawsuits recently against some well-known crypto exchanges and some companies that created cryptocurrency mainly because of selling unregistered securities. They weren’t registered through the SEC and the SEC has decided to classify quite a number of cryptocurrencies as securities though Bitcoin is not one of them.
I think cryptocurrency or even the technology behind it is the wave of the future and it is worth investing and getting into now, but you need to be very careful when you do and make sure to do plenty of research. So if someone asks you what is a cryptocurrency scam, after reading this, you can tell them and how to protect themselves from becoming a victim of a cryptocurrency scam.