Blockchain Scams: How to Protect Yourself

Blockchain technology and cryptocurrencies like Bitcoin and Ethereum have exploded in popularity over the last few years. However, with the massive growth of crypto also comes more opportunities for blockchain scam to take advantage of unsuspecting investors or crypto enthusiasts. This article will provide an overview of the most common blockchain and cryptocurrency scams that people need to be aware of in order to avoid falling victim.

There are several major types of crypto scams that are constantly evolving as scammers come up with new tactics. The main categories include:

Impersonation scams
Fake investment/trading scams
Phishing scams
Fake crypto wallets
Fake ICOs
Crypto giveaway scams

“Someone claiming to be tech support, an authority figure or a government official may contact victims saying they need to verify their crypto wallet or saying they can help get money back that is “lost” or stolen.” – Blockchain.com

While the specific techniques used in these crypto scams may change over time, there are some basic precautions one can take to avoid falling victim. This includes being skeptical of any unsolicited offers, double checking URLs and handles, and never sharing login credentials or wallet keys. There are also steps to take if one unfortunately does become the victim of a scam.

This article will provide a comprehensive overview of how these crypto scams work, how to avoid them, and what to do if you become a target. Forewarned is forearmed when it comes to the crypto “wild west”.

Major Types of Blockchain Scams

There are a variety of crypto scams out there, but most fall into one of these major categories:

Impersonation Scams

One of the most common crypto scams involves impersonation of legitimate companies or authorities. For example:

Scammers may pretend to be from crypto exchanges like Coinbase or Binance.
They may impersonate government authorities like the IRS.
They may pose as tech support or customer service for blockchain companies.

“Someone claiming to be tech support, an authority figure or a government official may contact victims saying they need to verify their crypto wallet or saying they can help get money back that is “lost” or stolen.” – Blockchain.com

The scammers use these disguises to try and gain access to login credentials or convince victims to send them cryptocurrency.

Fake Investment/Trading Scams

Anothercommon scam involves fake crypto investment opportunities or trading services promising unrealistic returns.

May promote “robotrading” bots or automated trading systems.
Often involve Ponzi or pyramid schemes.
Lure in victims with promises of huge guaranteed returns.

These schemes simply take money from new investors to pay earlier ones until the scammers eventually disappear with the remaining funds.

Phishing Scams

Phishing remains one of the most prevalent crypto scams. This involves sending fake emails or messages pretending to be from legitimate blockchain companies or services.

Emails may pretend to be password reset requests from exchanges.
Messages may pretend to be from wallet support teams.
Scammers direct victims to fake sites to steal login info.

“Some phishing attacks use social engineering techniques to get users to click on a link.” – TechTarget

As with impersonation scams, the goal is to gain access to account credentials or convince victims to send crypto to the scammer’s wallet.

Fake Crypto Wallets

Scammers also create fake cryptocurrency wallets designed to steal funds.

Wallets may be listed on app stores or promoted online.
Malicious code transparently replaces wallet addresses.
Users think they are transferring to their wallet but funds go to scammers.

This is why it’s critical to only use well-known, vetted wallets from reputable providers.

Fake ICOs

Many scammers have created fake initial coin offerings (ICOs) to collect investor funds while having no intention of launching a real project.

Fake ICOs often have red flags like unrealistically high promised returns.
Little detail on the founders, project plans, or technology.
Once investment funds are collected, the ICO and founders disappear.

Thorough vetting is required before investing in any ICO.

This covers some of the major categories of blockchain scams seen so far. The list continues to evolve over time as scammers come up with new schemes.

Crypto Giveaway Scams

One scam that often spreads via social media are “giveaway” scams that promise to send back cryptocurrency if you send them some first.

Promotions that say “Send 0.1 BTC, get 1 BTC back!”
Accounts pretend to be affiliated with or endorsed by celebrities/influencers.
Once victims send crypto, the scammers block them.

“The scammers ask for money or cryptocurrency by promoting a giveaway.” – USA Kaspersky

Legitimate crypto giveaways will never ask for funds upfront first. Be very wary of any promotions like this.

Scam Trends

While this covers the major scam types, the specific techniques used are constantly evolving:

Scammers register new domains and create fake social media profiles.
New malicious wallet apps continue to pop up in app stores.
Celebrity endorsement scams use fake news and doctored images.

The best defense is being vigilant for any red flags and confirming legitimacy before sending funds or sensitive information.

Blockchain scammers are constantly innovating to find new ways to profit from unsuspecting victims. By understanding the most common techniques, users can better protect themselves and avoid losing funds.

How to Avoid Blockchain Scams

While blockchain scams are becoming more sophisticated, there are steps cryptocurrency users can take to avoid falling victim:

Verify URLs and Accounts

Double check web addresses for subtle differences from the real site.
Confirm social media accounts are verified and have long history.

“Imposters often register fake websites and social media profiles to appear legitimate.” – Forbes

Research Investment Opportunities

Be skeptical ofany promotions promising guaranteed high returns.
Thoroughly vet any ICO before investing funds.
Look out for Ponzi or pyramid schemes.

Never share passwords or wallet keys.
Use multifactor authentication when available.
Ignore emails/messages requesting login information.

Use Reputable Platforms

Only download wallets from official providers.
Stick to large, mainstream crypto exchanges.
Avoid decentralized exchanges and newer platforms.

Don’t Trust Unsolicited Offers

Ignore direct messages with investment opportunities or giveaways.
Hang up on suspicious calls requesting sensitive information.
If something seems too good to be true, it probably is.

The golden rules are to protect login credentials, thoroughly vet any opportunities, and confirm legitimacy of any requests. Following basic security best practices can thwart most blockchain scammers.

What to Do If Scammed

If you unfortunately fall victim to a blockchain or cryptocurrency scam, here are some steps to take:

Report the Scam

Contact relevant authorities like the FTC or FBI to report the scam.
Notify involved cryptocurrency companies or projects about scam accounts.

“If you lost money to a scam, report it to the FTC at ReportFraud.ftc.gov.” – FTC

Consult Experts

Contact cybersecurity firms specializing in blockchain investigations.
Hire lawyers knowledgeable about cryptocurrency fraud.

“Consult professionals who specialize in tracing stolen digital currencies and protecting assets.” – Coindesk

Take Measures to Avoid Repeat

Learn from experience to identify red flags for future scams.
Strengthen account security measures where compromised.
Be more vigilant about protecting personal information.

While lost funds may not be recoverable, taking swift action and contacting the right people can help limit damages. Don’t let embarrassment prevent you from reporting the scam to authorities.

Conclusion

As blockchain technology continues growing in adoption, users need to be aware of the various crypto scams proliferating and educate themselves on avoiding these threats. While new types of scams will emerge, the categories covered in this article encompass the major scam types seen so far.

“Cryptocurrency scammers are finding more inventive ways to separate people from their digital wallets.” – MoneySmart

No investor is immune from blockchain scams, even experts can be fooled. By learning to identify common techniques and red flags, cryptocurrency users can better protect their funds and avoid falling prey.

“The best way to avoid scams is to know how to identify them.” – Investopedia

If the misfortune of being scammed occurs, acting swiftly to report it and notify authorities can potentially help track the scammers or reclaim some losses. Being vigilant and skeptical is key to avoiding the myriad of blockchain scams waiting to take advantage of unsuspecting victims.

Blockchain Scams: How to Protect Yourself