What are Crypto Scams and How to Safeguard Against Them

Recent events have thrust cryptocurrency back into the spotlight, and it has reignited the hype around it. However, with so many hoping to get into crypto, there are some who have unfortunately fallen victim to crypto scams. You may think this would never happen to you, but the reality is, scammers are getting craftier and better at what they do! In this article, we’ll dive into what crypto scams are and how you can prevent them from happening to you.

Types of Crypto Scams

Crypto scams are fraudulent schemes targeting people interested in cryptocurrency. Common types of crypto scams include: 

Pump and Dump Telegram Groups

A pump and dump scheme is a type of market manipulation where a group of individuals artificially inflate the price of a cryptocurrency (often a newly issued or obscure one) through coordinated buying and hype. 

How it works:

The group of individuals acquires a large amount of cryptocurrency, and they then generate hype surrounding the crypto by spreading false rumours through social media.

Once the price reaches a peak, the original investors, often called “whales,” sell their holdings, causing the price to crash dramatically. Victims who buy into the hype after the price has already started to rise are typically the ones who suffer the most significant losses when the price crashes.

Pump and dump schemes are illegal; however, the decentralised nature of the cryptocurrencies makes it difficult to prevent and prosecute these activities.

Crypto Phishing Scams

Crypto phishing scams are a common tactic used by cybercriminals to steal cryptocurrency. It involves tricking users into revealing sensitive information, such as private keys, passwords, or seed phrases, by posing as a legitimate entity. 

How it works:

Scammers create fake websites, emails, or messages that mimic reputable cryptocurrency exchanges, wallets, or other platforms. They lure unsuspecting victims through urgent messages claiming account issues, phony customer support requests, fake giveaways or promotions, and links to websites that are malicious. Once the victim clicks on the malicious link or fills in their information, the scammer will use this information to gain access to the victim’s crypto wallet. 

Impersonators

Impersonation crypto scams are a common tactic used by fraudsters to deceive users into handing over their cryptocurrency or sensitive information. These scammers often pretend to be reputable individuals, companies, or platforms to gain trust.

How it works:

Scammers create fake social media profiles, websites, or email accounts that closely resemble legitimate entities, such as popular cryptocurrency exchanges, celebrities, or government agencies. They engage with potential victims, building rapport and trust over time with testimonials of “happy customers” and supposedly credible information of their identities.

Once trust is established, scammers will ask for cryptocurrency or personal information such as private keys, seed phrases, or login credentials. When the funds are transferred, the scammers disappear, taking the funds with them.

An alternate version of this scam involves the scammer requesting fees from victims under the guise of needing them to complete the transaction or release the “profits.”  This can happen multiple times until the victim realises that they’ve been scammed. Unfortunately, by then, it’s often too late to recover the funds. 

How to Spot Crypto Scams and Prevent Them

While the tactics used to deploy these scams vary, the main purpose of the scammer is to trick victims into giving away their crypto funds and personal information. Here’s what to look out for to avoid getting scammed: 

Guaranteed Returns

Investment opportunities promising too-good-to-be-true returns are always a major red flag. Keep in mind that legitimate investment returns range between 1% and 10% annually. No legitimate investment agent will guarantee profits for any investment. Be sceptical of offers that seem too good to be true.

Time Pressures

Scammers often create a sense of urgency to pressure you into making quick decisions. If you find yourself being pressured to make a payment, then this should signal to you that it’s probably not a good idea to follow through with it.

Requests for Personal Information

Scammers will ask for personal information, such as your digital wallet password, or request you transfer your legitimate crypto funds to an alternate account they control. Never share your private keys, seed phrases, or passwords with anyone. Legitimate agents will never ask for this information.

Unsolicited messages or calls

Be cautious of unsolicited messages or calls claiming to be from cryptocurrency platforms or individuals offering investment opportunities. Always double-check websites, email addresses, and social media profiles for authenticity. Never click on links from unknown sources. 

Fees to Release Profits:

Scammers often ask for fees to release your supposed profits. After showing fake evidence of high returns, they claim you need to pay processing, withdrawal, or tax fees before accessing your earnings. This tactic exploits your excitement about the fake profits to extract more money from you.

Tips on How to Deal with Crypto Scams

Here’s some advice to help you avoid falling victim to scams:

1. If you’re uncertain about an investment, check with Bank Negara Malaysia, the Securities Commission Malaysia (SC), or Cybersecurity Malaysia for the licensing status of the company. Look for any warnings about cryptocurrency investments.

2. National Scam Response Centre (NSRC): If you suspect you’ve been scammed, contact the NSRC immediately and provide all relevant details.

3. Police Report Records: Check if the investment account is linked to any police reports through the Royal Malaysia Police Commercial Crime Investigation Department’s website.

Subscribe to our financial newsletter for the latest news, insights, and advice on personal finance, investing, and more. With every email, you’ll gather the confidence and knowledge to make informed decisions to achieve your financial goal.