Financial crime has always been prevalent in the world and has been at the forefront in the past few years due to the rise of cryptocurrency and digital wallets. It has allowed cybercriminals to explore new markets to make illegal money, which is helped by the fact that there are fewer protective methods available for these newer markets.
In 2023, the industry lost $1.8 billion to fraud and hackers. However, this figure did reduce by almost $2 billion from the previous year, showing that there have been big strides made in cyber protection. This means that more cryptocurrency investors can spot these scams before they are affected. With that being said, there are still big losses in the industry, so further information is needed to inform investors about cybercriminal activity.
In this guide, we will explore how to spot the signs of a cryptocurrency trading scam so that you can keep your money and assets safe from potential fraudsters and hackers.
Types of Cryptocurrency Scams and How to Spot Them
Cryptocurrency scams fall into two categories; targeting the digital wallet directly by accessing private information or deceiving traders into transferring crypto investments directly to the scammer. It’s important to take a look at the specific crypto scams to further understand how you can spot them, as stopping financial crime requires a collective push.
Social Engineering Fraud
Psychological manipulation is often used for scammers to conduct these social engineering frauds, as they use deceit to gain vital information that allows them to access an account. These scammers will act as though they are a trusted entity, such as a well known agency, tech support company or even a friend.
Cryptocurrency scammers will go to any means necessary to gain the victim’s trust and obtain the information they want. These scammers can even use artificial intelligence (AI) to conduct voice scams as they pose to be someone else. For example, scammers can conduct online research to find snippets of someone’s voice, use it to gain the trust of a victim and make them hand over private information.
Phishing
Scammers often aim to secure a crypto wallet’s private keys, which is a string of letters or numbers that allow users to access their accounts. Phishing scams usually come in the form of emails with links that lead crypto wallet holders to a website that asks them to enter their private keys. Once the fraudsters have this key, they have free reign over the victim’s cryptocurrency.
These types of scams are among the most popular, as they require little effort from the scammers side. The Internet Crime Complaint Center (IC3) received over 880,000 complaints in 2023 with potential losses exceeding $12.5 billion. This was for scam tactics including phishing, spoofing and extortion.
Romance Frauds
Fraudsters usually have no time frame on when they need to get this private information and will sometimes put months into a scam to get access to a crypto wallet. The main premise of these romance frauds is to make the victim think they are in a real relationship and deceive them into revealing their private information, or transferring assets. Almost 20% of romance scams involved cryptocurrency in 2022.
Romance frauds have proven to be very lucrative for scammers, as they tend to use their experience to their advantage. However, you should be able to tell if you’re becoming a victim of a romance scam if they establish a bond quickly, make excuses to not meet you, ask for financial help or want to move away from dating apps quickly.
Blackmail and Extortion
Blackmailers make strong claims and threats against their victims to coerce them into giving over their private information. An example of this is claiming to have the search history of the victim, including any illicit websites they have accessed. They will then threaten to leak this information unless they receive a private key or crypto transfer.
Imposter Scams
Sometimes scammers will pose as celebrities and influencers through social media in an attempt to trick targets into giving them cryptocurrency in hopes of multiplying their investment. These fake social media accounts are made to look as real and convincing as possible by gaining a lot of other fake followers to seem legitimate. This faux legitimacy is then used to manipulate victims into parting with more money as they appear to be a more trusted source.