The cryptocurrency market is often described as the American Wild West, due to the chaos and disorganization that characterizes it. The crypto market is characterized by volatility, high risk and reward, loss and widespread fraud.
Types of cryptocurrency scams
According to the US Federal Trade Commission (FTC), from October 2020 through March 31, 2021, reports of crypto-related scams rose to nearly 7,000 people reporting losses of over $80 million.
Сryptocurrency scams fall into two categories:
- Initiatives that aim to gain access to the digital wallet or authentication credentials.
- Transferring cryptocurrency directly to a fraudster due to impersonation, fraudulent investment or business opportunity, or other false and fraudulent means.
Social engineering tricks
For social engineering scams, fraudsters use psychological manipulation and deception to gain control of vital information related to user accounts.
These types of scams make people believe they are dealing with a trusted entity such as a government agency, well-known company, tech support, community member, or friend.
The most popular social engineering methods:
- Romance Scams: scammers often use dating websites to make unsuspecting targets think they are in a genuine long-term relationship. Almost 20% of the money reported in romance scams was via cryptocurrency.
- Donations: scammers also try to pose as celebrities, businessmen, or cryptocurrency influencers. To get the attention of potential targets, many scammers promise to match or double the cryptocurrency sent to them in what is known as giveaway scam.
- Phishing: phishing scams target information related to online wallets. Scammers are interested in the private keys of an encrypted wallet, which are the keys required to access the funds within the wallet.
- Extortion scams: for these emails, scam artists claim to have a record of adult websites or other illegal web pages visited by the user and threaten to expose them unless they share private keys or send them cryptocurrency.
DeFi scams
DeFi scams are the latest type of scam to hit the cryptocurrency market. Decentralized finance, or DeFi, aims to decentralize finance by removing third parties and gatekeepers for financial transactions. However, the development of DeFi platforms has its own problems.
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