Crypto fraud are becoming increasingly common. In 2021, the Canadian Anti-Fraud Centre reported cryptocurrency scams losses totalling $75 million. If you are interested in or already own cryptocurrency, here are some tips to protect yourself and pitfalls to avoid.
A cryptocurrency is a digital asset (virtual currency) that can be exchanged for certain goods and services. Some investors treat cryptocurrency as an asset that can rise and fall in value, somewhat like publicly traded stocks. However, digital currency is considered more volatile than stocks. There are many cryptocurrencies, but Bitcoin and Ethereum are among the best known.
The name says it all—they are common scams that involve so-called virtual currencies. In most cases, fraudsters use variations of common scams with the sole purpose of stealing your money.
Fraudsters target cryptocurrency for a number of reasons, namely the fact that this new type of virtual currency allows for largely anonymous transactions and is generally less regulated by government and regulatory authorities. It is used as a viable alternative to traditional currency, which is managed and regulated by the traditional banking system.
Although there are several types of cryptocurrency scams, they fall into two main categories:
It can happen to anyone. You could fall victim to a scam whether or not you own any cryptocurrency. Fraud can take many forms, such as:
These scams often use a technique called social engineering. It involves gradually gaining people’s trust and using it to access their information or get them to do something. Con artists will often contact you by phone (including text), by email or on social media.
Cryptocurrency exit scam
Initial coin or token offerings, or ICOs, are very risky and highly speculative investments. Why? ICOs operate in an environment conducive to manipulation and fraud. From a technology standpoint, creating tokens and marketing them on certain platforms is easy, requiring no intervention or authorization from a third party.
Cryptocurrency investment scams
They are a variation of the fake investment scams that use cryptocurrency as a payment method or investment product. Con artists lure you with fraudulent investment opportunities involving virtual currency and promises of guaranteed risk-free returns.
Fraudsters create a sense of urgency by sharing exclusive
offers available for a limited time only. They need a steady stream of
new victims to invest, so they often use Ponzi schemes and other
pyramid systems to get you to recruit people you know for their
Fake investment sites
The growing popularity of the cryptocurrency market has led to a number of new cryptocurrency exchange platforms on the web. All too often on these platforms, fraudsters try to convince you to trade by enticing you with possible, or expected, high returns (legitimate websites usually charge high fees for cryptocurrency exchange transactions).
You will lose money on cryptocurrency purchase and exchange
transactions on these fake sites. Transactions will never go through,
and if they do, fraudsters alone stand to gain.
Account takeovers, phishing and SIM swapping
As with online banking platforms, fraudsters can steal your usernames, passwords or private keys if you have cryptocurrency accounts on legitimate trading platforms using practices such as phishing. It can be used in combination with SIM swapping to take control of your account and steal or embezzle your cryptocurrency.
What is SIM swapping?
SIM swapping, also called SIM jacking or splitting, is a type of fraud where fraudsters contact your mobile phone operator and impersonate you to gain use of your phone number. They can bypass the two-factor authentication required on many sites.
Beware of classified ads, online purchases, advertisers or sellers listing cryptocurrency as the only payment method for goods and services. For example, fraudsters will send you a web link to complete the transaction. Once the transaction is completed, there will be no product or service delivery. You will be unable to reach the contact person and will have lost your money.
Job opportunities: Fraudsters may also pose as recruiters or headhunters in the job market. They send you an attractive job offer requiring mandatory training, at your expense, only payable in cryptocurrency.
To avoid fraud, always steer clear of:
Consider developing the following reflexes:
Traditional payment methods such as credit cards, bank cards and payment service providers such as PayPal® and Interac e-Transfer® provide purchase protection that includes the non-delivery of goods and services. With cryptocurrency, there is no way of getting your money back.
However, you can:
It’s important that you do everything you can to protect yourself from all financial fraud, not just cryptocurrency fraud.
Get more fraud prevention tips.
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