Top 6 cryptocurrency scam methods.
Unfortunately, the world of cryptocurrency is often accompanied by criminals who are after your cryptocurrency. New investors in particular are often victims of cryptocurrency scams. It is also sometimes difficult to distinguish scams from legitimate services. In this article we highlight a number of common crypto scams, where you as an investor should stay far away from. A golden rule in the world of cryptocurency is: if it is too good to be true, it probably is.
Phishing (use of fake copy websites)
This is a commonly used method by criminals. Not only in the crypto world, but everywhere where money is traded or data can be harvested. Banks are also troubled by this. A criminal completely recreates a website and puts it online. Most of the time, they try to lead visitors to the fake website, by buying advertisement.
Another common method is using fake email messages from the company itself with a fake URL to the website. When the user then logs in, all the information is sent to the criminal. Even accounts with activated 2 factor authentication can be taken over with this method. A 2FA code remains valid for at least 30 seconds and they can enter this really fast on the real website.
Our advice is to always bookmark websites of cryptocurrency brokers or exchanges in your favorites. Never use a link from an email message or a search engine. Always check before logging in that the URL (website name) is correct. Often there is just 1 letter different, making this cryptocurrency scam difficult to see. See the image for some examples of Binance phishing URLs.
Note: a green lock and https is now available for free. Almost every phishing website uses this. Checking for a lock is not enough to ensure that it is not a phishing website. Find out how to secure your exchange account here.
Bitcoin Revolution scam (advertisements of famous people)
A lot of attention has recently been paid to these kind of advertisements. You may well have seen them. Ads by Jeremy Clarkson, Simon Cowell and Bill Gates, which appear from a renowned news website, such as the Daily Mail or the Sun. They target very country specific, so it can be someone famous from your country and a famous news website of your country.
The advertisement says that they have discovered a secret how you can earn a lot of money quickly. And then you will be redirected to the Bitcoin Revolution or the Bitcoin Code page. Owners of these ads mainly buy ads on popular platforms such as Google, Facebook and Instagram. As a result, they are displayed with higher priority than other messages, because they spend a lot of money on these ads.
These pages are created by promoters of the Bitcoin Revolution program. Promoters receive a fee of up to $ 800 for each customer they refer. They try to deceive ignorant people with false information and hope that they deposit money. If you sign up for the Bitcoin Revolution you will be referred to a CFD broker. This is not illegal, but it is very risky and the broker they work with charge high transaction costs. Certainly as a novice investor you can quickly lose a lot of money here.
You will also be called by person that speaks your language. He will help you sign up and try to convince you to deposit money. He also tells you that a certain currency or share will rise in the future. Chances are that you will lose the money due to the high risk level. The fact that you get so-called inside information makes this a cryptocurrency scam. The platform you are referred to is a legitimate licensed company. The licenses are also obtained through a shadowy construction.
Sometimes you are also led to a fake broker with a fake portal. The portal shows you profits and the scammers try to lure you to make an extra investment. Withdrawal of your funds is not possible.
This is how they often work:
- You will be directed to the platform via a fake ad / email message. You are promised high returns through an automatic trading bot.
- Because you provided your telephone number during your registration, you will be called (often by someone who speaks your language) to inspire confidence.
- You will be tempted to invest a relatively small amount of a few hundred euros (usually € 250).
- In your (fake) portal you can see that this amount has suddenly become much higher due to the automatic trading robot.
- You will be called again with the question whether you want to invest more.
- Withdrawing money is not possible and the returns you see in your portal are fake.
Our advice is not to use Bitcoin Revolution, CryptoBoom, Bitcoin Trader, Bitcoin Era, Bitcoin System or other variants of this program. Why would someone share their secret method when you can make so much profit with it?
Cryptocurrency giveaways (doubling your crypto)
This method is mainly used via Twitter and Telegram. Scammers comment with bots under a popular post on Twitter. Most of the time of someone famous in the crypto scene, for example, Binance, Coinbase or Elon Musk. The message contains a website where you can claim your free cryptocurrency.
When you visit the website you will see that you first have to transfer a one-time amount in Bitcoin or Ethereum for verification. Once the amount has been transferred, your cryptocurrency will (supposedly) be doubled or increased tenfold. When you have transferred your cryptocurrency you will receive nothing and you will lose everything.
Criminals are getting more and more ingenious with this scam. For example, they hack verified accounts and rename the username to create more confidence. They also post fake reactions from bots that they have successfully received cryptocurrency. These posts are at the top because the criminals generate a lot of fake likes and a lot of comments under the message. Those reactions also get a lot of likes, as you can see on the image above.
In 2020, scammers also try to scam people via YouTube. Verified or popular accounts are hacked and a ‘live stream’ is shown with another give away.
Ponzi fraud or pyramid schemes
Most of the platforms that promise incredibly high returns, is most of the time a ponzi fraud or pyramid scheme. The percentages are usually around 1% per day or higher. These platforms are 99.9% of the time a crypto scam. New investors usually pay for older investors, keeping the platform profitable when new members join. As soon as this stops, the platform will collapse and the owners will disappear with all the money from investors.
In order to instill confidence, they pay well in the first weeks / months / years, so that many people see proof of payment. These programs also always have a partner program, with which a lot of money can be earned. The partner program often also contains multiple layers, just like a pyramid. Then there are a lot of people who recommend this platform to their followers. Over time, the platform stops paying and goes offline. Often your money is also fixed for a few days / weeks / months, so you can not just withdraw all your money from the platform.
Most people know that it is a pyramid scheme, but still hope to make money with it. It is very risky to participate and we advise you not to participate. Always keep in mind that all your profits are at the expenses of other investors.
Pump and Dumps
This method was very popular in 2017 in particular, but it still occurs on a small scale. Via Telegram you will be lured to a special Pump and Dump group. In a Pump and Dump group there are dozens of users who will all buy a certain cryptocurrency around the same time. The group leader indicates a time when the cryptocurrency is announced and the joint pump is started. So most people in the group don’t know which cryptocurrency is being pumped.
For the pump, the group leader and a few other people who are in the plot ensure that they have purchased the cryptocurrency beforehand. They will announce the coin at the agreed time and everyone will start buying the coin. This causes the price to rise quickly, which means that many people have to buy the coin at a higher amount. Trading bots and other investors are also triggered by the rapid price increase. The group leader and the other people in the plot sell their cryptos at the highest point. Then the price drops and most people have paid too much for the crypto they now own. The only winners are the group leader(s) and other people who are in the plot. Many exchanges arm themselves against this scam through protections against pump and dumps.
SIM card swapping
This is a very insidious method, and is often only applied to people who criminals know have a lot of cryptocurrency. Especially for people who have their 2 factor authentication via SMS or who can recover their password via SMS.
With the SIM card swapping method, a criminal requests a copy of your current SIM card from your provider and has it sent to his own address. A criminal can create a profile of his victim through social media and other information online. In this way, he can easily answer simple questions such as date of birth or their home address. With this information, he calls the provider to ask if he can order a new SIM card. As a check a number of questions are asked to which he has the correct answer. Then he tells that the SIM card must be delivered to a different address. When he activates the SIM card, the other SIM card is deactivated (without any notification). With a successful activation, the criminal can reset passwords and log in to accounts where 2-factor authentication is done via SMS. Here you can read a story of a victim.
How to protect yourself against this:
- Contact your provider and enable the highest security. Also make sure that a SIM card can only be sent to known addresses. If in doubt, the SIM card must be picked up personally at the shop.
- Only enable 2 factor authentication using an authenticator app.
- Make sure that little useful information is publicly available about you.
These were the six most common cryptocurrency scam methods. Is there a new scam that you think we should mention? Let us know via the comments or contact us.