The current figures for cryptocurrency fraud are alarming. $5.6 billion stolen in 2023 is a scary number. But thank God, in 2024 their number decreased by 30%. People have become smarter, but most of them are no longer rushing headlong into the whirlpool. Well, we would like to believe it, but crypto fraudsters still exist, money flows out of users' accounts like sand through fingers. Let's consider their main types, and we will explain how to protect yourself from fraudsters, what you should pay attention to so as not to end up in the category of "investor" or "user" and not in the category of "victim".
Fraud in the cryptocurrency world
The FBI’s Internet Crime Complaint Center (IC3) has released sobering figures: in 2023, investors lost a total of $5.6 billion to cryptocurrency fraud. This is a 45 percent increase from the previous year. What is particularly alarming is that most of these losses can be attributed to investment fraud. In 2023, 32,094 cases of investment fraud were reported in the crypto sector. Victims lost a total of $3.96 billion. In comparison, in 2022, it was “only” $2.57 billion. These figures clearly demonstrate that fraudsters are becoming increasingly skilled at luring investors with false promises.
Who are the victims? The unexpected findings are shocking. You might think that in the world, cryptocurrency scams mostly target young people. In fact, it’s not.
Most cases (about 5,200) affect people between the ages of 30 and 49.
However, the biggest cryptocurrency theft involved those over 60, who lost over $1.24 billion in 2023.
The following figures show this: criminals are deliberately targeting the elderly. And scammers are becoming more sophisticated. The current trend is that they use dating platforms and social networks to gain trust. Once the victim is emotionally involved, they lure them into fraudulent investment schemes. The trick is that victims lose not only cryptocurrency or money, but also trust in interpersonal relationships.
Cryptocurrency ATMs were designed to make it easier to exchange cash for digital currencies. Instead, they have become a favorite tool for fraudsters: 5,500 complaints of ATM fraud were received in 2023. The loss was $189 million. People over 60 were particularly affected, who lost $124.3 million.
Scammers are inventive. Two new methods have caused a stir in 2023: liquidity mining — fake websites promising high returns for “lending” cryptocurrencies — and money-making gaming apps. They lure victims with fake winnings to entice them to invest further.
In both cases, the winnings are just a facade. Cryptocurrency scams are a scam, and victims end up losing everything. So how do you avoid crypto scams?
Types of cryptocurrency scams
1. Ponzi schemes (pyramid schemes)
Financial pyramid — are crypto-fraud schemes, mirages, and a way to extract money from investors by promising them high returns. Existing investors are paid money that was raised from new investors. A pyramid scheme has no product or structure underlying it. It is a way to deceive investors by promising them high returns. Existing investors receive money from new investors, who in turn receive money from other investors, and so on.
Pyramid scheme operators lure investors by promising them “get rich quick” or “high rates of return in a short period of time.” They pass on the money they receive from new investors to old investors as a percentage of the income. Simply put, it’s robbing Peter to pay Paul. Thus, the fraud continues and the pyramid grows. Eventually, the traders flee, taking huge sums of money with them.
Several initial coin offerings (ICOs) in the cryptocurrency market have been pyramid schemes. The scheme of a fake ICO is simple: an ICO launches a new coin or token and convinces investors to buy the token. When the structure gains momentum and attracts enough users, the founders walk away with the funds of the defrauded investors.
2. Cryptocurrency phishing
Phishing scams have been around for much longer than cryptocurrencies and can be used in many areas. They are very common in every industry, and the cryptocurrency industry is no exception. The main goal of phishing attacks is to get hold of users’ confidential or private data so that the hacker can access their cryptocurrency funds. Phishing attacks are also used to gain access to online banking accounts, email accounts, and various other accounts or password-protected assets.
In phishing scams, hackers obtain users’ private data through various sources such as email, phone, fake websites, social media platforms, etc. For example, users are sent phishing emails asking them to click on a link that redirects them to an external site where they are asked to enter their private data. Sometimes, hackers use a domain address that is similar to the address of the official platform. Once the credentials and passwords are obtained, the attacker can easily steal the users’ cryptocurrency funds.
3. Social media fraud
Social media scams are very common. Digital currencies are very volatile, and it is obvious that we are afraid of losing out on huge profits if we do not enter the industry actively enough. Scammers see this as an opportunity to steal from new investors.
In all social networks, such as YouTube, Facebook, Twitter, Telegram, Instagram, it is almost impossible to distinguish real posts, events, and ads from fake ones. There are many known cases when fake tweets were published on behalf of such popular personalities as Elon Musk, Jeff Bezos, and Joe Biden, promising multiple profits in exchange for sending 1 BTC or 1 ETH to their wallet address. Hackers also create fake accounts with the names of popular cryptocurrency platforms on channels such as Telegram, where they ask users to provide confidential information to receive funds.
4. Funds Transfer and Dump Fraud
Unethical market practices such as pump and dump schemes are becoming increasingly popular in the cryptocurrency industry. This is a scam in which a group of traders or an individual manipulates the price of a particular token by buying up a particular coin in large quantities. At the same time, this coin is also promoted on various social networks. This encourages other users to buy this token, thereby increasing its price.
Only when the price reaches a certain threshold will a group of traders dump the artificially inflated coin (pump it), causing its price to plummet. The traders who initiate the “pumping” are the only beneficiaries, while others suffer losses.
5. Fake wallets and platforms
Fake crypto wallets are created to deceive cryptocurrency owners. Users, tempted by a promotional offer or bonus, deposit their BTC or ETH into them. Once the user sends their funds to a fake wallet, they cannot get them back. And hacking crypto wallets is not required.
Fake cryptocurrency platforms lure customers by offering benefits such as low transaction fees, discounts, etc. Once a user deposits their funds on such a platform, it becomes difficult to withdraw funds. Some fake cryptocurrency platforms make money by hosting fake ICO tokens on their platform.
Although the cryptocurrency industry is growing rapidly, it is still in its early stages of development. Therefore, this market is more vulnerable to various types of fraud and theft. However, by following strict precautions, users can avoid fraud and protect their funds.
Tips on how to protect crypto assets
As you can see, now more than ever it is important to protect yourself from fraud. Stop being a naive fool who dreams of easy money and dreams of getting everything, right away, and for free. If you want free, you will fall into a mousetrap. Here are some quick tips on how to effectively protect yourself from cryptocurrency fraud, even if you are not a specialist:
- Understand the basics: Before investing in cryptocurrency, educate yourself thoroughly. Understand what blockchain technology is and how cryptocurrencies work. The more you know, the harder it will be for scammers to scam you.
- Be skeptical of offers that are “too good to be true”: if something sounds too good to be true, it probably is. Be wary of promises of above-average returns or risk-free investments. There are no guaranteed returns in the world of cryptocurrencies.
- Check the source: Where does the investment offer come from? Do thorough research on the platform or person offering you the investment. Search the internet for independent reviews and testimonials.
- Beware of unexpected contacts: Be especially cautious if you are contacted unexpectedly – via email, social media or dating platforms. Scammers often use these channels to gain your trust and then convince you to invest.
- Use trusted cryptocurrency exchanges: If you want to invest in cryptocurrency, use only reputable and regulated cryptocurrency exchanges. Make sure the exchange is legal in your country.
- Protect your wallets: It goes without saying that cryptocurrencies should be stored in a secure wallet. Use strong, unique passwords and, if possible, activate two-factor authentication. Remember: crypto wallets are only hacked because of the stupidity of their owner. That's it!
You have nothing to hide, but it makes sense to check the reliability of investment platforms and be especially vigilant when communicating with unknown people on the Internet. However, there are a few more very important points that are easy to forget:
- Be careful with personal information: never give out sensitive data like passwords, private keys, or recovery phrases! Reputable companies or platforms will never ask for this.
- Trust your intuition: if something doesn't feel right, it probably is! Don't give in to pressure or make hasty decisions. Take the time to check everything carefully.
- Seek professional help: Anyone who is unsure should consult a financial advisor or cryptocurrency expert before making any large investments.
Conclusion
The world of cryptocurrencies undoubtedly offers opportunities. However, the current figures discussed in this article clearly call for caution. We have not yet told you about attacks on the blockchain, but this is a separate topic. It is worth being vigilant and listening to the “warning” instinct more often. Especially when big money is at stake. At least occasionally try to be guided not by emotions, but by common sense. This will save you from a lot of trouble. The security of cryptocurrencies is in your own hands. Good luck and profit to you!
