A guide to staying safe when investing in crypto
Can you spot a scam?
Bitcoin and other cryptocurrencies have become an increasingly popular choice for many new investors.
Unfortunately this has also made them primary targets for thieves looking to take advantage of them. The number of scams is rising as they become ever more sophisticated.
This blog will point out some examples of common crypto scams to watch out for and how you can keep yourself safe.
Phishing scams involve sending emails to unsuspecting investors, with the hope of luring them into clicking on a link that will lead them to a fake website, or malicious application. From here, the user will be asked to enter their login information or connect their wallet. The scammer will use this to hack into the wallet and steal the crypto inside. It is very easy to fall for these scams as they imitate real websites and emails almost perfectly, which makes it extremely difficult to tell them apart.
Pump and dump schemes
A “pump and dump” scheme is when a new project is heavily promoted online, to encourage investors to buy a certain token. Influencers are usually gifted tokens in exchange for promoting these projects to their audience. Sometimes, fraudsters will also use fake celebrity endorsements in order to gain trust and market the project through various online channels.
As investors rush in to buy the token, the price will be pushed up drastically to the point of overinflation. At this point, the scammers will sell off all their holdings at once and cause a price crash. The token will continue to decline and never recover, leaving investors to lose money from their initial investment.
A “rug pull” is when the developers of a project drain the liquidity pool and run away with all the investors’ crypto assets. These projects often have anonymous developers behind them and usually, they don’t get caught, nor is the stolen money recoverable. These scammers abandon the project after making a huge profit for themselves. In most cases, these projects are created solely for the purpose of stealing people’s money. One of the most famous rug pull scams was Squid Game, where
fans bought into the SSQUID token, believing it was tied to the popular TV show. It wasn’t.
Giveaway scams often ask people to send cryptocurrency with the promise of high yield returns. These scams use social media accounts to appear legitimate and make use of clever messaging. They offer “once ina lifetime” opportunities with an added sense of urgency. This convinces people to transfer their funds quickly, in hopes of receiving instant rewards.
Scammers often create fake cryptocurrency trading websites or imitate popular crypto wallets to trick unsuspecting victims. These are usually an almost perfect replica of the real ones and can be very easy to fall for.
Fake crypto sites are often used in one of two ways:
1. Phishing pages: These websites are created to fool people into providing details that will allow them to access their victims’ accounts. They are usually attached to emails, but they tend to show up on search engine results pages as well.
2. Straightforward theft: At first, the websites will allow investors to withdraw a small amount of money, so the project seems legitimate. Then, they wait a while so it appears to depositors their investment is doing well, and put even more money in. Suddenly the site will shut down and the scammer will disappear with the funds.
Protecting yourself from theft and scams
If you’re asked to send Bitcoin or crypto for investment purposes with the promise of high returns, it’s a scam. 100% of the time. Remember, if it seems too good to be true, it often is.
Common traits of scammers:
- Asking for payment in Bitcoin or other types of cryptocurrency rather than Singapore or US dollars.
- Requesting a small amount of money initially, before asking for a larger amount.
- Calling regularly or pressuring you to invest more money.
- Instilling fear of missing out (FOMO) to pressure you into investing.
- Promising guaranteed payouts or high investment returns.
- Websites or social media accounts that contain incorrect spelling or grammatical errors.
- Contacting you first through Direct Message offering to “help” you with an issue.
- Making big claims without providing a detailed explanation or supporting information.
How to protect yourself?
- Be aware that cryptocurrency prices may fluctuate greatly, so you should only invest money you can afford to lose.
- Never ever share your private key or seed phrase to your wallet with anyone.
- Always enable 2-factor authentication (2FA) to add an extra layer of security to all your online accounts.
- Never trust anyone who contacts you directly to ask for payments in crypto, or offers to “help” you with an issue. If someone contacts you first, it is almost always a scam.
- Always double-check to confirm a website URL is legitimate before connecting your wallet or entering your personal details.
- Do not click on any email links unless you have verified its authenticity.
- Do not download any apps or browser extensions unless you have verified they are legitimate.
- Reject any offer that requires an upfront payment, especially if that fee has to be paid in crypto.
- Do not take any information at face value. Always do your own research and get as much information as you can from official sources, before investing in any cryptocurrency project or crypto- related offering.
- Minimise visiting sites through links in google searches, in case you click on a fake site.
The Australian Securities & Investments Commission also shared its top ten signs:
- You receive an offer out of the blue
- You see a celebrity advertisement that is actually a fake
- A romantic partner you only know on-line asks for money in crypto
- You get pressured into transferring crypto from your current exchange to another website
- You’re asked to pay for a financial service with crypto
- The app you’re using or directed to isn’t listed on the Google Play Store or Apple Store
- You need to pay more to access your money
- You are ‘guaranteed’ returns, or free money
- Strange tokens appear in your digital wallet
- The provider withholds investment earnings ‘for tax purposes’
These were shared via their media release where you can read more about what they had to say.
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