How to Avoid Crypto-Scams


How to Avoid Crypto-Scams

Do you accept cryptocurrency in exchange for your company’s goods and services?

Or are you thinking about it?

Then you should probably be aware of various types of scams associated with this virtual currency, most of which fall into the “too good to be true” category, so that you can “think like a scammer” and recognize their traps before it’s too late.

But before that, you should be aware that these scams are not a rare phenomenon.  In 2022, losses from them totaled more than $2.5 billion, with cryptocurrency investment fraud overall up 183% over the previous year. About half of those who lost crypto in this fashion over the past two years reported that the wheels were set in motion thanks to an ad, post or message on social media.

Among the most common types of scams are what’s called “Pump and Dump,” in which scammers advertise a new or niche type of cryptocurrency and promise great returns. Unknown to investors is that the scammers hold significant amounts of this currency, and once enough investors buy in to cause the price to spike, those behind the scam sell, sell, sell—earning significant revenue for themselves while deflating the price.

Another type of scam are “Rug Pulls,” in which the scammer advertises sample nonfungible-token (NFT) artwork on a professional-looking website, solicits contributions via crypto to mint the art—and then vanishes without a trace. Finally, there are old-school Ponzi schemes in which scammers finance themselves and/or older investors with the investments of newer ones, until the pyramid inevitably collapses.

Among the types of phishing attacks used to draw in targets are: fake identity, where a scammer impersonates a trusted figure such as a loved one, investment manager or celebrity; fake support teams, where scammers claim to be part of a reputable cryptocurrency or trading platform company; cloned websites, which gather login info and other credentials to steal assets from the real site and/or users’ crypto wallets; fake emails from what appears like a legitimate source that prompt users to provide personal information or install malware; and, finally, the aforementioned social media traps that convince targets to invest in a pretend cryptocurrency or click on a phishing link.

Then there is the problem of which crytocurrency to accept.  There have been several crytocurrencies which have popped up only to join a growing list of bad investments.   The leading crypto has been Bitcoin, but then there is the volativity of the coins.  Best bet is that if you are offered and accept some cryptos as payment, there are exchanges on line thru which you can convert the crypto into dollars at a discount or with a significant service fee.

Finally, those considering accepting cryptocurrency—and those who already have—should be aware of the types of malware attacks out there. These includes malware that promises a “software update,” which can sound worthwhile because of the myriad software tools upon which the cryptocurrency world depends. In other cases, scammers hack a copy of a target’s SIM card, which provides insight into two-factor authentication codes—and thus, to their crypto accounts. Finally, scammers set up fake crypto exchanges and wallets with “too good to be true” deals, then either simply fail to provide the crypto, and/or install malware.

None of this is to say that your business shouldn’t accept cryptocurrency as payment.  Just don’t do it with your eyes wide shut to the possible ramifications if you aren’t vigilant and knowledgeable about scams and scammers.