How To Recognize Crypto And Bitcoin Scams
Melissa AU Team | Identity Verification |
The concept of money is changing. It’s not all just notes and coins, you’ve probably heard of cryptocurrency and bitcoins too. This isn’t play money. Bitcoins made their debut in 2009 and in June 2021 was accepted as legal currency in El Salvador. While other countries have not yet defined it as legal tender, bitcoin transactions are permitted. There are many other forms of cryptocurrency existing as well; Etheruem, Cardano, Tether, Dogecoin, etc. Unfortunately, since it isn’t very well understood, fraudsters design many scams around cryptocurrency.
Recognizing Common Cryptocurrency Scams
Cryptocurrency is designed as an open-source currency that cannot be owned or controlled by a central entity. It is practically impossible to hack into the system and make transactions in anyone else’s name. Anyone with an internet connection can send and receive bitcoins. This is what cybercriminals target. Here are some of the most common ways they scam people.
Phishing Email Scams
A confirmation email about converting cash into cryptocurrency or a transaction should be just that – an email confirming the transaction. Any email that mentions a transaction but also asks for further action is probably a scam.
Similarly, emails that offer disproportionate giveaways are usually scams. Never believe an email that asks you to deposit a certain amount, no matter how small with the promise of returning 2X or 3X the amount. There are also many versions of the Nigerian prince scam that are used to trick people into cryptocurrency scams.
Blackmail Scams
Another way cybercriminals attack is by blackmailing people. They may threaten to hold a person’s secrets and expose them unless the person makes a ransom payment in cryptocurrency. They may also hack into a person’s crypto wallet.
While they cannot transfer funds from this wallet, they can hold the currency hostage until the account holder makes a transfer. Any email or message that forces you to make a transaction is a scam and must be brought to the attention of police authorities.
Scam Advert Pop-Ups
Being a new technology, bitcoins interest the younger demographic. Thus, this is the audience most targeted. In addition to emails, scamsters also use pop-ups advertisements to target this audience. The pop-ups are designed to be highly engaging and when clicked, they take users to a webpage that looks like an article about financial investments, etc. The article would typically have a hook to entice the audience into sharing their names and contact details.
This data can then be used to call the person in the guise of an ‘investment manager’ and convince them to deposit a small amount into a fake trading account. The account would seem to increase in value and the person would be encouraged to make higher deposits.
These types of scams typically continue until the person tries to contact the ‘investment manager’ or cash out their gains.
YouTube Video Scams
Videos are eye-catching and attention-grabbing. They’re also easy to believe and appear trustworthy. Scamsters recognize this and use videos on YouTube to fool people. There are many different types of video scams. Video ads promoting giveaways are a common example.
Cybercriminals may also doctor videos by known high-net-worth individuals and cryptocurrency brands. These videos may convince viewers to use a QR code appearing on the screen to transfer their bitcoins or other crypto assets to a fraud account. The influencers of course are not aware that their videos are being misused like this.
Holding & Transferring Bitcoins On Behalf Of Someone Else
If a friend asks you to pay for something at the store you probably won’t think twice about it. They’ll pay you back later. But, asking someone to hold a certain amount of cryptocurrency in your account and later transfer it to a different address is illegal.
Even if someone you trust asks you to do something like this, beware of their intentions. You may not realize it but this is a scam that causes financial losses and may even lead to you being imprisoned for money laundering.
Typosquatting
Typosquatting refers to how hackers create fake crypto exchanges to gain access to people’s Bitcoin wallets. Victims believe that they are storing their crypto funds in a safe digital online wallet but they can only make deposits and view their balances.
When they try to make a withdrawal, they find themselves unable to do so. Common examples of typosquatting involve setting up web domains with names that look very similar to valid domain names.
To protect yourself from these scams, you must ensure that you only use established and recognized centralized crypto exchanges.
Twitter Scam
Even social media platforms like Twitter can be used to scam people. For 2 hours on July 15th, 2020, over 130 Twitter accounts were hacked as part of a bitcoin scam. Hackers posted tweets on behalf of these accounts. Followers were asked to send bitcoins to a particular cryptocurrency wallet with the promise of getting back bitcoins with double the value as a charitable gesture.
Before the scam could be uncovered by Twitter and addressed, more than 320 transactions had taken place and bitcoins valued at more than US$110,000 had been deposited in the account.
How Can Identity Verification Services Help To Prevent Crypto Scams?
How do fraudsters gain access to customer details? In many cases, the people behind cryptocurrency scams exploit security loopholes by creating fake identities and taking over empty wallets or existing accounts. Thus, it is critical for crypto companies to adopt robust identity verification methods to safeguard their reputation and their customer’s interests.
Given the ease with which images can be stolen from social media and the dark web, it isn’t enough to merely ask customers to upload a copy of their Identification documents. The need of the hour is for a system that complies with KYC and AML regulations without compromising on customer convenience. For example, customers may be asked to upload a photograph of themselves with their ID documents or they may be asked to use a 2-step verification process.
Stringent identity verification can reduce the risk of having fraudsters create phony accounts and thus help maintain a clean, safe database. Without access to your database, fraudsters will find it harder to target your customers. This lowers the risk of them being able to impersonate legitimate account holders and take over their accounts to launder money or steal.
Proper identity verification ensures KYC compliance. In turn, knowing your customer will help crypto companies identify situations where the account is being handled in an uncommon way. For example, an alert may be sounded if an account that is held by a person in city A starts being accessed in city B.
Implementing a strict identity verification protocol also increases the trust customers have in the crypto companies. Users feel safer buying and selling cryptocurrency on the platform.
Summing it Up
When it comes to fighting cryptocurrency fraud, crypto currency companies must take steps towards strengthening their identity verification protocols. Knowing who your customers are and verifying their details helps quickly identify potential fraudsters and lowers the risk of a crypto scam while giving authentic customers the seamless, secure experience they expect.