How to prevent a cryptocurrency scam

Cryptocurrencies involve a lot of money, which is why they unfortunately also attract many scam artists and charlatans. On this page, we discuss the most frequently used scams in the world of crypto. We also offer some advice to defend yourself against them. Read these tips carefully and be careful when confronted with these types of situations. You are in charge of your crypto fortune; make sure it also stays that way!

Cryptocurrency blackmail

One incredibly nasty tactic employed by criminals to rob people of their cryptocurrencies is blackmail. This tactic involves a scammer sending you an email telling you that your computer has been hacked. The scammer also adds that he can follow your every move. The email further mentions that he installed a key logger on your computer, which enables the hacker to track your typing and remotely activate your webcam. He will mention that he has recorded footage of you. The scammer will then provide you with two options: you can either pay a certain Bitcoin, Ethereum, Litecoin or any other cryptocurrency amount and have the material wiped, or you can ignore the threat. If you opt for the latter, the scammer will threaten to share the footage with all your contacts and to publish it on social media. For this scam, scammers generally make use of stolen mailing lists, as they can use those to scam thousands of people simultaneously.

Fake exchanges

The world of cryptocurrencies has only existed for a bit more than ten years, and as such, it still finds itself in a very early stage of development. Unfortunately, such circumstances always attract malicious parties seeking to abuse users, for instance, by setting up fake Bitcoin exchanges. Customers are deceived on such exchange platforms through extremely favourable exchange rates. Users of such exchanges think that they have stumbled upon a great deal, but in practice, they will never be able to withdraw the cryptocurrencies from the exchange. Hence, always ensure that you are using a legit exchange when buying and selling cryptocurrencies.

Giveaways

Information can spread very rapidly on the internet. Scammers try to abuse this by allegedly offering free Bitcoins or other cryptocurrencies. You would only have to pay a small fee or provide a bit of personal information to register for such giveaways. If you see such an initiative on a website or social media, always treat it with suspicion. This way, you avoid that you and other people will fall victim to this type of scam.

Imitation

It’s very easy for scammers to create imitation accounts on social media and to pretend to be someone else. They will often wait for the person who's being imitated to publish something, only to respond to the post pretending to be that person. They will then post fake giveaways in the name of that individual, or they will advertise their own projects. It will look like the original author of the post has left a new message. They may also use these accounts to send you a private message, inviting you to participate in a giveaway. Does something appear too good to be true? Then it usually is.

Malware/Ransomware

The last few years, hackers have become increasingly creative in finding ways to rob people. When you transfer cryptocurrencies, always take some time to double-check the recipient address. Some malware applications can change an address when you copy it (Ctrl+C). The hacker then replaces the address stored on the clipboard with his own. Keep in mind that you cannot revert a transaction that has been processed by the network. You should be very careful here; before you know it, your hard-earned Bitcoins will be gone. Also, be cautious when granting admin permissions to computer applications.

When you fall victim to ransomware, it will lock your computer (or part of it). You can only unlock it by paying in crypto. In such cases, consult a computer professional you trust to remove the application. Having a decent virus scanner installed is by no means a luxury, as it provides your computer with nearly full protection against such threats.

Arranging a meeting in real life

When selling or buying Bitcoin, the other party may ask you to meet up in person to finalise the transaction. Be aware that you are putting yourself in great danger if you do not know or fully trust the other party. Meetings like these may lead to robbery or worse. Scammers also often hand you fake banknotes in exchange for cryptocurrencies. Consider using a peer-to-peer platform to complete the transaction instead of meeting each other in real life.

Phishing emails 

Beware of emails in which strangers ask you to transfer a certain amount of money in exchange for a substantial sum of cryptocurrency. If something appears to be too good to be true, it often is. Another often-employed scam involves an email in which you are requested to reset your password for an exchange that you are registered at. In principle, exchanges never ask you to do this, so always check the sender’s email address. These emails often attempt to obtain your data by redirecting you to a fake website that looks exactly like the exchange you are familiar with. 

Pyramid games and Pump and Dump scams

Pyramid games constitute a classic scam, in which the participants are promised momentous profits based on the number of people they convince to partake in the scheme. Participating in such projects is often costly, but the scammers will try to convince you that the potential profits far outweigh these costs. Don't fall for this scam, and certainly don't invite your network to participate in such practices. If someone contacts you with such a request, consider it a red flag, as it likely involves a pyramid game.

The same applies to pump and dumps. These scams often involve a very late notification concerning the ‘pumping’ of a particular coin. By then, the scammers have already bought large quantities of this coin. They are merely waiting for the masses to become interested, and then they will start selling. This scam often proceeds at lightning pace, and before you know it, the coin has already been dumped by the scammers, leaving you hanging. Don't partake in such practices, which also partly ruin the industry.

Scam coins

Alternative cryptocurrencies (i.e. every coin besides Bitcoin) are often presented as bringing about a new paradigm; e.g. ‘the greatest discovery since the internet.’ Don't fall for such scams and always thoroughly research a coin before you invest in it. In some cases, this involves scammers generating much publicity for a fake project. Such projects often include slick website design or a large community of investors trying to evoke a fear of missing out (FOMO). What usually happens with such projects, is that they distribute a large number of free tokens to draw people in.

The growing interest in the project should boost the currency's price, after which the scammers will sell the currency for a hefty profit. This is also known as a pump and dump scheme, but it’s a bit more subtle than regular scams. Beware of such scams, because as an investor, you will often end up destitute.

Companies only accepting Bitcoin or other cryptocurrencies as payment methods

Cryptocurrencies are enticing for scammers because of their pseudonymous nature. If you adhere to certain precautions, it's even possible to remain completely anonymous when trading in cryptocurrencies. Couple this with the fact that transactions are irrevocable, and you have a perfect recipe for a scam. It takes minimal effort to channel funds away using this method. Therefore, always be cautious when a webshop only accepts Bitcoin or other cryptocurrencies as payment methods.

Amounts of less than 10 euros

Because of the high transaction costs, it’s generally not enticing to buy only small amounts of crypto. When the transaction costs make up such a high percentage of your investment, the coin will have to gain much in value to compensate for it. If someone asks you to make a small payment, always try to examine why the other party would be interested in this. Such requests are very likely to be scams.

Check the payment description

When completing a payment through iDEAL, always check the name of the beneficiary of the transaction. This name of the recipient is always displayed, and you can use this to find out where you are sending your money to. Most parties offering iDEAL-payments work with a payment provider. In this case, the payment provider serves as the beneficiary. The final recipient, e.g. a webshop, will be listed in the payment description. You can find a list of licensed payment providers on the website of De Nederlandsche Bank (DNB), the Dutch central bank.