Here’s how to protect yourself from cryptocurrency troubles

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Many investors have avoided cryptocurrencies and for good reason. After all, whoever wants to invest in something made, has no real benefit other than to help commit crimes, and is as unstable as a stool with legs.

However, investors who got into Bitcoin during the early days of, say, Bitcoin or Elon Musk's joke, Dogecoin, have made a lot of money and are not afraid to show it off. So much so that even die-hard conservative investors are at least taking another look at cryptocurrencies, especially as Canadian securities regulators and the US Securities and Exchange Commission put in place stricter rules to help protect innocent people.

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Despite this new oversight, cryptocurrency fraud and illicit activity remain prevalent, leaving investors questioning the safety of putting any of their money in the hands of the industry.

“The decentralized nature and pseudonymization of many cryptocurrencies makes it difficult to trace fraudulent activity to the perpetrators,” says Tony Anscombe, chief security evangelist at ESET Canada Inc., a cybersecurity firm based in Thornhill, Ontario. “Transactions made on the blockchain, unlike traditional banking, are often irreversible, providing fraudsters with the certainty of monetizing their crime.”

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Here, he offers his perspective on why cryptocurrency fraud is so common and how investors and consumers alike can protect themselves.

Q: Why is cryptocurrency fraud so common?

a: The lack of regulatory oversight in the field of cryptocurrencies makes investors vulnerable to various scams and fraudulent schemes. The lack of a central authority to monitor and regulate transactions also contributes to the spread of fraud, as there are fewer safeguards in place to protect investors. Additionally, the rapid growth and popularity of cryptocurrencies has attracted opportunistic individuals looking for quick riches without understanding the risks or processes needed to keep their investments safe.

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Unsolicited emails or social media ads lure victims with their promise Great returns on their investments in cryptocurrencies. They will usually link to a legitimate-looking investment app or website. However, all of this is fake, and the money will never be invested or returned. According to the FBI, cryptocurrency-related fraud totaled $3.96 billion in 2023, a 53 percent year-over-year increase.

Q: What are the most common types of cryptocurrency scams to watch out for and how do they work?

a: The most common types of cryptocurrency scams involve a range of deceptive practices where criminals build a relationship of trust with the victim.

• Scams like Ponzi schemes promise high returns on investment, but rely on money from new investors to pay returns to previous investors, leading to inevitable collapses when the flow of new capital dwindles.
• Social engineering is often used through dating apps and social media to gain the trust of victims and then claim that they or a close friend is a cryptocurrency investing expert and is making large sums of money, then offer the victim a cut of the action if they want to invest.
• Phishing scams involve tricking individuals into revealing their private keys or login credentials, enabling fraudsters to access and steal their cryptocurrency holdings.
• Fake initial coin offerings (ICOs) lure investors with promises of revolutionary projects or products, only to disappear with investors' funds once the ICO concludes.
• Pump and dump schemes artificially inflate the price of a cryptocurrency through misleading information before organizing a coordinated sell-off, leaving unsuspecting investors to suffer significant losses.
• Fraudulent wallets or exchanges trick users into depositing funds, only to walk away with the money or manipulate transactions for personal gain.

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There are also refund scams to watch out for. When falling Victim of a cryptocurrency scam Or a cyber attack that leads to the theft of money, you feel remorse and shame, not to mention anger at the financial loss. Unfortunately, for many victims, this is not where the story ends. Imagine a worse outcome: someone calls you or you see an ad offering cryptocurrency recovery services, but instead of getting your money back, all they do is evade the upfront fee you paid them.

Unfortunately, this type of “refund scam” is becoming increasingly common, and The FBI issued a public service announcement about last year.

Detections of malware specifically designed to steal cryptocurrencies from users' wallets (crypto theft) also rose by 68 percent during the first half of 2023, according to the latest reports. ESET Threat Report. One of the most popular is Lumma Stealer, also known as LummaC2 Stealer, which targets digital wallets, user credentials, and even two-factor authentication browser extensions.

Q: How can investors reduce the risk of becoming a victim of cryptocurrency fraud?

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a: Investors can mitigate the risk of becoming a victim of cryptocurrency fraud by implementing several strategies. First, it is necessary to conduct thorough research before investing in any cryptocurrency project or platform. It pays to be skeptical of any low-risk, high-return investment plans, even those that may seem so. Endorsed by celebrities Or other Trusted individuals. It is always best to pay for goods online by credit card, as there is more buyer protection that way. It is unlikely that any legitimate company will ask you to pay them upfront in cryptocurrencies.

Verifying the legitimacy of projects, teams, and exchanges can help identify potential scams before committing funds. Using hardware wallets to securely store cryptocurrency assets adds an extra layer of protection against hacking and theft.

Use caution when dealing with unsolicited offers via email, social media, or messaging apps, and never share private keys or sensitive information online. Separate emotions from investments, especially with any romance scammer or scammer you meet online who offers investment advice, even if you feel a close connection to them. Go to a reliable, reputable exchange with good reviews and some legacy of being a sound cryptocurrency trading platform.

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