How to avoid Cryptocurrency Theft and Scams

Cryptocurrency seems to have had a lot of success stories in the past decade. Similar to the Y2K era of the internet when thousands of companies decided to dive headfirst into the world of online marketing and business. Many people have begun to try their hand in startup ventures through Blockchain development and creating digital tokens.

Cryptocurrencies have been under a lot of scrutiny in the past due to their notorious reputation of being unregulated. This makes it rather easy for financial predators to target unsuspecting investors. The number of cryptocurrency scams have soared since its inception making it hard to determine the legitimacy of even the best-looking projects.

The cryptocurrency industry has been known to attract many bad actors due to the early-stage nature of the industry, promise of large potential gains, and lack of common security infrastructure across the board. How you choose to engage into the new wave of digital assets, be it a common exchange or a new decentralized platform, there will be scammers and cons out there trying to manipulate you.

Stories of crypto holders losing large amounts of money to scams have surfaced all over the internet with few signs of slowing down. In the modern time, the usage of the internet to store financial assets should not come without added security measures. It is always best to learn how to protect yourself from the threat of losing personal data and ones’ hard-earned money.

As with any investment, we generally suggest you follow your gut and the famous proverb “if it sounds too good to be true, it probably is.” Here are some things to look out for:

A few things to watch out for to avoid Cryptocurrency scams

  • Promise of Outlandish Returns: Many fake “traders” will attempt to reach you in Telegram chatrooms, email, etc. – 99.9999% of them will be trying to steal your money. Some of them lead with the fact they are professional “FX traders” moving into crypto or that they are selling Bitcoin at extreme discounts. Do not believe them, no matter how real they sound.
  • Read the Fine Print: Self-explanatory but reading the legal infrastructure that underpins your trading behavior is critical.
  • Phishing: This occurs when a scammer or identity thief contacts you (through whatever means) by posing as a legitimate actor to lure you into providing personal data such as usernames, passwords, bank account numbers, etc. This can also be an illegitimate email asking for personal information while posing as a legitimate source. In order to prevent loss of funds, always remember to check the security certificate of websites, email address (compare it with what you think the domain should be), check to see if the hyperlinks they provide match where you want to go, keep informed about phishing techniques, keep your browser up to date, and use firewalls! Celebrity “endorsements” of crypto have been popular as well.
  • Crypto Mining / Multi-level Marketing: There are many people running cryptocurrency mining affiliate programs, or referral programs offering you a commission for signing others up to invest in crypto mining pools. They claim that if you make an investment in their crypto mining operation you could receive very high profit margins on a yearly, monthly or even weekly basis. Be on the lookout because most of these are scams to steal your money.
  • Pump and Dump: Recognizing the trading exchange you utilize is critical. Given the success of names like E*Trade, Fidelity, etc., traders in the US just assume they are dealing with a good counterparty. Be aware of exchanges with little traction or name recognition, research exchanges to ensure they do not participate in ‘wash trading’, and use Reddit / Twitter to sanity check your chosen venue. The community is quick to call out scams, and, if you can’t find any info on the exchange, it’s probably a scam. Only trade through an exchange at your own risk and avoid pump and dumps by carefully researching the value of what you’re trading, their company efforts and trade volume history.
    Read this article for more information: How do Cryptocurrency Pump and Dump Scams Work?
  • Ask the Community for Help: Bitcoiners are always willing to share their thoughts on a particular program. Posting on r/Bitcoin or tagging any of the Twitter handles we recommend you follow with a question should elicit a response. Also, feel free to reach out to us!

Some additional tips to protect your cryptocurrency:

  • Use Cold Wallets when possible. Hot wallets should be used when you actively need quicker liquidity but should not be the preferred storage mechanism for long term assets. Click to purchase a Ledger Coldwallet.
  • Use 2FA. Text 2FA leaves you susceptible to Sim swaps, so try to use Google Authenticator or a similar service
  • Ensure Custodians provide indemnity to avoid fallout from negligence or failure to perform
  • Make sure your loved ones can access your crypto if something inexplicable happens to you
  • Divide your assets among multiple wallets.
  • Always backup your wallet.
  • Double check addresses when sending or requesting funds.
  • Avoid public WiFi when accessing your accounts (or just… in general)
  • Research paper or hardware wallets (only use if you are savvy, while secure, they are difficult to operate for a newbie)
  • Use difficult or randomized passwords (generators can be found on Last Pass)
  • Do not brag about your holdings to others!
  • When buying alt coins, only invest in projects that have clear and concise data and detailed steps of their plans for development and usability!

Above all, the best way to protect yourself against cryptocurrency scams is to treat it like you would any other investment. Never give out your private keys or password to strangers through messenger or email. Always check that you’re visiting a legitimate website before entering any information. Keep your personal devices locked to avoid losing your assets if your device is stolen. Stay up to date on the latest information to have a heads up on any possible security threats. Has this article helped you? Let us know in the comments.

If you’re just starting out in cryptocurrency and want to know how to open a wallet and begin investing: Click here for How to Start a Cryptocurrency Wallet for Beginners

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