Crypto and trading scams have become very common. If you have never been scammed, someone may have attempted to scam you or someone you know, or you may have heard about it on the internet.
According to a report, hackers stole $4.3 billion worth cryptocurrency between January and November 2022. This is a 37% increase compared to that of 2021, and from September 2020 to December 2022, up to 2 million people fell for crypto currency scams.
To protect yourself from crypto and trading scams, you should consider arming yourself with necessary information that enables you to easily detect scams from legit trades.
These Scams Target Social Media Users
As of 2022, up to 4.76 billion people use social media, and that's more than half of the people in the world. It's literally one of the easiest ways to reach billions of people. This makes social media a gold mine for scammers.
According to the US Trade Commission, consumers lost $8.8 in 2022 to various scams. Generally, it all started through a message, post or ad that they came across on social media.
We can get so carried away thinking social media is where we meet with friends irrespective of distance, but always keep in mind that not all the 4.76billion social media users are your friends.
Also keep in mind that your friend's social media account can be hacked by scammers at any time. Before you know it, your friend who has never really been interested in crypto and online trading, may start advertising a new coin or online trading platform to you.
Unbeknownst to you, you are chatting with a scammer. Thinking it's a friend you can trust, you may decide to give it a try, only to get scammed.
Sometimes, these scammers try to use manipulative messages to deceive you to divulge confidential information that they can use to perform their fraudulent act. This is called social engineering.
They may even go as far as using phishing. This means that they pretend to be a reputable brand (e.g. your bank or broker) with a 'fake' website and brand logo, to prove their legitimacy.
Then they try to persuade you into giving out information like your passwords, login details to your accounts or Crypto wallet, through email, text, social media or even calls. Immediately they get your login details, the scam is almost complete.
Mind you, dating sites are not left out. These scammers may create fake profiles on dating sites, act like they are in love with you. Immediately they find a way, they scam you and move on to the next victim.
These Scams Pose As Legitimate Investments
Posing as a legitimate investment is another way scammers perpetuate their fraudulent activities. One of the ways they do this is through Ponzi schemes.
To make this happen, these Ponzi scheme operators act as money managers. They tell you to bring your money to them, and make you feel like your money will be used to trade Forex, buy shares or even invest in real estate.
In actual sense, there is probably no investment. These so-called money managers pay old investors with the funds of new Investors. They promise you huge profits with little or no risk, and you do not have to go through any form of eligibility test to see if the product suits your risk profile.
For some months or even years, they will consistently pay investors the proposed returns. Finally, when they decide its game over, they disappear with all the money. Some Ponzi schemes even require that you invest with bitcoin.
Some scammers create fake Crypto currency exchange with attractive exchange rates, but once you send your Crypto currency, that's the end.
Another Ponzi scheme, could be seen in the Squid Coin Cryptocurrency Crash, which saw the value of the squid coin rise as high as $2,856 and fall to 1 cent. This was because after many people bought the coin, they were unable to sell them, and the promoters later converted all the coins to BNB tokens, and stole them. Total funds stolen was about $3.3m.
In some other cases, these scammers call you claiming to be your broker, money manager or bank customer service agent. After introducing themselves as customer service agents, they go ahead to convince you to give them your login details.
Your bank or brokers agent will not ask for your login details. If you receive such calls, feel free to hang up and contact the bank, broker or whichever company it is by yourself, using the right contact details.
You can get the right contact details from your broker's website.
You also gain professional perspective and expert opinion by doing your research. For example when comparing trading CFDs in the UK, many scammers pose online as legitimate traders & encourage you to signup with offshore brokers. On average, in the UK, which is a regulated market, even the best forex brokers had 78% losing retail traders as their clients, which gives you an idea of the risks involved.
One of the most important factors is regulation. In the UK, the Financial Conduct Authority (FCA) reigns supreme over the capital market, and there's no going around them. Every broker must carry a license issued by the FCA, to be considered trustworthy as can be seen in the research above.
It is dangerous to jump at an investment offer without research, seeking expert advice and talking to others; because you may be being led into a trap, and others might see what you don't.
To verify a legitimate investment, get the registration number of the investment provider, and visit the regulator's website in your region, to carry out a search.
The Scammers May Pose As Fund Recovery Specialists
Imagine being scammed and while trying to get back your funds, you get scammed again, watch out for fake fund recovery specialists.
These fake fund recovery specialists seek people who have been victims of online scams, by checking social media comment sections where some people make complaints. They then reach out to you claiming they can help you get your money back.
Most times, they request for upfront payment for the fund recovery service, and even ask for sensitive information like your Crypto wallet keys or account login details.
Once you pay them, they disappear and if they were able to get your login details, they may take over your trading account, crypto wallet or bank account. These scammers may withdraw your remaining funds or use your account to carry out more fraudulent activities.
This is not to say all fund recovery specialists are scammers, just be sure that you are not at the verge of being scammed twice.
Scammers Could Pump & Dump The Asset
Crypto currency and stock are susceptible to pump and dump. It is important that you understand how these pump and dump schemes work so as to spot it before you get scammed.
In order to carry out a pump and dump scheme, an individual or group of individuals, come together to buy lowly priced assets like stocks.
They then go around to spread the word about the assets they have purchased. They use social media forums like Reddit, to encourage more people to buy the target assets.
As more people buy in, the price of the assets keeps increasing. When the asset price is fully pumped, they sell their assets to the new incoming buyers.
Seeing that they own a large amount of the asset, selling theirs will send the price crashing and the investors will lose their money.
The Scammers Request Payment In Gift Card & Crypto
Whenever someone requests payment in gift card or crypto, you may want to reconsider. First, when it has to do with gift cards, they will ask that you put money in a gift card (like Amazon, iTunes, Google play gift cards etc.) then send them the number at the back of the card.
Don't fall for it, no legitimate company will ask you to make payment with gift cards. As the name implies, gift cards are gifts, but for payment.
Second, when it has to do with making payment with Crypto, you should keep in mind that unlike the fiat currency and bank account, most governments do not insure crypto currency and your digital wallet.
Payment you make with crypto currencies can hardly be reversed, and is usually not legally protected. If there ever arises a need to dispute the transaction, it may not be possible for you.
Crypto Keys & Login Details Are Stolen During Fake Software Updates
It's quite normal for us to update our apps from time to time, whenever there is an upgrade or updated app. The unfortunate thing is that scammers also target software updates.
Scammers can take advantage of the upgrade process to take your Crypto keys and login details. When they have access to your account or wallet login details, they can take your money or use your account for other malicious acts.
Keep Your Eyes Open
With the right information, crypto and trading scams can be detected before the scammer is successful.
Avoid investing in a hurry, and always ensure to do your due diligence to research about a Crypto currency, or investment before investing. Lastly, keep in mind that social media may not always be the right source to get investment advice.
