Identifying Crypto Scams and General Advice on Avoiding Them

Those that have been very observant in the digital currency ecosystem can attest to the fact that there is hardly a week gone by when a hack, rug pull, or other forms of cybercrime-related activities will not make the headlines in the digital currency ecosystem.

Since the start of the year, we have heard of a number of hacking activities involving big platforms like Crypto.com, and more recently, the data breach suffered by Hubspot which exposed some data of many digital currency ecosystems like BlockFi.

Besides these general events, Avalanche-based DeFi project Atom Protocol rug pulled its investors a day after launch in February, citing a fault in its smart contracts. Whether the given excuse is genuine or not, the unsuspecting investors have been rubbed off their hard-earned money already.

Understanding that scamming people can be a big payday for those involved in it, we can hence not expect the rate to be toned down. Rather, the onus lies on key stakeholders in the space to educate the public about these possible scams, how to identify them, and offer probable ways to avoid being a victim as an active or passive investor in the space.

Forms Which Scams Takes Place in the Crypto World

To scam someone takes a sheer amount of creativity and persistence. However, the rate of occurrence of these scams is a sign that many have taken to these unhealthy acts as a career. Here are some of the forms that a scammer can attempt to scam unsuspecting investors;

Free tokens in your unhosted wallet.

It is a common avenue to rob users of the funds stored on unhosted wallets like Trust Wallet, Metamask, and Phantom, amongst others. If you ever see unknown tokens in your wallet, and you are positive that they weren’t added by you, it’s possible that you are being scammed.

Of course, it can also be a promo campaign of a new unknown token. In this case, you usually get a few dollars. However, if you suddenly receive several thousands of dollars, it’s highly likely that a scam is happening. Should you see any coin in your wallet, you can check the coin’s value by using the PancakeSwap decentralized exchange.

For these types of scams to have an effect, the scammers may prompt the potential victims to buy a subscription, connect their wallets to an unknown website to sell tokens, or report their SEED phrase. Do not try to sell these tokens!

You can see the example of unknown tokens in a Metamask wallet.

Metamask phishing with Google ADS

Scams perpetrated through Google ads are some of the most subtle and prevalent scam styles in the digital currency ecosystem today. Recently MetaMask alerted its community of such scams and recommended the use of direct links to the legitimate metamask.io URL and to stay away from sponsored ads.

It is known that the wallet’s users were being directed to a fake MetaMask phishing page through Google ads. They are prompted to install the extension, which will give them options to import an existing wallet or create a new one as shown in the screenshot below;

If they click on the ‘Create Wallet’ button, the real MetaMask.io site is opened as there is no cryptocurrency to steal. However, if they click on the ‘Import a wallet’ option, they will be asked to enter the SEED phrase of their wallet, which is then sent to the scammers. For any reason, do not input your Seed Phrase or private keys on a platform you are not sure of.

A letter from “MetaMask”

In addition to what I’ve mentioned above, you should also be aware of phishing attempts from MetaMask and other prominent crypto services. Recently, many users have received official-looking emails from MetaMask in which fraudsters request users to pass Know Your Customer (KYC) checks. Of course, as the wallet service does not require such a procedure (especially as it is a non-custodial wallet solution), it’s a scam, and you should refrain from clicking on any of the links in the fraudsters’ messages.

Telegram secret chats spam and Telegram groups

Provided a user is actively involved in the digital currency ecosystem, scammers will soon begin sending messages in a secret chat, saying that their targets have won a sale, an airdrop, or a whitelist. While this form of private messaging is not always a scam, it is wise to exercise caution in order to stay safe.

This can be an advertising technique employed by a new project. But normally, if you don’t participate in giveaways yet win, Telegram-based private messages can be a red flag. It’s better to not respond and cease all communication with the representatives of the scam project.

While the private message scams are more prevalent on Telegram, users should watch out for similar schemes on other social media platforms as well.

Fake emails

A very widespread type of scam involves sending an email with an attractive offer. Some of these emails typically read like this:

“Hooray, you have won a closed competition from Binance and now you have a personal link to the mail queue” or “Your mail has been selected as the winner in our Whitelist. Please login to our website so that your victory can be confirmed.”

Again, occasionally such messages can be real. But you should always check the information in the official sources and project chats before taking part in such things.

Conclusion

Unfortunately, crypto scams are here to stay for a long time, and the best way to prevent losses is to stay vigilant and arm yourselves with the knowledge of the tactics used by fraudsters. Crypto enthusiasts should approach their trading or investment journey with caution and it would be a wise choice to stay knitted with a trusted community that has more experienced market members in it, as they may be able to help out with reasonable advice.

Gleb Zykov, the Co-Founder and CTO of a DeFi security and analytics company HashEx

Disclaimer: The сontent of this article is for informational purposes only, and does not constitute any financial or other advice. You alone assume the sole responsibility of evaluating the merits and risks associated with the use of any information in this material. We strongly advise that you do your own research before making any decisions.