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There are many scammers out there out to steal your assets, and they use numerous methods. In this article, we’ll discuss five different common types of crypto scams and how to prevent them.
2021 was a recording-breaking year for cryptocurrency scams. Crypto scammers stole $14 billion of crypto that year, according to a report by blockchain data firm Chainalysis.
We have previously discussed ways to avoid crypto scams, but today we’ll take a deeper look into some types of crypto scams and how to prevent them.
5 Common Types of Crypto Scams and How To Prevent Them
1. Phishing:
This type of scam involves fraudsters sending emails pretending to be credible sources. These emails usually have links you are asked to click on, and they urge you to input certain sensitive details and information.
When you provide the details, they now gain access to your personal information, which might include your private key, giving them access to your crypto wallet, and they can easily make away with your assets.
Do not give out sensitive information on the internet or anywhere, as many people are posing to be credible sources, but they are only there to steal your assets.
2. Pump and Dump:
An individual or group commits pump-and-dump fraud when they inflate the price of an asset to sell their own holdings at a profit.
They persuade people to buy into a particular crypto or crypto project, and once it has gained a reasonable amount of growth, they sell all their holdings. When the investors notice the foul play, they also sell off their holdings which causes the crypto to crash.
This fraud scheme is popularly done in NFTs as well.
Doing your research is very important, especially in the crypto industry. You must do intense research before investing in a crypto project, old or new.
3. Rug Pulls:
Rug pull involves fraudsters who build a project, promote it and once it has gained high momentum, they totally desert it and go off with the investors’ funds, leaving the investors high and dry.
4. False Initial Coin Offerings (ICOs):
According to sgrlaw.com, Initial Coin Offerings (ICOs) are another form of cryptocurrency that businesses use to raise capital.
Investors get unique crypto “tokens” in exchange for their investment in the business through ICO trading platforms.
A discount on the new crypto coins is typically promised to customers in exchange for sending active crypto coins.
ICO frauds collect the funds of early investors only to desert the crypto project, Just like rug pulls.
5. Hacking:
To conduct crypto transactions, you need a crypto wallet, and these wallets are protected with two private and public keys. Private keys act like crypto wallet passwords, giving you ownership and control of your wallet and its assets.
Your private keys should be kept safe and secure and away from the reach of others. Scammers usually attack these wallets by gaining access through private keys to control the assets in them. They can easily move your cryptocurrencies to another wallet or withdraw them when they have access.
Conclusion
You can spot crypto scams in various ways, such as anonymous team members, promises of guaranteed investment returns, and much more.
Sometimes it’s hard to differentiate the real ones from the fake ones, which could cost you a lot.
Check out this article on how to spot NFT red flags, as some of them can also apply to the crypto industry.
Always do thorough research before investing in a crypto coin or project and get reviews from multiple sources.
Keep your private keys safe, and do not click on suspicious links and emails. Make sure you protect your sensitive information.
With these common crypto scams, you are now aware of tactics scammers use to fraud you of your assets. You are in total control of your crypto assets, and keeping them safe is up to you.
