Cryptocurrency and NFTs are the latest investment and trading crazes.
These digital assets are decentralized and powered through blockchain technology, allowing individuals and organizations alike to use their crypto or NFTs as they see fit – be it long-term investments, short-term trades, property, or even using popular coins like Bitcoin to make purchases. Anything blockchain-related is starting to become valuable in the eyes of many, and real wealth is being created for the masses.
Although there are many advantages to building your digital wealth using cryptocurrencies and NFTs, the technology is still in its early years and regulation is highly varied. Cyber criminals have taken note of this lack of security, resulting in several different scams luring in unsuspecting digital asset investors.
According to a January 2022 report from CNBC, crypto scammers raked in a record-breaking $14 billion in 2021 through crypto-related theft and crimes!
Learning how to protect yourself from crypto and NFT scams has never been more important. In this article, we will cover 4 of the most common scams and how to avoid them. Keep reading to learn about how Webacy can help keep your cryptocurrency and other digital assets safe long-term.
1. Social Engineering Scams
A social engineering scam is a type of psychological deception in which the scammer manipulates their victim into providing their blockchain account information.
To achieve this scam, the cyber criminal will often take on a fraudulent identity, posing as a trustworthy professional or creating false websites. For instance, a scammer may pose as a well-known company such as Google or Amazon to get into contact with a victim. Using this false identity, they can gather needed information through fake login forms or other information-gathering methods.
Scammers using social engineering techniques may also take more personal methods, such as establishing fake romantic relationships to gain access to a person’s financial information. These scams can be not only severely financially damaging but can also cause immense emotional distress for the victim.
In order to avoid social engineering scams, it is crucial to always be wary of who you are speaking with online and what websites you are visiting. NEVER share your login information with anyone besides trusted financial advisors and verified platforms. Even if the username of the person, or the phone number may seem legitimate, always double check that the ask is expected (ex. you were resetting something), or that the other party or entity is truly authentic.
2. Giveaway Scams
A cryptocurrency or NFT giveaway scam involves the use of a promoted giveaway, often with a fake endorsement from a celebrity or other trustworthy figure.
Giveaway scams can be especially dangerous as they are extremely easy to come by and are mixed in with actual giveaways hosted by reputable companies or celebrities. The giveaway may offer large amounts of cryptocurrency or valuable NFTs as a prize, making entry into the competition very tempting to eager investors.
These scams work by requiring those who enter the supposed giveaway to either disclose account information or send small amounts of cryptocurrency to a scammer’s digital address. Once crypto is sent to a new wallet address, there is no way to get it back without access to their wallet information and real identity.
Online giveaways of any kind always come with risks. If you do choose to partake in crypto giveaways, make sure to never provide vital account information – and remember, if the giveaway asks you to pay first, it’s probably a scam.
3. Initial Coin Offerings & NFT Rug Pulls
Although not inherently a scam, initial coin offerings – or ICOs – are prone to attracting scammers and bad characters. An ICO is the process of creating a new cryptocurrency that users can then purchase, typically at a low price initially.
The problem with ICOs largely lies in the way they are advertised. These new coins are often pushed as being the next “big thing,” providing investors with a false sense of security that the coin will rise dramatically in value over time.
Depending on the entity behind the coin, this can result in sharp increases in price in which – if the ICO is actually being put forth by a scammer – the creator can then sell all their coins and make a killing. This is what is sometimes referred to as the crypto version of a “pump and dump.” Always wait and see: usually pressure based campaigns are designed to pump and dump. The true nature of a campaign will always reveal itself over time.
A similar scam can happen with NFTs, in a fraudulent process known as a “rug pull”. An NFT creator will heavily promote a new project to earn massive amounts of funding and investments immediately upon the project’s launch. Once the launch occurs, the creator then cashes out, plummeting the project’s value and leaving the investors at a major loss.
The most common recent examples of this type of scam are the incidents with social media influencers promoting cryptocurrencies to their fan bases, who often consist of young and even underage individuals. Recently, a major NFT rug pull was carried out by vetted creators, with the creators walking away with nearly $1.3 million of their investors’ money.
To avoid this type of scam, it is important to always purchase your cryptocurrencies through a trusted platform, as well as research the asset’s creator and whitepaper beforehand.
4. NFT Bot and Link Scams
While NFTs show a lot of promise in terms of helping digital artists to give their work greater long-term value, providing unique access and utility to projects, and more, these blockchain-based projects are also highly unregulated. As a result, investing in even projects put forth by vetted creators and reputable companies comes with major risks.
The best example of current NFT scams to be wary of are fraudulent links that contain malware or dangerous forms designed to look like trustworthy login portals. These login portals are often used to access crypto wallets, a type of financial account that holds cryptocurrencies and is used for buying and selling NFTs. These links are often DM’d or direct-messaged to a user with a similar profile picture of the channel administrator. Unsolicited DM’s should be treated like spam: rarely trust them. In fact, it’s generally safest to disable DMs in any risky Discord channels.
Recently, this type of NFT link scam was carried out through Discord, in which the scammer hacked into an official creator’s channel to post a scam link. Those who followed the link and logged into their wallets ended up having their wallets completely emptied – resulting in an estimated $150,000 gain by the scammers.
How to Identify Scams Before They Happen
To avoid the types of scams detailed above, the most important safety measure to take is to always look up wallet addresses on Etherscan before carrying out any transactions.
Not only does this site help you to verify whether or not a person or company you are trading with is legitimate but it will also allow you to view the comments attached to a wallet’s account. If the owner of the wallet has a history of scamming, this will undoubtedly be noted in the comments – alerting you to stay far away from any transactions with that particular account owner.
In addition to researching wallet addresses, you should always be wary of any links given through message boards or automated bots. When in doubt, never click a link you deem even slightly suspicious and never log in to your wallet or crypto accounts through portals provided through a link; unless the portal is through a verified URL or intentionally a place that you want to connect your wallet to.
Final Thoughts: Protect Your Crypto with Webacy
Here at Webacy, one of our core objectives is to help you ensure the security of your cryptocurrency and other digital assets.
When you sign up for our platform, you gain exclusive access to features such as our killswitch – a tool in Webacy that enables you to transfer your assets to a new, secure location in the event your crypto account information is leaked to hackers or scammers.
Along with helping you to manage the safety of your digital, the Webacy platform also helps you to ensure your digital legacy. Our services include determining your inner circle, creating a crypto and digital asset will, and managing your social media accounts after you pass.
To learn more or sign up for Webacy, visit our website.