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Cryptocurrency Fraud: What You Need to Know

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Cryptocurrency Fraud: What You Need to Know
The emerging world of cryptocurrency is home to a lot of fraudulent activity with scammers aiming to capitalize on users who are new to crypto. It isn’t just newbies who can fall for a fraudster’s tricks – some scams can prove very convincing and trip up anyone in the crypto sphere.

In this article, we’ll help you become aware of the common scams that are taking place and keep your crypto safe online.

What is cryptocurrency fraud?
Cryptocurrency fraud is a deceptive activity in the crypto industry with the perpetrator intending to make financial or personal gain. Scammers and hackers on the internet are looking to make some easy money from unsuspecting victims by inducing them to do something, such as click on a link or reveal personal details, to gain access to their finances.

For cryptocurrency scams, thieves often attempt to break into a victim’s digital wallet to access their crypto holdings. They can typically gain access to a wallet by requesting you connect your wallet to a fraudulent website or by tricking you into handing over your wallet’s private keys.

What are the different types of cryptocurrency scams to look out for?

Phishing scams
Phishing scams are nothing new, but people still fall victim to them every day. A phishing scam can look like a malicious link in an email or a fake website which can sometimes look imperceptibly like its legitimate counterpart. The link or website can be set up to steal your personal information like your crypto wallet private keys or internet passwords.

Man-in-the-middle attacks
Similar to phishing scams, man-in-the-middle attacks are a way for scammers to steal your personal data. Rather than through links, the man-in-the-middle will intercept a Wi-Fi connection on a public network to gain access to your cryptocurrency wallet or personal account information. To prevent this, ensure you use a VPN to protect your data when making Ignition Casino crypto deposits.

Investment managers
Fraudsters can pose as investment managers who promise to help you turn huge gains on your portfolio. These bad actors will encourage you to send them cryptocurrency and they may claim they can make it 50x in value. However, “if you follow through with their request, kiss goodbye to your crypto,” warns Forbes Advisor. The scammer is likely tricking multiple people with this type of scam and will then disappear with everyone’s crypto.

Market manipulation
The crypto markets are no strangers to market manipulation. This is where techniques are used to deceive investors by artificially pumping up or lowering the price of a crypto coin or token, which leads to huge buys or sell-offs from investors. Market manipulation techniques include spreading false information on the internet or artificially increasing the trade volume, so the coin looks more in demand.

Pump and dump schemes
This occurs in both the traditional stock market and the crypto markets. A pump and dump scheme is when the owners of a coin sell off all of their holdings when a coin launches. This causes an artificial peak in the price, which immediately drops when the initial coin offering (ICO) ends. These schemes can be made worse by false claims around a project that generate lots of hype.

Rug pulls
This fraudulent act has been known to be committed by project founders, where they build up a project and encourage lots of people to get involved in buying the token in its presale. After the token has been sold and all the funds have been collected from unsuspecting investors, the scammers disappear with the money and the project ceases to exist.

How can you avoid crypto fraud and scams?
Over 46,000 people reported becoming involved in cryptocurrency scams just in 2021 alone, according to Fool. That’s an astounding amount and these scams laid around $1 billion falling into the hands of fraudsters.

Here are a couple of ways to stay safe and vigilant in the crypto space: 

  • Ignore any unsolicited messages – scammers often message on Twitter and Discord with promises that are too good to be true. 
  • Check the link before you click it – make sure you trust any crypto-related link before clicking on it. 
  • Always do your research – before investing in a coin, ensure that you know a lot about the company you’re investing in and trust the team behind it. 
  • Never share your private key or seed phrase with anyone – store the information offline in a safe place. 
  • Check the website address – scammers will often change one letter or number in the address so it looks just like a legitimate website.
  • Treat everything with extreme caution – you must feel confident with any payment request or investment opportunity before you carry it out. 

Investing in crypto can be fun and profitable but it’s always important to be careful and remember it’s real money you can stand to lose. 

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