Scams have become a widespread problem in the cryptocurrency industry, with malicious actors using various tactics to steal funds from unsuspecting investors.Â
By understanding the common tactics used by scammers and being proactive in protecting their assets, you can better safeguard yourself against fraud and minimize your risk of loss.
The Employee Impersonation Scam takes place when an individual unknowingly clicks a link or downloads unverified software onto their computer (see Phishing Scams below). This leads to malware being placed on the computer unbeknownst to the individual.
The malware lies dormant on the individual’s machine until they visit their banking site or exchange site. As soon as they arrive at the site, the malware has a script prepared that immediately opens a chat window, appearing to be a Customer Support agent from Uphold.
The “Support Agent” informs the individual that their account has been compromised and they will be contacted by a member of the bank’s fraud department. That phone call then walks the individual through moving their money to a more secure location, which in reality is moving the funds to the scammer’s account.
In some instances, the scammer will ask the individual to provide their personal codes or 2FA information, which Uphold will ever do.
Phishing scams are fraudulent attempts to steal sensitive information, such as login credentials, passwords, and private keys, by disguising as a trustworthy entity, such as a legitimate cryptocurrency exchange or wallet. They often use fake emails, websites, or pop-ups to trick users into entering their information.
An example of a phishing scam in the cryptocurrency industry is a fake email or pop-up that appears to be from a well-known exchange, such as Binance, and asks the user to enter their login credentials or private key. The information is then used to steal the user's funds.
What You Need to Know
Pig Butchering scams are a form of long-term fraud, aptly named because the scammer "fattens up" their victim over time before draining them of all their funds.
Initial Contact
The scam often starts with an unsolicited message via SMS, social media, or dating apps. The initial message might appear harmless, like a wrong number or a casual greeting. Once the target responds, the scammer seizes this as an opportunity to initiate a conversation and build rapport.
The Investment Trap
After gaining your trust, the scammer introduces the idea of investing in cryptocurrency. They may even let you withdraw a small amount initially to prove the "validity" of the investment. However, when you try to withdraw more, they'll claim that fees or other expenses need to be paid.
Red Flags to Watch For
- Quick attempts to move the conversation to private messaging apps
- High-pressure sales tactics or deadlines
- Promises of unusually high returns
Protect Yourself
- Be cautious of individuals who claim to have exclusive investment opportunities.
- Never share sensitive information like your banking details or social security number.
- If an offer sounds too good to be true, it probably is.
Final Stage
Once the scammer believes they've maximized your investment, they will disappear, shutting down accounts and making off with your money.For more information, please also refer to the FinCEN Alert on Pig Butchering Scams.
SIM swapping, also known as SIM hijacking, is a type of attack where a malicious actor gains access to a victim's mobile phone number by tricking the mobile carrier into transferring the number to a new SIM card controlled by the attacker.
Here is how the attack typically works:
- Gaining access to personal information: The attacker first gathers personal information about the victim, such as their full name, date of birth, and address. This information can be obtained through social engineering, phishing scams, or by purchasing it on the dark web.
- Contacting the mobile carrier: The attacker then contacts the victim's mobile carrier, posing as the victim and claiming that they have lost their SIM card or that it is damaged. The attacker provides the carrier with the personal information they have obtained to prove their identity.
- Transferring the number: If the attacker is successful in convincing the carrier, the carrier will transfer the victim's phone number to a new SIM card controlled by the attacker. The attacker can then use the new SIM card to receive calls and text messages meant for the victim, including authentication codes and two-factor authentication (2FA) alerts.
- Taking control of accounts: With access to the victim's phone number, the attacker can reset passwords and take control of the victim's online accounts that are protected by 2FA, such as email, social media, and cryptocurrency accounts.
- Stealing assets: If the attacker gains access to the victim's cryptocurrency accounts, they can steal their assets by transferring the funds to their own accounts.
It is important to note that SIM swapping attacks are becoming increasingly common and can cause significant financial losses for victims. To protect against these attacks, it is recommended to use strong passwords, enable 2FA on all accounts, and be cautious of suspicious emails and phone calls asking for personal information.Â
Additionally, some mobile carriers offer added security measures, such as multi-factor authentication or a temporary freeze on the mobile number, that can be used to prevent SIM swapping attacks.
These scams promise high returns on investments, but in reality, they are just paying early investors with the money deposited by new investors. The scheme eventually collapses when there are not enough new investors to pay the existing ones.
An example of a Ponzi scheme in the cryptocurrency industry is Bitconnect, which promised its investors high returns through a lending program and trading bot. However, the scheme eventually collapsed and many investors lost their funds.
Fake exchanges are fraudulent websites that mimic legitimate cryptocurrency exchanges and trick users into depositing funds into fake accounts. The funds are then stolen, and the users have no way of recovering them.
An example of a fake exchange is a website that appears to be the legitimate cryptocurrency trading venue, Uphold, but with a slight difference in the URL or logo. Users who deposit funds into this fake exchange will lose their money, as the exchange is not connected to the real Uphold platform.
Cloud mining scams are fake companies that claim to be mining cryptocurrencies for their investors. They take money from their investors and run, leaving them with no returns and no way to recover their funds.
An example of a cloud mining scam is a company that claims to be mining Bitcoin on behalf of its investors and promises high returns. However, the company never actually mines any Bitcoin and just takes the money from its investors.
Pump and dump schemes are coordinated efforts to artificially inflate the price of a cryptocurrency, often through spamming the market with buy orders. The individuals behind the scheme then sell the cryptocurrency for a profit, causing the price to crash and leaving other investors with losses.
An example of a pump and dump scheme is a group of individuals who coordinate to buy a low-volume cryptocurrency, causing its price to increase. They then sell the cryptocurrency for a profit, causing the price to crash and leaving other investors with losses.
ICO scams are fake initial coin offerings that raise funds from investors and then disappear, leaving them with worthless tokens. The scammers often create fake whitepapers, websites, and social media accounts to trick investors into thinking they are investing in a legitimate project.
An example of an ICO scam is a company that raises funds through an initial coin offering, promising to develop a new blockchain project. The company takes the funds and disappears, leaving investors with worthless tokens and no way to recover their investment.
Wallet scams are fake wallet services that steal users' private keys and funds. They often mimic legitimate wallet providers and trick users into downloading their software or providing their private keys.
An example of a wallet scam is a fake mobile wallet app that appears to be the legitimate MyEtherWallet app. The app is designed to steal users' private keys and funds, as soon as they deposit any cryptocurrencies into the wallet.
Rogue trading bots are fraudulent trading bots that manipulate cryptocurrency markets and cause financial losses for unsuspecting users. They can be programmed to execute trades at specific times, take advantage of market volatility, or even make false trades to deceive investors.
An example of a rogue trading bot is a bot that is programmed to execute trades based on false or misleading information, such as fake news or false market signals. The bot can cause financial losses for investors who use it to trade cryptocurrencies.
Fake giveaways are scams that promise to give away free cryptocurrencies, but actually steal funds from the participants. They often require users to send a small amount of cryptocurrency to a specific address to enter the giveaway, but once the funds are sent, they are stolen and cannot be recovered.
An example of a fake giveaway is a scam that promises to give away free Bitcoin to its followers on Twitter. The scammer asks users to send a small amount of Bitcoin to a specific address to enter the giveaway, but once the funds are sent, they are stolen and cannot be recovered.
Fake Transaction scams occur when a fraudulent message is sent (either via text or email) which ask you to confirm a high-value transaction. When the victim replies “no, this wasn’t me”, you are told that in order to re-credit your card with the funds, you need to provide your credit card details. Your card is then used for fraudulent purchases.
The most frequently seen example of this are messages depicting to be from Amazon, often an iPhone being purchased.
Social media scams are fraudulent accounts on social media platforms that pretend to be legitimate entities, such as cryptocurrency exchanges, wallet providers, or even famous individuals. They trick users into sending funds to their wallets by offering fake promotions, giveaways, or investment opportunities.
An example of a social media scam is a fraudulent Twitter account that pretends to be Elon Musk and offers to give away Bitcoin to its followers. The scammer asks users to send a small amount of Bitcoin to a specific address, and once the funds are sent, they are stolen and cannot be recovered.
Man-in-the-browser scams take place when an individual unknowingly clicks a link or downloads unverified software onto their computer (see Phishing Scams above). This leads to malware being placed on the computer unbeknownst to the individual. Â
The malware lies dormant on the individual’s machine until they visit their banking site or exchange site. As soon as they arrive at the site, the malware has a script prepared that immediately opens a chat window, appearing to be Customer Support from that bank. Â
The “Support Agent” informs the individual that their account has been compromised and they will be contacted by a member of the bank’s fraud department. That phone call then walks the individual through moving their money to a more secure location, which in reality is moving the funds to the scammer’s account. Â
In some instances, the scammer will ask the individual to provide their personal codes or 2FA information, which no bank or company will ever do.