Compared to 2020, cryptocurrency theft in 2021 was a staggering 516% increase.
Some of these frauds are very innovative and sophisticated. They can fool even the sharpest of minds.
Unless you have considerable experience with cybercrimes and cyber security, there’s very little you can do to protect yourself from a sophisticated hacker. Fortunately for retail investors, these hackers do not usually target individuals and instead attack institutions.
However, not all crypto and forex frauds require genius hackers. Some are very common, sometimes surprisingly so. What is more surprising is that people keep falling into these same traps time and again.
In this article, we will learn about 3 crypto and forex frauds that have affected unassuming investors repeatedly.
Top 3 crypto and forex exchange frauds and how to avoid them
Here are the three most common financial frauds and everything you can do to avoid them. Without wasting more time, let’s get into the topic.
1. Fake websites
If you have spent a considerable time on the internet, you have come across fake websites in all likelihood.
According to the New York Magazine, more than 40% of internet traffic is fake.
While it does not reveal the exact number of live imposter websites at any particular year, it does suggest that the internet is full of fakes. Such websites are broadly called spoof websites. To put it simply, spoof websites pretend to be legitimate websites in an attempt to get sensitive information from users.
The most common victims of spoof websites are those who do not have a clear idea of what a legitimate website looks like. Fake websites can often seem like original websites if they are created carefully. Almost every element of website design can be replicated by a skilled web developer.
Sometimes, these spoof websites are linked to other resources which add to their credibility. If someone is in a hurry or not paying attention to every aspect of a website, they can easily be victims of spoof websites.
How to detect spoof websites
Spoof websites can look exactly like their original counterparts. However, one thing that they cannot replicate is the domain name.
As every domain name on the internet is unique, no two websites can have the same domain name.
Spoof websites usually have a domain name that is close to the original. For example, www.facebook.com can become www.facenook.com . Unless you are careful about it, it is very easy to overlook these small things.
On top of that, spoof websites usually have a lot of ads and pop-ups. If you see these elements in a website, make sure you cross-check the domain name. When you know how to detect spoof websites, you will never fall victim to it again.
A few months ago, news surfaced that a London teenager had scammed many people successfully through a spoof website. UK police later recovered $2.7 million in crypto from him. It is just one example of how effective crypto scams through spoof websites have become.
2. Unsellable cryptocurrencies
The crypto market is a scary place for people who are new to it. If you follow crypto news portals, you will come across press releases of new cryptocurrencies or crypto projects.
There are way too many cryptocurrencies in existence, and not all of them are legitimate.
Most people do not know about cryptocurrencies that are below 15th or 20th rank. These little-known cryptocurrencies often promise tremendous returns, and some have indeed grown astronomically. However, many tokens are created with the intention of scamming people.
The best recent example is the Squid Game token. The token started trading at the Pancakeswap exchange. When the token launched, it was selling at around one penny per token. At its peak, the price of the Squid Game token was $2,856.65. Within the next couple of hours, the price fell to $0.0007.
The anonymous creators of the Squid Game token had pulled off one of the biggest crypto heists in the world.
The Squid Game token succeeded in what is known as a rug pull. The phenomenon refers to events when developers of a token run away with the investors’ funds. They were able to do this by configuring a smart contract that prevents the sale of a token. That means when the price of the Squid Game token was at more than $2800, investors were unable to sell it. They could only sell it when the price fell back to $0.0007.
How to avoid such scams
It is very easy to avoid such scams. You need to do only two things: stick to reputed cryptocurrencies and reputed crypto exchanges. No established exchange would host such tokens without due diligence.
Established cryptocurrencies also have accountability and a reputation to maintain. If you decide to buy Ethereum on Moonpay, you are ticking both boxes. Ethereum is an established currency and Moonpay is a reputed exchange. Your chances of being scammed are little to none in such a case.
3. Scam mobile applications
If you are keener on growing your wealth, you can easily have more than 5 finance apps on your smartphone. On top of that, we are always on the lookout for better and more profitable finance apps.
Unfortunately, if an app is too good to be true, it is likely to not be true.
In many ways, spoof websites and fake mobile apps work similarly. However, fake apps do not pretend to be some other app. Instead, they act as legitimate apps that work like any other finance app. People trust these apps more easily and end up divulging sensitive information.
Once your data is out, stealing your money is not a big deal for a skilled hacker.
How to avoid fake apps
The first thing that all money apps need to do is complete a KYC (know your customer process). There are tons of KYC software on the internet, but many are fake. Look for KYC software like SEON in your mobile app. If there is anything suspicious about an app’s KYC process, it is very likely to be fake.
Another thing that everyone should do before using a new financial tool or service is look up reviews on the internet. If there are negative reviews or very little information, it is better to avoid the app. Never give away money or sensitive information to any app or service until you are 100% sure about it.
A little education and awareness go a long way to protect your hard-earned money. It is also important for investors to educate those in their immediate surroundings.
If every investor becomes a little more aware and alert, many of these frauds can be avoided.
DC Forecasts is a leader in many crypto news categories, striving for the highest journalistic standards and abiding by a strict set of editorial policies. If you are interested to offer your expertise or contribute to our news website, feel free to contact us at [email protected]