How to Protect Yourself from Cryptocurrency Scams


How to Protect Yourself from Cryptocurrency Scams

Like the California Gold Rush, cryptocurrency can feel like a new financial frontier, full of the promise of riches. Unfortunately, the people who are most likely to strike gold are crypto scammers. Cryptocurrency scams are becoming increasingly sophisticated. So, even if you’re a seasoned crypto investor, you still could become a target.

What is Cryptocurrency?

Cryptocurrency is a type of digital money that exists only online. People invest in cryptocurrencies, like Bitcoin, hoping their value will go up over time. That said, cryptocurrency only holds value because people agree that it has worth, just like how we agree that dollars or euros have value. The key difference, though, is that cryptocurrency exists only online and isn't backed by any government, bank or physical asset, which is why it’s a very risky investment.
 

The Dangers of Cryptocurrency:

  • They’re not regulated or legally protected: Cryptocurrencies are not controlled by governments, making them riskier investments.

  • They’re vulnerable to hackers: Crypto exchanges and wallets can be hacked and stolen.

  • They’re not insured: Unlike bank accounts, cryptocurrencies are not insured against loss.

  • The market is volatile: Crypto prices can change rapidly, resulting in significant losses.

  • Crypto payments are non-reversable: Cryptocurrency transactions are permanent. There’s no way to get your money back if you make a mistake or are the victim of fraud. 

Types of Cryptocurrency Scams:

  1. Phishing Scams: Scammers will send emails, texts and fake websites resembling legitimate cryptocurrency exchanges or wallets. They trick users into entering their private keys or login credentials and steal them.

  2. Investment Scams: Too-good-to-be-true investment opportunities often are just that. A group of scammers will inflate the price of a cryptocurrency through misleading statements and coordinated buying, then sell off their holdings at the peak, leaving other investors with worthless assets.

  3. Ponzi Schemes: Using funds from new investors, scammers promise high returns with little risk, encouraging victims to recruit others to invest. The scheme collapses when new investments dry up, leaving earlier investors with significant losses.

  4. Fake ICOs: Fraudulent Initial Coin Offerings are designed to steal your money. Fraudsters create fake cryptocurrencies or tokens, often with a convincing website and whitepaper, to lure investors into buying. Then, once the scammers collect funds, they disappear.

  5. Ransomware: Scammers use malicious software to access your crypto wallet or hold your computer hostage, demanding a ransom in cryptocurrency.

Ways to Prevent Crypto Scams:

  1. Do your research: Be skeptical of any investment that promises guaranteed or unusually high returns. Do your research and avoid schemes that require you to recruit others to earn profits. Avoid buying into a cryptocurrency solely based on hype or sudden price increases.
  2. Trade on secure platforms: Stick to reputable cryptocurrency exchanges. Avoid clicking on links from unsolicited emails or messages and always verify the URL before entering any sensitive information.
  3. Enhance your security: Create unique, hard-to-guess passwords, use two-factor authentication and secure wallets for your assets. Also avoid public Wi-Fi to protect your information.
  4. Review your accounts: Regularly reviewing your account statements and transaction history allows you to quickly report any unauthorized or suspicious activity immediately.
  5. Report suspicious activity: If you ever suspect any fraudulent activity or encounter a potential scam, please contact us immediately or visit your nearest F&M Bank office. We’re here to support you.