The growing interest in cryptocurrencies has also led to a growing number of crypto-frauds. People are increasingly purchasing and trading these types of assets, even though they sometimes lack basic knowledge about them. These circumstances have become very attractive to scammers who exploit this lack of knowledge. Below, we describe the most popular methods, the precautions to take, and what to do if you fall victim.
Ways of Cryptocurrency Fraud
One of the most common methods is to instill trust in the victim in order to extort funds. The scammer contacts the victim with promises of a quick and easy increase in their funds after transferring them to a specified address. In the conversation, scammers pose as financial advisors specializing in cryptocurrency trading, for example. They entice victims to entrust their virtual funds with promises of successful investments. If the person has previously used an exchange, they may allude to this fact to instill even greater trust. Sometimes, they even mention the need for verification of the funds by the Polish Financial Supervision Authority (KNF), which is intended to validate the legality of their actions.
Sometimes scammers are more cunning and first conduct research on a potential victim to learn about their interests or personal details about their friends. For example, they might mention a friend who has allegedly used their services.
As the above examples show, the method of operation may vary, but it always involves gaining trust in the potential victim in order to convince them to transfer funds to the fraudster's account, which are never returned to the victim.
Another effective method relies on the weakest link in computer network security – user error. It involves impersonating genuine websites, such as cryptocurrency exchanges – most often the most popular ones. The success of this method is ensured by the fact that the websites created by fraudsters are deceptively similar in appearance to their real counterparts. They typically match the original websites in terms of colors, fonts, and logos, with the only difference being a minimal change in the website address. Therefore, it's crucial to carefully check website addresses, checking for typos and ensuring the domain name is correct.
The final threat we'll describe is a fraudster gaining possession of a private key. It's worth explaining what a private key is. It's a security feature used to sign and approve transactions in the blockchain network. It acts as a kind of password, which, once entered, grants access to the cryptocurrency stored in the account.
Anyone who obtains a private key can access all the funds in a given cryptocurrency account. The key can be compared to the code to a safe deposit box containing significant savings. Therefore, it's crucial to store it in a highly secure location and never disclose it to third parties. Fraudsters can obtain this key, for example, by illegally gaining access to the computer or mailbox where someone stores the private key. Sometimes, people reveal it themselves, unaware that they shouldn't do so, as it would allow the fraudster to freely dispose of their funds.
The methods of operation of crypto fraudsters described above are just some of the most popular ones that cryptocurrency holders may encounter recently on the cryptocurrency market.
How to protect yourself against theft?
Education is paramount – it's worth familiarizing yourself with at least the basics of acquiring and trading cryptocurrencies. The vast majority of fraudsters capitalize on their victims' ignorance. A growing number of resources are currently available on cryptocurrencies, and it's worth familiarizing yourself with the positions and announcements published by the Polish Financial Supervision Authority (KNF) on this topic.
It's also important to remember that protecting your private key is paramount. Possessing a private key allows you to freely manage your collected cryptocurrency. Therefore, it should never be shared with third parties and should be stored in a secure location that no unauthorized person has access to. Avoid saving your private key on a computer, phone, or other devices that could be stolen or accessible to others. One of the safest solutions seems to be storing your private key on a plain piece of paper and hiding it in a location that third parties don't have access to.
You should always pay attention to where you are sending funds because a cryptocurrency transfer cannot be reversed, and the recipient is not identified by name and surname, as is the case with a cash transfer.
It's also important to exercise common sense and avoid hasty actions. Often, scammers contact you and insist on making a quick decision. This should alert you.
Additionally, it is worth having a copy of your cryptocurrency wallet, which should be kept in a safe place, so that in the event of damage, destruction or theft of the wallet, you can use its backup copy.
What if funds are stolen?
If we do not take precautions and fall victim to fraud, we should immediately report the crime to the nearest police station, describing in detail the circumstances in which the funds were withdrawn from the account.
Time is of the essence in this situation, as the withdrawn funds may be directed by fraudsters to so-called "mixers," which effectively make it impossible to determine the source of a given cryptocurrency.
This alert is for informational purposes only and does not constitute legal advice.
author:
