According to a recent estimate, scammers stole $14 billion worth of cryptocurrency in 2021, setting a new record for cryptocurrency theft.
According to the “2022 Crypto Crime Report,” which was published on January 6 by blockchain data firm Chainalysis, it is almost twice as much as the $7.8 billion that fraudsters stole in 2020.
It’s understandable that “Olympic-level scammers” have seen new prospects for illegal behavior given the surge in interest in cryptocurrencies over the past year, said William E. Quigley, a well-known investor, and co-founder of the WAX blockchain. During a panel discussion last month organized by blockchain company Light Node Media, Quigley predicted that the high-tech aspect of cryptocurrencies will continue to draw skilled con artists.
Consider the recent “Squid Game” hoax, in which investors claim that a new cryptocurrency token called SQUID and an associated immersive online game were nothing more than a sophisticated con. Investors assert that the developers vanished after the value of the currency soared and allegedly cashed out with more than $3 million.
Common Cryptocurrency Attacks
The Federal Trade Commission (FTC), based on scam reports submitted in the U.S., estimates that from October 2020 to March 2021, about 7,000 persons in the U.S. lost upwards of $80 million in cryptocurrency scams. Compared to the 570 bitcoin investment scams and $7.5 million in losses in the same months the year prior, this is a significant increase. Given the surge in cryptocurrency fraud, here are several patterns to watch out for:
1. Demanding Payments in Crypto Only
It’s probably a scam if a person or business that appears trustworthy says they only accept Bitcoin or Ethereum as payment. Since bitcoin and other cryptocurrencies are a growing asset class, analysts claim that reputable institutions won’t take cryptocurrencies without simultaneously accepting U.S. dollars via conventional payment methods including wire transfers, cheques, credit and debit card purchases, and cash.
In general, anyone who requests payment in Bitcoin may be seeking to hoard it and profit from its rapidly rising value. Additionally, blockchain does not use standard know-your-customer (KYC) protocols as banks use. This indicates that wallets can be opened without the need for proper identity, a Social Security number, or an address and phone number. Despite being public and producing permanent, open-access records, blockchain allows users to transact more or less anonymously, making it simple for someone to con you out of your money and run.
2. Cryptocurrency Investment Scheme
It’s common for a new cryptocurrency to be created, and when this happens, it’s known as an initial coin offering (ICO). However, ICOs can also be targets for fraud. A business or person may claim to have a once-in-a-lifetime chance to invest in a novel kind of cryptocurrency with certain 1,000% profits. They might then exert pressure on you to add several additional coins to a compromised digital wallet or “pump and dump” by accumulating the coin and dumping it when its value soars.
3. Phishing Scams
This kind of fraud is as ancient as the internet, but there are some fresh consequences with cryptocurrency. Bad actors send emails to recipients in an effort to trick them into clicking links and entering their personal information, including their crypto wallet key information, just like a “regular” phishing attack would. However, you only receive one private key for your blockchain wallets, unlike most passwords and usernames. This is a feature of blockchain technology’s decentralized architecture, which ensures that one organization cannot control your information. However, it presents a problem if you ever need to alter your key.
4. Romance Scams
Crypto frauds are prevalent on dating apps. The FTC reports that from October 2020 to March 2021, bitcoin accounted for nearly 20% of the money lost in romance scams. This kind of scam involves long-distance or digital connections where one side urges and persuades the other to buy or provide money for some new cryptocurrency while in reality, it’s just a way to trick people out of their money.
