- Increasing number of crypto scams have led to countries tightening crypto regulations
- Crypto scammers using social media to get trick their victims.
- As cryptocurrency is unregulated, funds lost through crypto scams are not recoverable.
Crypto scams continue to be a big problem in the industry today. As cryptocurrencies are unregulated, crypto scammers are making huge profits, by luring victims into investing their funds and making the most out of it.
In fact, increasing crypto scams are part of the reason why some governments have limited or banned crypto trading. Some countries are now looking to implement more regulations on crypto trading to not only protect users but also reduce crypto scams.
The Federal Trade Commission in the US reported that since October 2020, crypto scam reports have skyrocketed, with nearly 7,000 people reporting losses of more than US$ 80 million on these scams. ActionFraud UK reported some £146,222,332 has been lost to cryptocurrency fraud since the start of this year, with the average loss per victim just over £20,500. More than half (52%) of victims were aged between 18 and 45.
In Asia, both China and India have been making headlines for crypto scams, with China officially announcing a ban on crypto trading last month. Meanwhile, India has become a hotbed for crypto frauds, with more users showing interest in crypto trading. The subcontinent is currently investigating its largest crypto scam involving bitcoins.
Over in Southeast Asia, Singapore police received 533 reports of crypto-related cheating, fraud, or other crimes between 2018 and 2020, with investors losing around S$29 million. The Monetary Authority of Singapore continues to warn people that cryptocurrencies are volatile and highly risky investment products unsuitable for retail investors. Interestingly, Singapore also sees itself as a crypto hub in Asia some day.
So why crypto scams are increasing and dangerous?
Just as any investment scam, a cryptocurrency scam involves criminals stealing money from people who think they are investing in digital currency. As most crypto assets and services are not regulated by financial regulators, the funds are not protected, compared to other regulated investments.
This means, if a crypto scammer cons a user into investing their funds, the is no possibility of the funds being able to be recovered at all. And because genuine cryptocurrency trading can offer high value in returns for some users, there has been a mad rush into the industry in recent times.
A recent example of a major crypto scam is the Squid Game token. The Netflix show has already been making headlines around the world and scammers also thought this would make a good scam. And they were right.
The BBC reported that Squid, which marketed itself as a play-to-earn cryptocurrency, had its price soaring by thousands of percent. But, users were criticizing it as they were not allowed to resell their tokens. The scam called a “rug pull” is when the promoter of a digital token draws in buyers, stops the trading activity, and makes off with the money raised from sales, which in this case was an estimated US$3.38 million.
Today, crypto scams are pretty much like social engineering attacks, whereby the scammer targets gaining personal information, especially security authentication codes for transactions. What’s scarier is the way scammers are targeting victims, with many using social media ads and dating apps.
According to a report by Sophos, scammers are now combining romantic lures with crypto scams. For example, a fake IOS cryptocurrency app in the US and Europe managed to con victims of at least US$1.4 million. Another example is in Malaysia whereby a businessman lost RM186,923 after being duped in a crypto scam introduced by a friend he met on social media.
How to avoid crypto scams?
Well, fortunately, there are ways to detect and avoid crypto scams. However, at most times, users tend to ignore the facts and just go for the investment. In any case, here are three ways to avoid crypto scams.
- Research – The best way to avoid any form of scam is to always do some background research on a particular cryptocurrency. Many websites provide information on fishy crypto tokens and potential scams. Users just need to take the initiative to research them a bit more before making any investment.
- Review websites and social media pages – This one is when it can be a bit tricky. Social media today has a lot of pages and advertisements promoting crypto assets and crypto trading. The trick is, to always check the history of these accounts and pages. Before investing any funds, be sure to also do more research outside of social media to check the trading platform’s status and genuineness.
- Maintain privacy – Never share passwords or authentication codes for a crypto wallet with anyone. Users should also enable multi-factor authentication wherever available.
The reality is though, cryptocurrencies are becoming mainstream in society. Not only are more companies enabling crypto payments, but the adoption of crypto in society is also increasing. The only question now is, will society be vigilant enough when trading and investing in cryptocurrencies.