As soon as the internet gave birth to the world’s first form of electronic cash, scammers, hackers and other bad actors have been hard at work looking for ways to cheat and scam people. To best protect yourself from these bad actors, here are the most common scams in the Bitcoin space and how to avoid them.
The Most Common Bitcoin Scams
Criminals work in a very high risk, high reward industry. Theft, scams, hacks, shams, frauds, rackets are just a few of the tools in their arsenal of crime. In order to know how to best protect yourself from all of these ploys, it is helpful to know what to look for so you can best protect yourself.
Bitcoin Scam #1: SMS Phone Spoofing
This is one of the oldest tricks in the book and this isn’t even technically a hack; It’s actually just social engineering. Here’s how it works.
A scammer calls up your cell phone provider and pretends to be you with some sort of sob story and they need to divert your phone number to a new device. After many attempts, the customer service representative changes the phone that receives your phone calls.
Once the scammer is receiving all of your calls and texts, they can receive any 2FA codes or passwords that you have set up via SMS. If you have SMS as 2FA on your Bitcoin exchange, then it is only a matter of time until you get an email notification that all of your bitcoin has been stolen.
How To Avoid SMS Phone Scams
Do NOT use SMS as any sort of 2FA anywhere in the Bitcoin space. It’s also a good practice to not use SMS for any sort of 2FA anywhere unless it is absolutely necessary. It’s been proven that SMS is the absolute least secure of all 2FA because your phone number is not controlled by you; it’s controlled by your cell service provider.
Bitcoin Scam #2: Social Media Account Impersonation
Back in December of 2017 when bitcoin and a number of other cryptocurrencies were hitting new all-time highs almost every day, there was a surge of new users that came in the crypto space. With the surge of new users came the new opportunity for scammers to take advantage of the increase in uneducated users flooding into the crypto space.
One of the easiest ways to scam users was to create fake Twitter accounts of prolific Bitcoin users, thought leaders and famously rich people by claiming that they were giving away free bitcoin or some other cryptocurrencies. One of the most commonly scammed accounts was Elon Musk.
How To Avoid Social Media Impersonation Scams
If someone on twitter or any other social media site is telling you that they are giving away free bitcoin or some other cryptocurrency, they are a scammer. Period. Nobody is going to give you anything for free simply because you give them something first.
Do not send any bitcoin to strangers on Twitter who say that they will give you twice the amount of bitcoin that you send to them.
Bitcoin Scam #3: Phishing Emails and Websites
Phishing is one of the older scams online and is actually a pretty simple concept. A scammer will create an email or website that looks just like an official company email or website and send it out en masse to unsuspecting users who may potentially think it comes from the real company and then divulge private information about the
How To Avoid Phishing Email & Website Scams
One of the easiest ways to avoid these types of scams is to double and triple check the origin of the email address for emails and the SSL certificate of the website that you are using.
Bitcoin Scam #4: Cloud Mining Ponzi Schemes
Cloud mining is a completely legitimate business that is done completely ethically by a number of companies around the world. There are also a number of Ponzi schemes that are operating under the guise of being a cloud mining company. While most of these scammers are in fact mining bitcoin, they are mostly just paying their older investors with money from newer investors and also adding some newly mined bitcoin into the mix.
How To Avoid Cloud Mining Ponzi Scams
The easiest way to avoid this is to avoid using the majority of cloud mining services but if you’re insistent on doing some cloud mining, then make sure that you are only using services that are reputable. It is very important to DYOR when investing in cloud mining services.
Bitcoin Scam #5: Keylogger Malware
When you visit Bitcoin websites, the likelihood of some sort of malware being installed on your computer is pretty high. These malicious websites will often employ shady tactics to get you to download and install a piece of software and when you click “I have read the terms and conditions” and “I agree”, you are actually consenting to malware being installed on your computer.
Keylogger malware is usually designed to collect usernames and passwords but in the Bitcoin space, they are mostly designed to log when a user inputs their 12-24 word seed phrase.
How To Avoid Keylogger Malware Scams
This one is pretty easy to avoid since you are in control of when you download things from websites. If you are using any sort of Bitcoin websites, you can bet that they may be using malware themselves or that they may be targeted by bad actors who have corrupted their system to install malware and pass it on to their users.
In short, do not download files from random websites on the internet. Especially if they are a Bitcoin website without a strong reputation of trustworthiness.
Bitcoin Scam #6: Fake Exchanges and Wallets
Fake exchanges and wallets are a growing problem. Scammers will create a website that looks just like an exchange or wallet and uses a domain name that is slightly different than the real one. When an unsuspecting user lands on the site, they are prompted to send bitcoin to the deposit address and when they do, the scammer just made some easy money.
How To Avoid Fake Exchange and Wallet Scams
Double check domain names and verify that the ones publishing software are the real site. A good way to do this is to look for a verified twitter profile for the company and use the link in their bio to go to the correct site. You may even want to tweet at them to ensure that they are a legit company that is run by human beings.
Bitcoin Scam #7: Bitcoin Ransomware
Ransomware was one of the first scams that made its way around the Bitcoin space. Ransomware is unknowingly installed by the user. As soon as it is installed on the hard drive, it encrypts the entire hard drive. In order for the owner of the computer to decrypt the hard drive, they need to pay a ransom in order to get access to their own computer.
How To Avoid Bitcoin Ransomware Scams
You can avoid ransomware by not downloading and installing random software on your computer.
Bitcoin Scam #8: ICOs
Short for ”Initial Coin Offering”, ICOs became one of the easiest ways to scam unsuspecting users who were new to the Bitcoin space. In order to take part in the ICOs, you had to send some bitcoin or Ethereum to a “company” who was creating some new good or service.
How To Avoid ICO Scams
The majority of ICOs are probably scams since they don’t have any sort of viable product at the time of launching their ICO. If you want to avoid getting scammed, then it’s probably best to avoid them altogether, since there is no real way to audit the supply or prevent the project creators from inflating the supply at will. Don’t get greedy. Stay humble and stack sats.
Final Thoughts
As long as criminals continue to work in their high risk, high reward industry, they will continue to use the most cutting-edge tools available; that includes incredibly powerful tools like bitcoin and other cryptocurrencies.
In order to best protect yourself, I strongly suggest that you take note of all of these Bitcoin scams and do all you can to not send any bitcoin to strangers online who don’t have any sort of reputation behind them. Don’t use SMS for any sort of 2FA. If someone on social media is telling you that they will send you .2 BTC if you send them .1 BTC, they are a scammer. Don’t download random software from untrusted sites like unknown exchanges and wallets. Don’t invest in random ICOs and do lots of research before you send any large sums of bitcoin.
It’s typically best practice to buy some bitcoin from a reputable source, HODL it on a hardware wallet, store your seed phrase properly, and keep it somewhere safe.
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