Common Cryptocurrency Scams and How to Avoid Them (part 2)
For instance, if Alice sells memberships to both Carol and Dan (at $100 each), she’ll be left with $100 because half of her revenue must be passed onto the level above her. If Carol goes on to sell memberships, then we’ll see rewards trickle upwards – Alice gets half of Carol’s revenue, and the organizer gets half of Alice’s half.
As the pyramid scheme grows, the older members earn an increasing stream of revenue as the distribution costs are passed from the lower to the upper levels. But because of the exponential growth, the model is not sustainable for long.
Sometimes, participants are paying for the rights to sell a product or service. You might have heard of certain multi-level marketing (MLM) companies accused of running pyramid schemes in this manner.
3. Fake Mobile Apps
It’s easy to overlook the warning signs on fake apps if you’re not careful. Typically, these scams will direct users to download malicious applications – some of which mimic popular ones.
Once the user installs a malicious app, everything might seem to work as intended. However, these apps are specifically designed to steal your cryptocurrencies. In the crypto space, there were many cases where users downloaded malicious apps whose developers masqueraded as a major crypto company.
In such a scenario, when the user is presented with an address to fund the wallet or to receive payments, they’re actually sending funds to an address owned by the fraudster. Of course, once the funds are transferred, there’s no undo button.
Another thing that makes these scams particularly effective is their ranking position. Despite being malicious apps, some can rank highly in the Apple Store or Google Play Store, giving them an air of legitimacy. To avoid falling for them, you should only download from the official website or from a link given by a trusted source. You might also want to check the publisher’s credentials when using Apple Store or Google Play Store.
4. Phishing
Even newcomers to the crypto space will undoubtedly be familiar with the practice of phishing. It typically involves the scammer impersonating a person or company to extract personal data from victims. It can take place across many mediums – telephone, email, fake websites or messaging apps. Messaging apps scams are particularly common in the cryptocurrency environment.
There’s no single playbook that scammers adhere to when trying to get ahold of personal information. You may get emails notifying you of something wrong with your exchange account, which requires you to follow a link to fix the problem. That link will redirect to a fake website – similar to the original one – that will prompt you to log in. This way, the attacker will steal your credentials, and possibly your cryptocurrencies.
A common Telegram scam sees the scammer lurking in official groups for crypto wallets or exchanges. When a user reports a problem in this group, the scammer will reach out to the user privately, impersonating customer support or team members. From there, they’ll urge the user to share their personal information and seed words.
If someone learns your seed words, they’ll have access to your funds. Under no circumstances should they be revealed to anyone, not even legitimate companies. Troubleshooting issues with wallets does not require knowledge of your seed, so it’s safe to assume that anyone asking for it is a scammer.
With regards to exchange accounts, Binance will never ask for your password, either. The same is true of most other services. The most prudent course of action if you receive an unsolicited communication is not to engage, but rather to reach out to the company via the contact details listed on their official site.
Some other security tips include:
Check the URL of the websites you’re visiting. A common tactic involves the scammer registering a domain that looks very similar to that of a real company (e.g., binnance.com).
Bookmark your frequently visited domains. Search engines can mistakenly display malicious ones.