Summary

There are many digital currency scams in the blockchain space. The most common scams include: extortion, fake trading platforms, giveaway scams, social media phishing, "clipboard hijacker" malware, phishing emails, Ponzi and pyramid schemes, and ransomware.

In this article, we’ll briefly describe each scam so you can learn and master effective measures to deal with common Bitcoin scams and properly keep your digital currency assets.

Introduction

Whenever a new technology comes out, criminals will get wind of it and look for opportunities to defraud. Unfortunately, as a borderless digital currency, Bitcoin has created a great opportunity for criminals to design digital currency scams.

The decentralized nature of Bitcoin allows users to have full control over their investments. However, the downside of this nature is that it is difficult to develop an appropriate regulatory and enforcement framework for it. Criminals design traps to lure users into making mistakes when using Bitcoin, and ultimately successfully steal Bitcoin, leaving victims with little way to recover their losses.

Therefore, it’s important to understand how criminals scam you and recognize potential red flags. There are many different Bitcoin scams to be wary of, and some of them appear more frequently than others. So, we’re going to discuss eight common Bitcoin scams and strategies to prevent them.

Common Bitcoin Scams and Prevention Strategies

Blackmail

Extortion is a common tactic used by criminals to threaten others with sensitive information and illegally demand money. They usually demand compensation in digital currency, with Bitcoin being the most common currency of choice.

Criminals collect or fabricate sensitive personal information and pressure victims to pay Bitcoin or other currencies.

The best strategy for preventing Bitcoin extortion is to choose your login credentials carefully and pay close attention to the websites you visit and where you store your personal information. Using two-factor authentication is also a wise precaution. Even if a criminal uses fake information to extort money, you will know immediately and take countermeasures.

Fake trading platform

As the name implies, fake trading platforms are imitations of legitimate digital currency trading platforms, which trick users into trading there. This type of scam usually appears in the form of a mobile app, or it may be a desktop application or a fake website. Compared with the "real body", some fake trading platforms are almost indistinguishable from the real thing, and we must carefully distinguish the authenticity. These fake trading platforms appear to be legal and compliant, but their purpose is to steal digital currency.

They often lure cryptocurrency traders and investors with free cryptocurrency, attractive prices, low transaction fees, and even gifts.

To prevent this scam, we should bookmark the real URLs of legitimate exchanges and double-check them every time before logging in. We can also use Binance Verification to check the legitimacy of URLs, Telegram groups, and Twitter accounts.

For mobile apps, we need to review the developer information, download volume, and user reviews. For more details, please read "Common Scams on Mobile Devices".

Gift Scam

The usual routine of gift scams to steal digital currency is to exchange small amounts of money for free gifts. Criminals usually ask victims to transfer money to a specific Bitcoin address first, and promise more Bitcoin in return (for example, transfer 0.1 Bitcoin to get 0.5 Bitcoin). However, the victim will not receive any gifts after the transfer, and will not be able to recover the funds.

There are many different giveaway scams. In addition to Bitcoin, criminals also try to steal other digital currencies (such as Ethereum, Binance Coin, XRP, etc.). In some cases, they may ask for private keys or other sensitive information.

Twitter and other social platforms are hotbeds of giveaway scams, with criminals often looking for opportunities to exploit popular tweets, important news, and announcements (such as protocol upgrade announcements or ICO previews) on social platforms.

The best way to prevent giveaway scams is to be ruthless and refuse any giveaways that require a pre-transfer of funds. Legitimate giveaways never require participants to provide funds.

Social Media Phishing

Social media phishing is a common Bitcoin scam. Like giveaway scams, this type of scam is common on social media. Criminals often create accounts on social media and pretend to be an authority in the field of digital currency (also known as "impersonation"). They then send out fake giveaways through tweets or chat messages.

The best strategy to prevent social media phishing is to double-check and verify that the person you are trying to contact is who you say you are. Some social media platforms add unique logos to verified users, such as Twitter and Facebook, which use a blue checkmark.

“Clipboard Hijacker” Malware

Clipboard hijacker malware is a stealthy way of stealing money. It hijacks your clipboard data and, if you're not careful, your funds go directly to the criminals' accounts.

Let's say you want to transfer Bitcoin to your friend Bob. The normal way of doing it is that Bob provides his Bitcoin address, and then you copy and paste it into your Bitcoin wallet. However, if your device is hacked by "clipboard hijacker" malware, the moment you paste the address, the software will automatically replace the address with the criminal's Bitcoin address. As long as the transaction is sent and confirmed, all your Bitcoin will fall into the hands of the criminals, and Bob will not receive any money.

To prevent this type of scam, you must always be aware of your computer's security and be wary of suspicious messages or emails that may contain infected attachments or dangerous links. Be careful about the websites you browse and the software you install on your device. You may also consider installing antivirus software to scan your device regularly for potential risks. It is also important to keep your device's operating system (OS) updated.

Phishing Emails

Phishing can take many forms, but the most common method is through the use of phishing emails. In emails, criminals lure recipients into downloading virus-infected files or clicking on links to visit legitimate-looking malicious websites. Such emails imitate products or services that users often use and send them information, which is extremely dangerous.

Criminals usually urge recipients to take immediate action in emails to ensure the security of their accounts and funds. They may ask recipients to update account information, reset passwords, or upload documents, usually with the goal of collecting login credentials and stealing account information.

The first step to protect yourself from phishing emails is to check if the email was sent from the original source. If in doubt, you can contact the company directly to confirm whether the email was sent. Secondly, you can also hover your mouse over the link (without clicking it) to check if there are any typos, unusual characters, or other anomalies in the URL.

Even if you don't see any signs of danger, don't click on the link. If you need to log in to your account, we recommend that you enter the URL manually or open the page from your favorites.

Ponzi and pyramid schemes

Ponzi schemes and pyramid schemes are the oldest financial scams. The fraudulent strategy of the Ponzi scheme is to continuously absorb funds from new investors to pay investment returns to early members. Once the criminals are unable to attract new investors, the capital chain will be broken. OneCoin is a classic example of a digital currency Ponzi scheme.

A pyramid scheme is a business model that pays registered members based on the number of new members they recruit. If no new members join, the funding chain will break.

The best way to protect yourself from both scams is to carefully research the digital currency you purchase, whether it is an altcoin or Bitcoin. If the value of the digital currency or Bitcoin fund you hold is entirely derived from new investors or members, it is likely a Ponzi or pyramid scheme.

Ransomware

Ransomware is a type of malware that locks a user's mobile device or computer, making it impossible to access important data. It cannot be unlocked unless a ransom (usually in Bitcoin) is paid. This type of software is extremely destructive and if a hospital, airport or government agency is unlucky enough to be infected, it will have serious consequences.

Ransomware usually prevents users from accessing important files or databases, threatening to completely delete the data if a ransom is paid within a specified period of time. Unfortunately, even if the ransom is paid, there is no guarantee that the criminals will keep their promise.

Here are some steps we can take to protect ourselves from ransomware attacks:

• Install anti-virus software and keep your operating system and applications updated.

• Avoid clicking on ads and suspicious links.

• Be cautious with email attachments, especially files with the suffixes ".exe", ".vbs", and ".scr".

• Back up your files regularly so that you can restore your device even if it gets infected.

• Visit NoMoreRansom.org for advice on how to protect yourself from ransomware and free system recovery tools.

Summarize

There are many Bitcoin scams to be wary of. However, the first step to preventing yourself from being scammed is to understand how these scams work. Only by learning how to prevent these most common Bitcoin scams can you protect your digital currency assets.

Do you have any other questions about common Bitcoin scams and how to avoid them? Visit Ask Academy, our Q&A platform, where Binance community members will patiently answer your questions.