Crypto gold rush: The rich, the digital dummies and tech-savvy criminals

It’s not a myth, we are living in the era of the digital gold rush.

But, like everything in life, there is a catch, and the biggest casualties in this mess are the techno-not-so-savvy users in the digital world.

The crypto industry has proven difficult to regulate by financial authorities worldwide, thus making digital currencies an invaluable tool for criminals and con artists.

Antivirus company Eset South Africa said crypto scams will be with us for a long time to come.

Eset CEO Carey van Vlaanderen said the world seems to have gone ‘crypto-mad’. 

“Digital currencies like bitcoin, Monero, Ethereum, and even Dogecoin, are all over the internet. 

Their soaring value promises big wins for investors (if you’re “buying the dip”, that is),” said van Vlaanderen.

While some people have made fortunes from digitally mining internet money,  trading cryptocurrencies, or selling NFT’s, there are scores more who’ve lost savings and large amounts of money trying to cash in on the digital gold rush.

“It has echoes of gold rushes that formed the first mining towns in South Africa back in the 1800s,” said van Vlaanderen. 

“But in reality, if you’re interested in cryptocurrency today, you’re quite possibly at a major risk for fraud.” 

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Why are cryptocurrency scams on the rise?

One of the main reasons ordinary people fall prey to crypto scams is a lack of understanding of the technologies underpinning the various internet coins.

Someone who has a thorough understanding of blockchain technologies is able to identify whether the technology underpinning a particular token is legitimate or hogwash.

One of the main reasons people are easily duped into parting with their hard earn money in these digitally masterful schemes is simply because they lack a thorough understanding of the technology.

“Fraudsters are masters at using current events and buzzy trends to trick their victims, and they don’t come much more “zeitgeist-y” than cryptocurrency,” said van Vlaanderen.

“Headlines and social media posts are partly to blame, creating a feedback loop that only adds to the hysteria over virtual currencies.”

Huge media interest in virtual finances also makes it a regular hook for phishing and scams.

“Soaring cryptocurrency prices attract consumers dreaming of getting rich quick and social media helps to amplify the buzz, real or fictional,” explained van Vlaanderen.

There’s also the lure of mining coins for money which phishers can use as a hook.

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What are the most common cryptocurrency scams?

If you have digital coins stored in a cryptocurrency exchange, the reality is it is always at risk from hackers. 

On numerous occasions threat actors have successfully managed to extract funds from these businesses, sometimes making off with hundreds of millions.

But in most instances, the breached companies promise to recompense their blameless customers. 

Unfortunately, there are no such assurances for the victims of crypto fraud. 

Fall for a scam and you will lose everything you put in for good.

This is why it pays to understand what these scams look like. 

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Here are some of the most common scams:

Ponzi schemes 

If it looks and sounds like a pyramid, and involves multi-level marketing (recruiting others to make the same or similar investment in order to grow your own fortune), it’s likely a Ponzi scheme. 

This is a type of investment scam where victims are tricked into investing in a non-existent company, where data has been digitally manipulated to show off high returns as more people join.

Look out for words like “Upliners, sponsors and down liners- where everyone is required to make a ‘once of purchase or payment.’

The most stomach-churning and humiliating part of this scam is that con artists leverage the relationships you share with family and friends, with the ultimate goal of making them also trust their scheme.

Cryptocurrency is ideal for this as fraudsters are always inventing new, unspecified ‘cutting edge’ technology to attract investors and generate larger virtual profits. 

“Remember falsifying the data is easy when the currency is virtual anyway,” said van Vlaanderen.

Pump and dump

Scammers encourage investors to buy shares in little-known cryptocurrency companies, based on false information. 

The share price subsequently rises and the fraudster sells their own shares, making a tidy profit and leaving the victim with worthless stocks or coins.

Fake celebrity endorsements 

Scammers hijack celebrity social media accounts or create fake ones, and encourage followers to invest in fake schemes like the ones above. 

In one ploy, some $2 million was lost to scammers who even name-dropped Elon Musk into a Bitcoin address in order to make the ruse more trustworthy.

Fake and copycat exchanges 

Fraudsters send emails or post social media messages promising access to virtual cash stored in cryptocurrency exchanges. 

The only catch is the user must usually pay a small fee first. The exchange doesn’t exist and their money is lost forever. 

Copycat sites offer what appears to be legitimate wallet services.  Users are encouraged to download wallets which then install malware on the user’s device. 

In these instances, iOS devices have been compromised whereas in the past the problem was limited to Android.

Impostor apps

Cybercriminals spoof legitimate cryptocurrency apps and upload them to app stores. 

If you install one it could steal your personal and financial details or implant malware on your device. 

Others may trick users into paying for non-existent services or try to steal logins for your cryptocurrency wallet.

Phishing

Phishing is one of the most popular ways fraudsters operate. 

Emails, texts and social media messages are spoofed to appear as if sent from a legitimate, trusted source with an urgent request for payment in cryptocurrency.

How you can avoid falling victim

The best weapon to fight fraud is a healthy dose of scepticism.

• Never provide your personal details to an entity that makes unsolicited contact with you, via email, text, or social media. 
• It may even appear to be your friend, but in reality, could be a hacker who has hijacked their email or social account. 
• Check with them separately via another contact method.
• If something is too good to be true it usually is. Take any investment scheme with a heavy pinch of salt.
• Switch on two-factor authentication for any cryptocurrency account you have.
• Dismiss any investment ‘opportunity’ which requires up-front payment.
• Never use unofficial app stores.
• Download anti-malware software from a reputable provider to your PC and mobile devices.
• The world may have gone cryptocurrency-crazy. But you don’t need to join in. Keep a cool head and ride out the hype while making good returns.

Compiled by Narissa Subramoney

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