Crypto scamscan be as simple as phishing and fake websites, or more complex like NFTrug pulls. Cryptoscams are particularly difficult to spot, and funds stolen are near impossible to track at times.
- Illicit wallets recorded funds worth $14 billion in 2021 alone.
Cryptocurrencies have taken the world by storm, dragging investors of both the institutional and retail variety. But with the increased interest from those who will pump money into the industry, comes interest from hackers, scammers and other kinds of cyber criminals too.
According to the 2021 Crypto Crimes report by blockchain analysis firm Chainalysis, the total value of cryptocurrencies held in illicit wallet addresses increased by 79% during 2021 to touch $14 billion.
Illicit wallet addresses in Chainalysis’ report refers to the wallets where scammers deposit the money they’ve stolen by running ponzi schemes, decentralised finance (
) hacks and more — one of primary reasons that companies like CoinDCX, which recently hit the milestone of having 10 million users on its platform, have partnered with risk-monitoring firm Solidus Labs to prevent market abuse.
The models by Solidus Labs’ will monitor for any suspicious activity, from fiat deposits, trading transactions to crypto withdrawal deposits. The aim is not only to prevent hackers from breaching the system, but to also ward against money laundering and terrorism financing.
…In today’s technology-entrenched world, countering illicit activities requires harnessing the latest world-class digital solutions from leading industry players such as Solidus Labs. In our long-term efforts to maintain the highest standards of screening and due diligence, CoinDCX is committed to bolstering compliance solutions on our platform.
Statement by Neeraj Khandelwal, co-founder of CoinDCX
The kind of scams crypto firms and users face can be many, ranging from illicit get-rich-quick schemes that will actually lose you money, to more. For instance, last month India’s Enforcement Directorate conducted several raids in an investigation into a crypto token called Morris Coin that was floated in the southern states of Kerala, Tamil Nadu and Karnataka to scam over ₹1200 crore from users.
Crypto isn’t always secure
As new as crypto is to the world, one of the most common forms of scams in the industry is actually almost as old as the Internet itself. While a crypto transaction actually is secure, there’s nothing stopping a scammer from creating a fake website that forces the user to send crypto or even their own fiat money to a cybercriminal — basic phishing.
The attacker could drive you to such fake websites through a malicious email, or through posts on social media, text messages and more. Such websites will usually market some attractive scheme around cryptocurrencies or NFTs, designed to convince you to spend money. The transaction, too, looks legitimate but will actually send money to criminals.
To identify and avoid these scams, you should avoid downloading any documents from unknown emails, messages or websites. You should also check if web pages that are accepting payments are https certified.
Social engineering and romance scams
As mentioned before, crypto scams look a lot like regular internet scams. So it’s no surprise that romance and social engineering hacks are common in this world too.
Romance scams, according to the US Federal Bureau of Investigation (FBI), are scams where a malicious actor uses a fake account to lure victims with the prospect of a romantic relationship. They are often carried out through dating apps and matrimonial websites, where people are quick to trust others because of the nature of the app/website. Once they gain the victims trust, they ask for money, and disappear with the same.
Fake crypto investment schemes
scam mentioned above, many Indians were cheated off crores of rupees when they were duped into investing into a fake cryptocurrency called Morris Coin. The investors were told that the coin was made on blockchain technologies and would trade for large sums, which would in turn increase their returns. However, the Enforcement Directorate found that the coin didn’t exist in the first place and didn’t trade on any exchanges either.
Morris Coin is one amongst many such incidents that have happened around cryptocurrencies. Fake investment schemes are one to watch. Investment schemes can also include ICO frauds, where you may be duped into investing in the initial coin offering (ICO) of a company that doesn’t exist, or has no intention to actually make a product.
DeFi rug pulls
In November last year, the price of a cryptocurrency themed around Netflix’s popular show, Squid Game, rose to $2861 before dropping to zero. The incident was an example of crypto rug pulls, which is a phenomenon where the creators of a project use social media, messaging platforms etc. to drive up the price of a coin or an NFT, and once users put their money into the project, they simply disappear.
Rug pulls are relatively new, and they usually affect the NFT side of the industry more than crypto. However, Chainalysis’ Crypto Crimes report from December noted that scammers had pulled in revenue worth $8 billion through rug pulls in 2021.
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