Abstract

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 will briefly introduce each scam so that you can learn and master effective measures to deal with common Bitcoin scams and properly safeguard your digital currency assets.

Introduction

Whenever a new technology comes out, criminals will catch wind of it and wait for an opportunity. Scam. Unfortunately, as a borderless digital currency, Bitcoin creates perfect opportunities for bad actors to devise digital currency scams.

The decentralized nature of Bitcoin allows users to have complete control over their investments. However, the drawback of this trait is the difficulty in developing an appropriate regulatory and enforcement framework for it. Criminals design traps to induce users to make mistakes when using Bitcoin, and ultimately successfully steal Bitcoin, leaving victims with almost no way to recover their losses.

That’s why it’s crucial to understand how criminals work and recognize potential red flags. There are many types of Bitcoin scams to be wary of, and some of them appear more frequently. Therefore, we will discuss 8 common Bitcoin scams and related prevention strategies.

Common Bitcoin Scams and Prevention Strategies

Extortion

Extortion It is a common method used by criminals to use sensitive information in their hands as a bargaining chip to threaten others and illegally ask for money. They usually demand compensation to be paid in digital currencies, with Bitcoin being the most commonly chosen currency.

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

The best strategy for protecting against Bitcoin extortion is to choose your login credentials carefully and pay close attention to the websites you visit and where you save your personal information. Using two-factor authentication is also a smart precaution. Even if criminals use false information to extort money, you will be able to know immediately and take countermeasures.

Fake trading platform

As the name suggests, fake trading platforms are counterfeits of legitimate digital currency trading platforms, tricking users into trading here. This type of scam usually comes in the form of a mobile app, but it may also be a desktop application or a fake website. Compared with the "real thing", some fake trading platforms can almost be confused with the real ones. We must carefully distinguish the authenticity. These fake trading platforms look compliant and legal, but their purpose is to steal digital currencies.

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

In order to prevent this kind of fraud, we should bookmark the real URL of the legitimate trading platform and check it carefully before each login. We can also use Binance Verification to check the legitimacy of URLs, Telegram groups, and Twitter accounts.

As for mobile apps, we need to review developer information, downloads and user reviews. For more details, read Common Scams on Mobile Devices.

Gift Scam

A common method used in gift scams to steal digital currency is to exchange free gifts for small amounts of money. Criminals generally require victims to transfer money to a specific Bitcoin address first, promising more Bitcoins in return (for example, transferring 0.1 Bitcoins to get 0.5 Bitcoins). However, victims will not receive any freebies after transferring funds and cannot recover the funds.

There are many types of giveaway scams. In addition to Bitcoin, criminals will also defraud 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 the hardest hit areas for gifting scams. Criminals often look for opportunities in popular tweets, important news and announcements on social platforms (such as protocol upgrade announcements or ICO previews).

The best way to prevent gift scams is to not be greedy for small profits and refuse all gift activities that require pre-transfer. Legitimate giveaways never require funds from participants.

Social media phishing

Social media phishing is a common Bitcoin scam. Like giveaway scams, these scams are common on social media. Criminals often create accounts on social media to impersonate authoritative experts in the field of digital currency (also known as "impersonation"). Thereafter, they send fake giveaways via tweets or chat messages.

The best strategy to prevent social media phishing is to double check to verify that the person is actually the person you are speaking to. Some social media platforms add exclusive logos for authenticated users. For example, Twitter and Facebook use blue checkmarks.

“Clipboard Hijacker”Malware

“Clipboard Hijacker”Malware steals money in a very subtle way . They hijack your clipboard data and if you're not careful, funds will be transferred directly to the criminal's account.

Suppose you want to transfer Bitcoin to your friend Bob. The normal way it works is that Bob provides his Bitcoin address and you copy and paste it into your own Bitcoin wallet. However, if your device has been compromised by a "clipboard hijacker" malware, after pasting the address Within a split second, the software will automatically replace the address with the criminal’s Bitcoin address. As long as the transaction is sent and confirmed, all of your Bitcoins will fall into the wrong hands and Bob will not receive any money.

To prevent this type of scam, you must always pay attention to the security of your computer and be alert to all kinds of suspicious messages or emails, which may contain infected attachments or dangerous links. Pay attention to the websites you browse and the software you install on your device. You may also consider installing anti-virus software and regularly scanning your device to screen for potential risks. In addition, it is also very important to update the device's operating system (OS) in a timely manner.

Phishing emails

There are many forms of phishing, the most common way is to use phishing emails. Criminals lure recipients in emails to download virus-infected files or click on links to visit malicious websites that appear to be legitimate. This type of email imitates the products or services that users commonly use and sends them information, which is extremely dangerous.

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

The first step in preventing phishing emails is to check whether the email was sent from the original source. If you have any questions, you can contact the relevant company directly to confirm whether an email has been sent. Secondly, you can also hover the mouse over the link (without clicking) to check whether there are spelling errors, unusual characters, or other anomalies in the URL.

Don’t click on a link even if you don’t see any danger signs. To log in to your account, it is recommended that you enter the URL manually or open the webpage from your favorites.

Ponzi and pyramid schemes

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

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

The best way to protect against both scams is to carefully research the digital currency you are purchasing, whether altcoins or Bitcoin. If the value of your digital currency or Bitcoin funds is entirely derived from new investors or members, it is most 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 Bitcoin) is paid. This type of software is extremely destructive and could have serious consequences if a hospital, airport or government agency were to be infected.

Ransomware usually prevents users from accessing important files or databases, threatening them to pay a ransom before a specified deadline, otherwise the data will be completely deleted. Unfortunately, even if a ransom is paid, there is no guarantee that the bad actors will keep their word.

We can take the following measures to prevent ransomware attacks:

• Install anti-virus software and keep your operating system and applications updated.
• Avoid clicking on ads and suspicious links.
• Handle email attachments with caution, paying special attention to files with the suffixes ".exe", ".vbs" and ".scr".
• Back up your files regularly so your device can be recovered if it becomes infected.
• Visit NoMoreRansom.org for ransomware prevention advice and free system recovery tools.

Summary

There are many types of Bitcoin scams that you need to be wary of. However, the first step in preventing being scammed is understanding how these scams work. Only by learning how to guard against these most common Bitcoin scams can you protect your digital currency assets.

Do you have any other questions about common Bitcoin scams and prevention strategies? Please visit our Q&A platform Ask Academy, where members of the Binance community will patiently answer your questions.