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Top 12 most common cryptocurrency scams

Started by Admin, Jul 05, 2024, 10:24 AM

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The rise of cryptocurrency investments also brings with it the risk of fraud and scams. Binance names the most common types of cryptocurrency scams and shares best practices to avoid falling for them. By Melisa Osores, Managing Editor for Latin America With the cryptocurrency ecosystem becoming more prevalent around the world, including in Mexico, cryptosecurity is becoming increasingly important, especially in traditional financial services offered through the internet and digital platforms.

According to a report by Chainalysis, an analytics firm that provides services to companies and authorities in more than 70 countries, the financial volume of illicit cryptocurrency activity represents only 0.24% of total transactions in the sector. "When it comes to assets, be it money or cryptocurrencies, the risk of falling victim to fraudsters is always present. That's why staying informed about the modus operandi of these criminals and reporting them to the authorities is the best way to fight these crimes," said Frida Vargas, general manager for Mexico at Binance, an infrastructure provider for blockchain and cryptocurrencies.

Mexico is one of the countries where cryptocurrency adoption is growing the most internationally. According to the latest Global Crypto Adoption Index study, Mexico ranks 28th out of 154 countries. A study by America's Market Intelligence found that 90% of Mexicans who buy cryptocurrency do so using an exchange such as Binance. That's why we strive to provide users with as much information as possible so they don't fall into the traps of scammers. Binance is actively fighting cryptocurrency crime by constantly improving processes and tools, as well as cooperating with authorities. For example, since November 2021, Binance has responded to more than 47,000 requests from law enforcement agencies around the world.

How do you recognize the most common types of fraud?

In addition to having the right processes and tools in place, crypto security training is also key to combating crypto attacks. That's why Binance's risk team is sharing 12 of the most common crypto fraud methods to help people recognize them and not fall for them:

  • Investment fraud: Investment fraud involves a scammer promising high returns if money is invested through a "highly recommended" website, app, or cryptocurrency exchange. The criminal may even claim to be an expert who will multiply your funds tenfold.
  • Job scam: The job offer may look real. The returns are much higher than the industry average. But scammers require applicants to post a deposit if they want the job.
  • Impersonation of a reputable person: Imposters try to gain your trust by impersonating an important person, such as a police officer, government official, or IRS official.
  • Impersonating the support staff of a stock exchange platform: Impersonating the support staff of a platform like Binance is unfortunately a popular attack vector among cryptocurrency scammers. They often try to manipulate users by exploiting the trust that the company has established over the years.

In the case of Binance, the company emphasizes that its employees will never ask users to provide sensitive information, login details, or two-factor authentication (2FA) codes. "If you receive a message from someone claiming to work for Binance and asking for confidential information, block the contact and contact the Binance Help Center immediately," the company said in a statement.

Types of scams

  • Romance scams: Romance scams involve impersonating a lover to start an online relationship in order to steal your money. These types of scams can sometimes take years to develop as the scammer starts out begging for small loans and then moves on to savings.
  • Fake Gift: Scammers invite you to a Telegram group or Discord server to participate in a fake cryptocurrency sweepstakes. The scammer usually demands a deposit fee or tries to trick the user into revealing sensitive information in exchange for prizes and "winnings."
  • Ponzi Scheme: Ponzi schemes are a type of scam in which early investors are paid with funds and commissions collected from new investors. There is no actual investment involved. Essentially, the scammer takes money from one investor to pay another. People involved in a Ponzi scheme are often encouraged to invite their friends and family to join.
  • Fake shopping sites: Fake shopping sites are designed to mimic a legitimate e-commerce site, even allowing users to register as sellers or customers. The fake site may offer to buy their products at prices well below the market average. However, the fake site will not deliver the product or will send useless items instead of what was promised.
  • Money Transfer Scams: Money transfer scams begin with the scammer sending money to the victim, and can occur in two different scenarios. First as an innocent peer-to-peer transaction: the fraudster sends money to the victim, who then transfers an equivalent amount of cryptocurrency back. This would be considered a normal person-to-person (P2P) transaction if it ended here, but after receiving your cryptocurrency, the scammer will invoice you back or cancel the wire transfer.

Another scenario

In another scenario, the scammer uses fake receipts, claiming to have sent money to your bank account. The scammer provides documentation of the transaction and demands a refund in cryptocurrency. Victims believe the receipt is real and send the cryptocurrency to the scammer's address.

  • Acquaintance scams: Not all scammers are unknown. The scammer may be a relative, close friend, or an acquaintance introduced by a friend. The scam may take place in familiar circumstances.
  • Rug pulling: In the cryptocurrency industry, "rug pulling" - is when a crypto project team collects money from investors and then suddenly abandons the project and destroys all of its liquidity. The scam typically occurs when investor enthusiasm is at its peak.
  • Other: This category is for unique cases where fraud occurs, but the circumstances do not fit any of our existing categories listed above.