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3 Known Crypto Scams

Crypto Security
July 5, 2021

Three types of cryptocurrency scams and how to avoid them:

It's no secret that cryptocurrencies are a scammers paradise and If you’ve been active in the crypto community this year, you would have soon realised scams are around every corner. 


Whether it's a multimillion dollar company CEO begging for donations, rug pulls from the most sincere projects or unrequested customer support with slightly off grammar, it may seem that scammers will do just about anything to get their sticky hands into your pockets. 


The number one best way to protect yourself from scammers is to live out the rest of your days as a tibetan monk and relinquish yourself of all electronics. For some of you this may be a little on the extreme side. In that case the next best thing you can do is to simply educate yourself.

So here are three types of cryptocurrency scams to look out for and how to avoid them...

Image of Scam Alert written on the black background

Rug Pulls


"A rug pull is a malicious manoeuvre in the cryptocurrency industry where crypto developers abandon a project and run away with investors’ funds. Once a significant amount of unsuspecting investors swap for the listed token, the creators then withdraw everything from the liquidity pool, driving the coins price to zero." - CoinMarketCap Glossary

Most rug pulls happen with relatively new projects and low credible teams. The SafeCookie twitter amassed 20k+ Followers, with a Telegram group also 10k strong. Yet still, rogue developers know no sense of morality and "pulled the rug" on the entire community.

Image of "SafeCookie" rugged by rogue Devs.
"SafeCookie" was recently rugged by rogue Devs.


However it is not unheard of for reputable entities and individuals to just as easily "rug" a community.

Take for instance a twitter account @WarOnRugs - "hellbent on exposing rug pull projects". He created his own "anti-rug" coin, but has since disappeared with over $400,000 worth of investors money. Even those posed as good samaritans can "pull the rug".


So before you FOMO into a project make sure to identify if a rug pull is possible. Some good indicators that a project may rug pull are:

  • Unlocked Liquidity Pool
  • Fully Anonymous Team
  • No Audit or Low Audit Score
  • Low Quality Social Media presence
  • Poor Website
  • Large % of overall supply held by top wallets


Please keep in mind that this is not financial advice and no matter how good a project looks it's critical to always do your own research.

Dusting

Although dusting sounds fairly harmless the reality of it is that it's a common tactic scammers are using to uncover the identity of owners behind their wallets. 


Think of dust as pennies or nickels in your wallet, that you know is there but ultimately can’t buy or do anything with. This is the same with your crypto wallet. Dust is collected in your wallet that is too small to sell.


Scammers send out dust to large amounts of addresses, because of the size of dust most users don't even realise they have received it. Scammers then cross analyse transactions to identify which addresses belong to which wallets. This is possible due to the pseudo-anonymous nature of cryptocurrency, allowing for just about anyone to view all transactions and wallets on the block chain.


Once the identity of the wallet owner has been identified the next step is to use phishing attacks or cyber extortion tactics in order to access their wallet.


Now before you decide to relocate all of your crypto into another wallet there are several ways to easily deal with dusting attacks.

  • Do not attempt to move the dust, as this will give the information required by bad actors to analyse transaction addresses.
  • Never give out private information such as passwords or seed phrases.
  • Most wallets support features to hide dust within your wallet.

Impersonation

Impersonation tactics have been around long before the blockchain was invented.


Some more notable ones being, government text messages, fake banks claiming debt and my personal favourite - The Nigerian prince. Throughout history we’ve seen the same scams over and over and cryptocurrencies are no different.


If you’ve joined a telegram group for a crypto project or other social media community, there's a good chance that you would have seen moderators and perhaps even the odd CEO in the group chat. 


Impersonation of these mods and other team members are common. Scammers will use similar handles, the same name and the same profile picture of their targeted team member.


If you’ve been directly messaged by a moderator or CEO there’s a few ways to tell if they are legitimate. 


Firstly check their user handle. Although it may be similar, user handles for telegram and many other social media platforms are unique. 


Of course - if they are asking for unusual requests like borrowing money for their project - they're probably not who they say they are.

Finally, never give out your seed phrase or password no matter the situation. This is ultimately what Impersonators are trying to get and is the barrier protecting your funds from being stolen.


Although rather obvious, there are plenty of inexperienced and perhaps naive crypto speculators falling victim to these scams and tactics. So remember to protect your personal information and always make sure to do your own research, or consult financial advice before making trading decisions.


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