Cryptocurrency scams have been on the rise in recent years, with cyber-criminals using various tactics to take advantage of crypto users. While some of these techniques are far from new, malicious parties are getting creative when it comes to crypto crimes.
An Attractive Target
While many crypto enthusiasts believe that centralized exchanges (CEXs) are safer, history has often shown them to be vulnerable to attacks. Because these exchanges centralize the storage of users’ assets, they can be attractive targets for cyber-criminals. If an exchange’s security measures are inadequate or successfully compromised, user assets may be stolen or lost.
Another risk of centralized exchanges is the potential for fraud or mismanagement by their operators. Since CEXs may have a single point of control, they may be more susceptible to insider fraud or other forms of misconduct, which can lead to the loss of funds or other negative consequences for users.
The Risks of Self-Custody
Recently, with the collapse of major centralized cryptocurrency platforms like FTX and Celsius, more users are choosing to take self-custody of their digital assets. The risky financial practices and alleged fraud committed at some of these platforms have caused many people to lose faith in them as safe places to store their cryptocurrency.
Self-custody refers to holding and managing one’s own cryptocurrency instead of entrusting it to a third party, such as an exchange. This approach offers users greater control over their assets and can potentially provide higher levels of security. However, it also comes with its own risks, particularly in the form of scams.
Types of Fraudulent Activity
One scam aiming to take advantage of crypto users is called “pig butchering.” It occurs when the scammer stays in constant contact to build a relationship with the victim and ‘fatten them up’ with affection over time to have them invest in fake projects.
The scammer tries to drain as much money out of the victim as possible, often using fake investment sites showing large fake profits and using social engineering tactics, such as intimidation, to extract more money from the victim.
Another common scam in the crypto industry is phishing. Cyber-criminals aim to steal self-held assets by taking control of high-profile accounts. Between May and August 2022, social media account takeovers involving Twitter, Discord, and Telegram wreaked havoc. Scammers post malicious NFT phishing links during those attacks, compromising high-profile social media accounts.
The Solutions
Crypto investors can protect themselves by staying vigilant. When buying or selling digital assets, conduct this activity on a well-known exchange. These spaces are mostly secure, but they are not immune to complications, as demonstrated by the FTX collapse. Yet well-known platforms such as Binance and Coinbase are still seeing massive amounts of traffic.
The most fundamental security measures apply to protecting yourself from crypto scams. These actions include updating passwords, abstaining from financial activity on shared systems, and never using an unsecured or public network for crypto trading. Antivirus software is also a must to protect your devices from being compromised.
These solutions might sound elementary, but simple measures can prevent significant problems.
