Top 5 Cryptocurrency Scams Targeting Australians – Forbes Advisor Australia

Here are five common crypto scams to be aware of:

Crypto Investment Schemes:

The basic idea behind these scams is to convince investors to invest their money in the scheme, which promises high returns in a short period of time. They use various tactics to lure people into their schemes, such as social media marketing, celebrity endorsements and promises of exclusive investment opportunities.

Once the investors send their money to the scammer, the funds are usually not invested as promised. Instead, the scammers often use the money to pay off earlier investors or to keep it for themselves. This is known as a Ponzi scheme, where new investors are used to paying off earlier investors, creating a cycle that collapses when new investors are no longer available to keep the scheme going.

Phishing Scams:

Crypto-phishing schemes aim to steal investors’ cryptocurrency by tricking them into giving away their login credentials or private keys for their digital wallets. These scams typically use email, social media, or other online communication channels to impersonate a legitimate company or service provider, such as a cryptocurrency exchange or wallet provider.

Typically, a phishing scam consists of similar steps. There is initial communication, which appears to be from a legitimate cryptocurrency exchange or wallet provider. The message will contain a link that takes the recipient to a fake website that looks identical to the real one. The message may ask the recipient to verify their account details or take other steps, such as resetting their password or downloading a software update. Once entered, the scammers will use this sensitive information to steal their funds.

Fake ICOs:

Initial coin offerings (ICOs) are a common way for new cryptocurrencies to raise funds. Fake ICOs can take many forms, but they usually involve creating a website and marketing materials that look professional and legitimate, with promises of high returns, low risks, and innovative technology. They may use fake endorsements, fake testimonials and other tactics to build credibility and convince people to invest.

Once investors send money to the fake ICO, the organizers can use various techniques to steal the funds. They can simply take the money and disappear, never delivering the promised cryptocurrency or token. Alternatively, they can use the funds to create a fake cryptocurrency or token that has no real value and cannot be sold or traded on an exchange.

“Before investing in any crypto or blockchain project, users should always do their own research. By remaining skeptical, you can identify a scam for what it is before you potentially lose your funds or give away personal information,” says Cheung.

“Things to look at include who is behind the project such as investors and the leadership team; are they already an established company with a viable product or are they still conceptual; what is the vision and road map for the future; and what the market tells you about supply, competition, trading volume and liquidity.”

Malicious Smart Contracts:

If you hold crypto in a wallet and deal with decentralized finance platforms or NFTs, it’s important to be aware of malicious smart contracts. Malicious smart contracts are programs designed to trick people into giving up their digital assets or personal information. These contracts are often created to look like legitimate contracts, but instead of fulfilling their intended function, they have hidden code intended to mine user wallets and steal funds.

One common way malicious smart contracts can trick people is through “phishing attacks”. In a phishing attack, the malicious contract will mimic a legitimate contract, such as a token sale or a decentralized exchange. Users will be asked to link their wallet and often have to complete an “authorization” type of transaction. While this is also the case with legitimate smart contracts, malicious contracts will use an ‘approve-all’ type function, essentially allowing all assets held in the wallet to be taken at once.

Honeypot Tokens:

Honeypot tokens are malicious tokens that are listed on decentralized exchanges with another legitimate token, such as ETH, for liquidity. The creators of the token will often create fake trading volumes and use different tactics to make it look like the token is in high demand. They can use bots to trade the token with themselves or offer incentives for people to buy and hold the token. This can create the illusion of demand and price appreciation, leading investors to believe they are making a smart investment.

However, after purchasing the token by trading a legitimate cryptocurrency, they will find that the token cannot be sold. In other words, the unfortunate trader bought something worthless that could never be sold. This leaves the investors with worthless tokens, and the scammers walk away with the legitimate tokens traded in return. You can check if a token is a honeypot by using a checker service like DetectHoneyPot.