Top 5 Cryptocurrency Scams Targeting Australians – Forbes Advisor Australia

Here are five common crypto scams you should be aware of:

Crypto investment schemes:

The basic idea behind these scams is to convince investors to invest their money in the scheme, promising 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 have sent their money to the scammer, the funds are usually not invested as promised. Instead, the scammers often use the money to pay off previous investors or keep it for themselves. This is known as a Ponzi scheme, where new investors are used to paying off previous 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 to 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. It is an 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 confirm their account details or perform other actions, such as resetting their password or downloading a software update. Once entered, the scammers will use this sensitive information to steal your money.

Fake ICOs:

Initial coin offerings (ICOs) are a common way for new cryptocurrencies to raise money. 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 risk, and innovative technology. They may use fake endorsements, fake testimonials and other tactics to build credibility and convince people to invest.

When 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, without delivering the promised cryptocurrency or token. Alternatively, they may 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 crypto or blockchain projects, users should always do their own research. By remaining skeptical, you can identify a scam for what it is before potentially losing your money or giving away personal information,” says Cheung.

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

Malicious Smart Contracts:

If you hold crypto in a wallet and operate 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 digital assets or personal information. These contracts are often made to look legitimate, but instead of fulfilling their intended function, they have hidden code intended to exploit user wallets and steal funds.

A 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 prompted to connect to their wallet and will often need to complete an “authorize” type of transaction. While this is also the case with legitimate smart contracts, malicious contracts will use an “approve all” type function so that all assets in the wallet can be taken at once.

Honeypot Tokens:

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

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