The Cryptocurrency Fraud Report 2023 published by the FBI earlier this month, outlined the losses experienced by Americans through cryptocurrency scams last year. The report, in conjunction with the Internet Crime Complaint Center (IC3), found that Americans lost more than $5.6 billion to scams from the cryptocurrency sector.
But what is it that makes crypto so attractive to scammers and are digital asset scams as rampant as they’re made out to be?
Scams Not Unique to Crypto
Sure, cryptocurrency scams certainly happen, scamming in general has become extremely commonplace. It seems almost certain that you, the reader, have received a text saying there was something wrong with a delivery, or bank account, or whatever else the scam may be, with a link to fix it. Or, you’ve received a call from a random number that needs your help for a similar issue. The overall scope of scams from crypto only comprised 10% of the complaints received by the IC3, which underscores just how many scams there are out there.
Though the overall scope of scams from crypto only made up 10% of the complaints received, the dollar value of the scams still made up about half the overall losses by Americans to scams.
The idea that crypto scams aren’t the same old traditional scams in new clothing is what is misleading when many think about avoiding crypto scams. Ponzi schemes and phishing scams are really the two most common crypto scams just as they are the most common scams outside crypto as well, as they’re the easiest to pull off consistently.
It’s perhaps worth noting that of all the scams reported, the age group of 60+ had a dollar amount lost that was greater than all age groups from under 20 up to age 49, combined. Age 50-59 was also only about 46% of the total that 60+ had. It’s pretty clear that a lack of technological knowhow plays a large part in crypto scams, but as with regular scams, it’s still older generations that are the main victims.
What Makes Crypto Good for Scammers?
There are three main things that make the cryptocurrency sector good for scammers. The first is that crypto is decentralized and doesn’t require a central authority to complete transactions. This means that criminals can receive and move funds a little easier than if they were using banks or centralized crypto services like crypto exchanges, as there’s no one monitoring them. Scammers can’t really use something like Coinbase to scam people, but they could use a decentralized exchange like Uniswap.
The second thing that makes crypto good for scammers is that, for the most part, cryptocurrency transactions are irreversible. This means that once you send the funds, it’s almost impossible to get them back without the authorities doing something to get them back to you. You can pretty instantaneously lose a lot of money.
Finally, even though crypto is fairly easy to track due to the public nature of the blockchain ledger, once transactions go into countries with lax or non-existent anti-money laundering laws, it can be hard for authorities to keep up their pursuit. This will only chance when there is more regulation in place globally.
Tips to Avoid Crypto Scams
Though the FBI and IC3 provided some tips to avoid crypto scams, the reality is that none of their tips discuss obvious things such as crypto wallet security, recovery phrase security, or private key/address security.
Rather, the security tips they provide are the same general tips you’d apply to not getting scammed through almost any other common manner, such as making sure website domains are correct or that the person contacting you is legitimately who they say.
As mentioned earlier, the difference with crypto is that the transactions are often irreversible or difficult to get back once they cross borders into places with lax anti-money laundering laws.
With that in mind, the two below tips are the best tips to avoid crypto scams:
Keep Wallet Information Private
All of your wallet information, such as your public address, balances, private keys, recovery phrase, and wallet password, should be kept private. Yes, you need to give out your public address to receive funds, but unless you’re receiving funds you shouldn’t publicly give out the information, as it is useful for scammers (they can tell you that specific address has an issue for example). Similarly, scammers could figure out which wallet is yours by knowing the balance.
If you want to post a public address for donations or something, create one that isn’t also the one you use for personal transactions.
The other information mentioned should never be given to anyone but maybe a loved one in case of your death.
No One Needs Your Wallet Info
Though we’re possibly beating a dead horse with this one, it’s worth mentioning again:
No one needs your wallet info. I repeat: No one needs your wallet info.
Whether that’s your private keys, recovery phrase, or password, there is no legitimate authority within the entire cryptocurrency sector that would ever need any of those three pieces of information unless they’re trying to scam you and take your funds. Your balance is a close fourth here.
Your public address in fact can be needed by others, but only provide that when you’re withdrawing or receiving from someone you trust.
Closing Thoughts
Though crypto scams are still fairly rampant in the sector, so are regular scams outside of it. The difference is that crypto is much harder to get back if you fall victim to a scam, but due diligence and knowledge of how crypto works remains one of the best ways to stay safe. As crypto goes up in value over time, it will be increasingly important to keep your safe.
