Cryptocurrencies have become increasingly popular over the past decade, with Bitcoin and other digital assets gaining acceptance as a form of payment for goods and services. As more people have entered the cryptocurrency market, the risk of payment fraud has also increased.
Fraudsters are constantly looking for ways to exploit the decentralised nature of cryptocurrencies to scam unsuspecting victims out of their hard-earned money.
Types of payment fraud in cryptocurrency
These are just some of the common types of payment fraud in cryptocurrency markets and how to spot them.
Like any other form of theft, the most basic type of cryptocurrency fraud involves criminals hacking crypto wallets and stealing their currency, or by setting up fraudulent crypto exchanges to steal funds.
Phishing scams are one of the most common types of payment fraud in cryptocurrency. Fraudsters create fake websites that look like legitimate cryptocurrency exchanges, and then ask users to provide their login credentials or personal information.
Once the fraudsters have obtained this information, they can use it to access the users’ cryptocurrency accounts and steal their funds.
To avoid falling victim to phishing scams, it is important to be cautious when clicking on links or downloading files from unknown sources. If you receive an email or message that asks for your login details or personal information, do not respond and report it as a scam.
Ponzi schemes are another common type of payment fraud in cryptocurrency. Fraudsters promise high returns on investments in digital assets, but they don’t actually invest the money. Instead, they use new investors’ funds to pay off earlier investors and the cycle continues. Eventually, the scheme collapses, and the fraudsters flee into the night with the money.
Malware attacks are a type of payment fraud in which fraudsters use malicious software to steal cryptocurrency from users’ wallets. The malware can be installed on a user’s computer or mobile device through phishing emails, fake software updates, or other means.
To protect yourself from malware attacks, be careful when downloading software or clicking on links. Install anti-virus software on your devices and keep it updated. Use two-factor authentication to secure your cryptocurrency wallets, and never share your private keys with anyone.
Fake ICOs or ‘rug pull’ schemes
An Initial Coin Offering (ICO) is a popular way to raise funds for cryptocurrency startups. However, some fraudsters use fake ICOs to scam investors out of their money. They create fake websites to make their projects seem legitimate, but in reality, they have no intention of developing the project or delivering the promised product.
To spot a fake ICO, do your research carefully. Look for red flags such as unrealistic promises or vague details about the project. Check the team behind the project and ensure that they have a track record of delivering on their promises.
How to prevent cryptocurrency payment fraud
Payment fraud is a real risk in cryptocurrency, and it is important to be vigilant and protect yourself – and your money. Always be cautious when clicking on links or downloading files, and do your research before investing in any cryptocurrency.
Action Fraud recommends that the public follow the advice of the Take Five to Stop Fraud campaign to safeguard themselves from falling foul of payment fraud in cryptocurrency.
STOP Taking a moment to stop and think before parting with your money or information could keep you safe.
CHALLENGE Could it be fake? It’s ok to reject, refuse or ignore any requests. Only criminals will try to rush or panic you.
PROTECT Contact your bank immediately if you think you’ve fallen for a scam and report it to Action Fraud.