Author: Joshua Ho
It’s never easy to navigate the world of crypto, whether you are new to the space (a “normie”) or a seasoned investor. We observed an explosion in crypto scams as the market peaked at the end of 2021. On the surface the occurrence seemingly reduced in 2022. However, fraud-related enquiries to our team has increased over recent months.
New York based Chainanalysis reported that cryptocurrency-based crime hit an all-time high in 2021, rising 79 percent to $USD 14 billion.
It was found that $USD 7.8 billion worth of cryptocurrency was stolen globally in 2021. Of the $USD 7.8 billion, $USD 3 billion was stolen in 2021 in a type of scam known as “rug pull”.
As the term suggests, “rug pull” comes from an expression “pulling the rug out”. Typically, a rug pull scam involves luring unsuspecting investors through various means into a project, pumping the price of the coins and digital assets up before taking off with the funds.
In Australia, approximately $AUD 99 million was reported lost in cryptocurrency investment scams in Australia in 2021.
How do you navigate through this sophisticated world of crypto scams? Below is a list of the most factors and tactics of scams that we have found Australians are being lured into:
FOMO is a hell of a drug
Don’t be rushed into making a decision. It is a red flag if someone pressures you to commit to an investment decision.
Take your time to do your research.
Wen moon?
Be wary of advertisements on social media or influencers promising 100x return or flashy Lamborghinis on your initial ‘investment’.
To the moon, as they say.
Nothing is guaranteed and there is a very high probability that you are their exit liquidity (the greater fool). If something is too good to be true – it probably is.
Fraudulent exchanges and trading apps
A fraudulent exchange or trading app may have a sleek user interface, 24-hour customer support and proper login features. It may not be obvious at first glance.
Unfortunately, investors are lured in by beautifully presented websites, seemingly mainstream social media marketing and polished communications with advisers, all of which provide investors with illusory comfort.
This comfort may be reinforced by the scammers with professionally presented reporting and advisory services. It is not until the unsuspecting investor tries to withdraw some of their apparently growing investment that they become concerned as various hurdles are faced.
If you have deposited crypto funds into a suspicious wallet or exchange and are being asked to pay more to release your holdings, it is a huge red flag.
It is very common that scammers request for more funds to be deposited before releasing funds that you think you are owed.
Digital Assets
The growth in digital assets (and NFTs) opens up opportunities for scammers, rug pullers and fraudsters to gain access to your crypto holdings.
Typical scamming tactics may include:
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stealth launches
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suspicious website links that lead to users inadvertently providing rights or authorising scammers to withdraw the users’ crypto assets
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suspicious or fake NFT airdrops that may drain a user’s wallet upon interaction
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fake profiles and unsolicited direct messages (DMs) on social media platforms
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spoofing file extensions to disguise malicious files (i.e. fake PDFs).
While the methods used by scammers could be endless, one must take extreme caution in any interaction using a hot wallet or even a cold wallet. Don’t carelessly open or download random files from untrusted sources. Always check the file types.
And no, using a cold wallet does not guarantee that your assets are safe from scams.
Phishing scams
Phishing scams are common attacks used by scammers on crypto users. Fraudsters target information containing crypto wallet private keys and seed phrases to gain control of your crypto assets.
A private key is a secret number used to unlock and spend cryptocurrencies . Seed phrases are unique sequence of words linked to your private keys.
Typical phishing methods include website links to trick users into ‘authorising’ a withdrawal of their crypto assets out of their wallets.
Social engineering scams
Social engineering scams involve scammers using psychological manipulation and deception to retrieve sensitive information from users, such as your seed phrases or private keys.
These scammers may pose as ‘help desk’, ‘tech support’, crypto exchanges or even government agencies to gain trust from users so that they can gain access to your private keys information or passwords.
They attack when you are in the most vulnerable state. It is a sad reality but 100% true.
Seed Phrases & Private Keys
Finally (and you’d probably know this) never ever reveal or give out your private keys and seed phrases.
Scammers and fraudsters will have full access to your crypto assets if they have access to your private keys or seed phrases. Avoid sharing your computer screen that contains seed phrases and private keys (on display) under any circumstances.
We’re ready to help. If have any questions about the digital economy please contact our team on +61 3 9820 6400.
Other Resources:
https://www.accc.gov.au/media-release/scammers-targeting-victims-again-through-money-recovery-scams
https://www.scamwatch.gov.au/get-help/protect-yourself-from-scams
https://blockchainaustralia.org/scamalerts/
Enforcement Authorities:
https://www.afp.gov.au/what-we-do/crime-types/fraud/serious-financial-crime-taskforce
https://www.police.vic.gov.au/fraud-and-scams
https://www.cyber.gov.au/acsc/report
Australian Cyber | Security Hotline | 1300 CYBER1 (1300 292 371)
Disclaimer: This is not advice. You should not act solely on the basis of the material contained in this post. These are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of these areas.
