So, your interest is piqued… you keep hearing about how lucrative the crypto space can be, and you want in. But you also don’t live under a rock, so you have an idea of how dangerous it can be to take your federally insured, guaranteed fiat dollars and invest them into crypto. And you’d be right. Your hesitancy is appropriately placed and, not only that, it’s also incredibly valuable to you… because you’ll need that caution if you’re going to staying safe.
Let’s go ahead and look at some statistics, so we know exactly what we’re up against. In the crypto space, over $1 billion has been lost to crypto scams just since last year, with the average loss coming in at around $2,600. Which cryptos were the primary culprits? Our good buddies Bitcoin, Tether, and Ether… where did the scammers find their victims most of the time? Again, some familiar names… Instagram, Facebook, WhatsApp, and Telegram.
Why is it so easy for scammers to pick off targets in the crypto space? Well, there are plenty of reasons, but mostly they are taking advantage of people who are still learning about the space, which happens to be most of us. Now… do they sometimes they take advantage of seasoned traders and experts in the space? Yes, absolutely, but there’s no reason to harpoon a whale all the time when scavenging on the smaller fish most of the time will suffice.
So, we wanted to do a “crypto scams 101”… but with a twist. Today, we’ll discuss fundamentals directly from the knowledge base of a certified security user within the crypto space. The difference between this information and what you’ll read in other publications is we’re not going to talk about what scams to look out for specifically, but we’ll discuss the two key rules you need to know to stay safe in the crypto space, along with some of the key reasons crypto can be unsafe.
This way, we help you help yourself, and you feel confident making choices, and that’s what we want. So, what’s the first thing to know? Well, a few of the key things that make the space potentially dangerous. Firstly, crypto transactions do not have the same checks, balances, and oversights that traditional money does. You must remember that, when you initiate or receive a transaction, it’s on you for the most part… wild and free, twisting in the wind.
Secondly, there are no refunds. Once you initiate and complete a transaction, there is no going back. If the other party is unwilling to send funds back that were incorrectly initiated, that’s tough toast… what’s done is done. Finally (and this one is more of a rule about a mode of operating within the space), trust no one. And we do mean no one.
It’s not personal, but scammers will use any means to get your crypto, because once they have it, they don’t have to let it go. And, since there are no refunds, funds reversal mechanisms, or uniform oversights in the space, they will attempt to scare or pressure you into sharing information with them. There’s even a scam in the crypto space called “pig butchering” where people on social media will befriend you, invest time and effort into a relationship, then rob you blind. So… trust no one.
Two Keys To Safety
In terms of specific scams… it’s good to know a bit about them, but there’s no reason to learn everything there is to know. Far from it… we’re here to tell you that there are two golden keys of knowledge that you need in terms of working in the crypto space to stay safe. Golden key one, nobody gets your seed phrase (the special phrase used to back up your crypto wallet) or login credentials. Secondly, if your money isn’t on “cold” storage, it isn’t your money. Cold storage is like a USB drive designed for crytpo instead of keeping is on an exchange, like Coinbase, where it can be locked up and kept from you.
Just remember, any crypto that isn’t on your cold wallet has a high likelihood of being stolen… and isn’t truly in your custodial care. Now, if some of these phrases aren’t that familiar to you, that’s perfectly fine. Just take note of the words and look out for them as you learn more during your crypto journey. The more you arm yourself with information, the more of a moving target you’ll be for scammers and the less interesting they will find you.
Why it’s important to know these two rules? Because we aren’t looking for a specific scam, instead, we’re watching out for people who want information they don’t need to know. We want to look out for people who make us feel unsafe, uncomfortable, or fearful if we ask questions about why they need our sensitive, private information. This is how you stay safe, and how you protect yourself… you learn how to survey the landscape, identify threats based on warning signs, then you move in accordance with the information you have.
Put It In Practice
We’ll use the pig butchering scam to illustrate our point on needing to know these two keys in order to stay safe. This particular scam is what’s referred in the security space as a social engineering scam, which means that perpetrators are using the trust you have in your friends to exploit you. Sad, but true. Unfortunately, the downside of influencer culture is that humans are not very good at knowing when someone is being genuine when we trust them, so we are susceptible to being tricked.
So, it works like this: you are befriended on a social media or trading platform… or, when the scammer wants to be really nasty, they impersonate a friend, family, or someone you really admire. Then, they build trust by engaging in long-term communication, establishing friendship or a romantic partnership, eventually propose that the victim invests in cryptocurrency on phony platforms, victims go to these platforms, invest, see huge returns, and think they are making a killing.
Now, while this may sound like the end of the story, it’s not. This scam is mean. So, once they start seeing big returns, the scammer pressures the victim to invest larger and larger amounts of money, without ever withdrawing. Eventually, that victim will want their money, attempt to withdraw to fiat, be told they must pay all kinds of different fees, and then the platform is suddenly gone. See, trust no one.
This also goes back to cold storage. If your crypto isn’t on a cold wallet, you don’t own it. The victim in this circumstance could have maybe been saved by some of this information. In traditional banking, it’s harder to be an influencer… but with crypto, so many fresh faces with so little knowledge and so very little oversight. It’s like fishing from a barrel to these scammers. But don’t feel like prey, because now, you’re armed with knowledge… which is what we always aim to deliver, so come back next week!