Crypto Dictionary

Phishing Scams in Crypto: What You Need to Know to Not Get Scammed

Is this email legit? Dive into our comprehensive description of crypto phishing scams, and learn how to spot and prevent these cyber threats to your crypto assets.

In the world of crypto, it's not just about making the right investments - it's also about keeping them safe. Digital bandits are lurking everywhere, ready to snatch your hard-earned coins through crafty scams. One of the most common? Phishing. Sounds fishy, right? Well, it certainly is. 

This guide will dive deep into the murky waters of crypto phishing scams, revealing how they work, how often they occur, and the many forms they can take. Most importantly, we'll teach you how to dodge these tricky tactics and keep your crypto secure. Ready to become scam-proof? Let's get started!

TL;DR:

  • Phishing in crypto is a type of attack where scammers try to lure sensitive data from the victim in order to drain their wallet.
  • It is usually done through a fake website or app that resembles an established service. Once the victim enters the data, they are instantly transmitted to the scammer.
  • Some commonly seen phishing schemes include Spear phishing, Whaling, Pharming, Evil Twin attacks, or Ice phishing.
  • In order to not get scammed, it is important to follow basic security measures, such as: hardware wallet, not clicking on unknown links, and not sharing your private keys.

What are Phishing Scams in Crypto

Phishing Scams are essentialy attempts on luring out personal and sensitive information from unsuspecting users. Scammers then use this sensitive information in all kinds of scenarios, such as stealing funds or hijacking social media accounts. This type of scam is particularly visible in the world of crypto, where scammers can remain anonymous and transactions can become pretty much untraceable.

There exist many different types of phishing scams, but they all share the same core principles - psychological manipulation, appeal to urgency, and short-term distraction. 

A common phishing scam follows this kind of scheme: Scammer sends out emails or messages with a link to some type of service. The victim then unknowingly clicks on the link, which takes them to a rigged website where they are asked to enter their credentials. Once they do so, the scammer steals and misuses their data - the possibilities are endless.

Why Scammers Love this Strategy

The magic of the phishing strategy lies in its variability - scammers nowadays keep evolving rapidly and inventing new tricks and plays for their victims. It can be a fake message from your exchange that there has been a security leak and you have to enter your login immediately. Or it can be a fake airdrop inviting you to enter your private keys.

This message can and most probably will look very realistic in order to fool you. It can look like an official Binance message with the same URL on the link. Although scammers have a sense of detail, they cannot get everything 1:1. Look very carefully for any suspicious text, graphics, or links.

How Does Phishing Work?

As described above, the key point of a phishing scam is to lure sensitive information from the victim in the easiest way possible. For these purposes, scammers usually establish a website or an app that looks almost identical to the service that the victim uses regularly. In crypto, for example, these websites can copycat major centralized exchanges, wallet providers, and custodian services.

This website is a clone set up by the scammers in order to deceive victims to enter their sensitive data, such as:

  • Private Keys - encryption key used to sign crypto transactions
  • Centralized exchange login - grants permission to handle funds stored on the exchange
  • Wallet recovery seed - a specific set of words used to recover hardware or software wallets

Once the data are entered, the fake website transmits them through malware directly into the scammer s device. Such data when misused may result in the complete loss of funds, which is basically non-recoverable.

Rule of thumb: No legitimate service or customer support will require you to directly send them your private keys or login details.

The Common Types of Phishing

As cryptocurrency security evolves, so do the scammers. On this list, you will find the most commonly used types of Phishing, but bear in mind that new schemes emerge every day. Here are some of the common scenarios: 

  1. Spear Phishing - This is a more targeted type of phishing where the attacker has done their homework about you. They may know your name, email address, or even the names of your friends or coworkers. The email or message you receive will look personalized and will likely try to trick you into revealing your personal information.
  2. Whaling - Also a type of highly-specified phishing. This strategy targets individuals in managerial or executive positions, who may hold vast amounts of crypto or have access to sensitive information about their company. The emails or messages look convincing and personalized, often resembling a colleague.
  3. Pharming Attack - In a pharming attack, cybercriminals redirect users from legitimate websites to fraudulent ones. This is often done by exploiting vulnerabilities in the DNS server. Once the user is redirected, they're tricked into entering their personal information, believing they're still on the legitimate site.
  4. Ice Phishing - In an ice phishing attack, the scammer tricks their target into believing they are receiving a legitimate transaction request. The email shows the transaction and asks the user to confirm it by providing their private key. In reality, there is no transaction, and the user is giving away their private key, which the attackers can then use to steal their crypto assets.
  5. Evil Twin Attack - This type of phishing attack involves creating a fake Wi-Fi network that appears to be a legitimate public network. When users connect to this "evil twin" network, they are prompted to enter login details or other personal information, which the attacker can then capture. This can happen at places like coffee shops, airports, or hotels, where public Wi-Fi networks are commonly used.

Interested in the field of crypto security? Learn about romance scams: what they are, how they work, and how to protect yourself.

Phishing Occurs More Often Than We Think

Over the past year, the rate of cryptocurrency phishing attacks has surged considerably. In fact, it grew by an alarming 40 percent, warranting its own unique classification. There were an astounding 5,040,520 instances of crypto phishing detected in 2022, a significant jump from the 3,596,437 recorded in the prior year of 2021.

Many scammers are apparently switching from traditional finance to crypto. After all, user competence in crypto is still quite low. 

How To Protect Your Coins

Here are some basic steps you can take to minimize the probability of revealing your sensitive data to scammers:

Utilize Hardware Wallets: These offline storage devices significantly lower the risk of phishing attacks compared to online wallets.

Enable Two-Factor Authentication: Add this extra layer of security to all your crypto-related accounts to ensure only you can access them.

Scrutinize Emails and Messages: Be cautious of messages asking for personal information or urgent action. When in doubt, contact the company directly via official channels.

Confirm the URL: Make sure you're on a secure and genuine site before clicking any link or sharing personal information.

Update Your Devices Regularly: This simple action can strengthen your devices against emerging threats.

Use Public Wi-Fi Wisely: Refrain from accessing your crypto accounts on public Wi-Fi networks. If necessary, use a virtual private network (VPN). 

FAQs

Can I recover my scammed crypto?

Unfortunately, it's generally quite difficult to recover stolen cryptocurrencies due to the anonymous and decentralized nature of blockchain technology. Once a transaction has been validated and added to the blockchain, it can't be reversed. While law enforcement agencies and cybersecurity firms can sometimes track the movement of stolen funds and identify the culprits, actual recovery of the funds is rare. It's best to prevent scams in the first place by being cautious and securing your digital wallets.

Why is it called phishing?

The term "phishing" is a play on the word "fishing," as the scammer "casts out" fraudulent emails or messages in the hope of "catching" a victim. The "ph" is likely a nod to "phreaking," an early form of hacking that involved manipulating telephone systems.

Why do fraudsters use crypto?

Fraudsters are attracted to cryptocurrencies for several reasons. Cryptocurrencies like Bitcoin are decentralized, meaning there's no central authority that can reverse a transaction once it's been made. They also offer a degree of anonymity, as transactions are tied to cryptographic addresses, not identities. Finally, the increasing value and popularity of cryptocurrencies make them an attractive target for scammers.

Does Coinbase refund stolen crypto?

Coinbase, like many other cryptocurrency exchanges, has security measures in place to protect users' assets. However, if your personal Coinbase account is breached due to your actions (like falling for a phishing scam and providing your login credentials), it's unlikely that Coinbase will refund your stolen crypto. Coinbase does not guarantee the recovery of lost funds due to individual account breaches. It's crucial to use strong, unique passwords, enable two-factor authentication, and avoid clicking on suspicious links to protect your account.

Disclaimer: The content of this piece reflects the writer's opinion. This article is not intended to provide financial advice and is meant solely for entertainment and educational purposes. Investing in cryptocurrency involves significant risk. Capital is at risk, and returns are not guaranteed. Always conduct your own research.

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