Detecting and Avoiding Scams
Coinbase Institute: Insights Series
At Coinbase, we’re on a mission to help update the financial system to make it safer and more secure. While only 0.34% of blockchain transactions are used for illicit activity, and cash remains the preferred medium for illegal transactions, crypto security is always a top priority. And while crypto and blockchain technology offer unprecedented ways to connect people globally, they also provide bad actors with a vehicle for reaching potential victims. Fortunately, users can protect themselves from common scams by staying vigilant and following the simple steps discussed below.
Common Types of Scams
Scams are not limited to social media, crypto, finance, or dating apps; they are a pervasive issue throughout tech and in society generally. It is estimated that consumers globally lose over $1 trillion each year to financial scams. To protect its customers, Coinbase maintains a robust compliance program, which includes Know Your Customer (KYC) checks, sanctions screenings, suspicious activity reporting (SARs), and strong law enforcement partnerships to detect and prevent illicit activity on our platform. We have also developed tools that use machine learning to predict the riskiness of certain blockchain addresses, allowing us to caution users when appropriate and ensure a safer and more reliable crypto experience.
Education is also important. Consumers should be aware of these common types of scams:
Phishing: Crypto phishing scams resemble those in traditional finance but often take the form of urgent messages from crypto platforms. Scammers direct users to fake websites that mimic legitimate platforms to steal login credentials.
Romance Scams: In romance scams, fraudsters establish online relationships and then ask for financial help, often citing emergencies or medical needs.
Pig Butchering: Scammers build a long-term relationship with the target, typically through social media, chat apps, or even dating platforms, only to eventually trick them into transferring large sums of money under the guise of an investment opportunity. Once the target is fully “fattened up,” the scammer vanishes, leaving them financially devastated.
Rug Pulls: In rug pulls, crypto project developers vanish after collecting investor funds, leaving worthless tokens behind. Scammers may attract investors through promises of high returns, celebrity endorsements, and flashy marketing.
Fake Airdrops: Fake airdrops offer free tokens to users who complete specific tasks or share personal information. Scammers use the excitement around new projects to obtain sensitive data, with the promised tokens never arriving.
How Consumers Can Protect Themselves
By remaining vigilant and taking certain steps, consumers can greatly reduce the risk of falling victim to these scams.
Stay Alert: Be cautious when meeting new people online or on mobile. Romance scammers typically have few followers and their messages are usually awkward and abrupt. You can easily report these scams to authorities and then block them.
Avoid Unverified Investment Advice: Never take investment advice from someone you’ve just met online, especially if they recommend investing in something you’re not familiar with. Scammers often promise quick, guaranteed returns to lure people into sending money. Always seek advice from trusted financial advisors.
Use Reputable Platforms: Use reputable crypto wallets and exchanges, and guard your information. Remember, your private keys and seed phrases are for your eyes only. Never give out your personal or financial information to someone you’ve only met online. Legitimate financial institutions will never ask for this information through casual online conversations.
Stay Safe When Using BTMs: Bitcoin ATMs (“BTMs”) can be a major convenience for crypto owners, but be wary if anyone directs you to use one to protect your assets or resolve a problem. Just like government agents, no banker will tell you to withdraw or deposit funds at a BTM. Anyone who does is a scammer.
Watch Out for Common Mistakes: Be on the lookout for grammatical errors, typos, and misspelled words. Scammers often make these types of mistakes.
Conclusion
Raising awareness and understanding of scams can help protect both individuals and the broader crypto community. To that end, Coinbase has launched the Tech Against Scams coalition with other industry leaders to combat online fraud and financial schemes. This partnership aims to protect and educate users. By sharing knowledge and best practices, we strive to create a safer digital environment.
Stay vigilant against scams by avoiding unsolicited investment advice, using reputable platforms, and educating yourself on fraud tactics. Together, we can safeguard our community and the promise of increasing global economic freedom.