Crypto Scams Cost Investors Over $10 Billion in 2024: Here’s How to Protect Your Investments

Crypto scams and security breaches have remained a serious concern ever since the advent of cryptocurrencies some 15 years ago.

With worldwide crypto losses estimated at $10+ billion in 2024 alone, vulnerabilities have left some investors worried about what they can do to protect themselves.

Key Takeaways

• Reports suggest that crypto scams and hacks result in billions of dollars in yearly losses.
• Ponzi schemes, phishing, and fake exchanges are common scams, while hackers focus their attacks on vulnerable exchanges and smart contracts.
• Use only reputable platforms alongside two-factor authentication (2FA) and keep your private keys secure.

Types of Crypto Scams and Hacks

Although blockchain technology is designed to prevent tampering, the fundamental weaknesses are typically in the ecosystem that exists around it.

Defrauding people out of their money is a trick as old as time. The cryptocurrency space has simply provided scammers with new tools and techniques to do so. Bad actors take advantage of people’s natural penchant for greed combined with a limited understanding of blockchain technology and the irreversibility of transfers to separate victims from their digital assets with little chance of recovery.

Common Crypto Scams

• Ponzi/pyramid schemes: Paying early investors with new investor funds while falsely claiming returns come from legitimate growth.
• High-yield promises: The most popular, these lure investors with false guarantees of exceptional, risk-free returns.
• Pump-and-dumps: Artificially inflate asset prices through misinformation, then sell holdings at the peak.
• Pig butchering: These involve cultivating online relationships before persuading victims to send crypto.
• Rug pulls/exit scams: Abandon projects and abscond with investor funds after generating initial excitement.
• Phishing/crypto-drainer: Create fake websites or emails to steal credentials or trick users into approving transactions that drain wallets.
• Impersonation/livestream scams: Impersonate celebrities/influencers to promote fake giveaways, often requiring upfront deposits.
• ATM scams: Create urgent justification for consumers to take cash from their bank accounts and put it into a Bitcoin ATM.
• Address poisoning: Sending tiny amounts from similar-looking addresses to trick recipients into using the wrong address for future transactions.
• Recovery scams: Target previous victims with false promises to recover lost funds for a fee.

Hong Kong-based BitForex executed a suspected rug pull in February 2024, withdrawing about $56.5 million in cryptocurrency before going dark.

Crypto Hacks

While scams have people unwittingly handing over their crypto, hacks target vulnerabilities in the code, infrastructure, or security protocols of third-party platforms, exchanges, and wallets, allowing attackers to bypass security measures and steal funds directly from the system.

Common Crypto Hacks

• Smart contract hacking: Exploiting vulnerabilities in blockchain application code.
• 51% attacks: Controlling majority mining power to manipulate blockchain transactions.
• Person-in-the-middle attacks: Intercepting communications between users and crypto services.
• Exchange breaches: Attacking crypto exchanges through security vulnerabilities.
• DNS hijacking: Redirecting users from legitimate crypto websites to malicious clones.
• Brute force attack: Testing all possible password combinations to gain unauthorized access.

Important

North Korea is the largest state-sponsor of crypto hacks, stealing $6-plus billion in crypto assets since 2017.

How To Protect Your Crypto

Protecting crypto requires certain measures:

• Use reputable platforms: Choose regulated exchanges and wallets with proven security records and positive reviews.
• Enable 2FA: This adds an extra security layer.
• Reject unrealistic claims: If it sounds too good to be true, it probably is.
• Secure private keys: Never share keys, and use cold storage for long-term holdings.
• Strong passwords: Use unique, complex passwords.
• Update software: Keep wallet applications and security patches current.
• Verify websites: Check URLs and security certificates before entering credentials.
• Stay informed: Learn about emerging scams and security best practices.
• Monitor activity: Regularly review transactions for unauthorized access.
• Report suspicious activity: Alert platforms and authorities immediately if fraud is suspected.

The Bottom Line

In 2024, the crypto space saw significant losses from scams and hacks, netting thieves and fraudsters billions. Investors and holders can protect themselves by adopting best practices, thereby ensuring a smoother, safer engagement with the crypto market.