What is a crypto scam?

What is cryptocurrency?

Cryptocurrency, usually just called crypto, is a new form of money that needs the internet to work. Because crytpo is so new, there’s limited protection and regulation for users, and this makes it the target of scams.

How does crypto work?

Crypto is very technically complex, but in some ways it’s like a form of digital cash. Once it has been spent or transferred, it’s impossible to retrieve, which scammers like.

You can learn more about cryptocurrency on our podcast, What is crypto currency, and is it the future of money?

Why do scammers like crypto?

Crypto can be sent nearly anonymously across the internet, and it’s impossible to reverse payments or transfers once they’re made.

Crypto can be converted to regular cash (such as Australian or American dollars) at a special exchange, but to do this the exchange user has to provide lots of personally identifying information.

Scammers will instead sell crypto on the black market, which is illegal in most countries.

eSafety tip

Crypto is often the requested form of payment for other scams. If a scheme or offer demands crytpo-only payment, that’s a good warning sign that you are dealing with a scammer.

Scammer offers fake crypto brokering

Crypto can offer high returns to legitimate investors, but purchasing crypto legally is complicated and requires lots of forms of identification. The potential high returns associated with crypto investment come with equally high risk due to an unregulated market.

Scammers take advantage of this by offering fake crypto brokering services. These claim to simplify the process, and let you get the benefits of holding crypto without the complexity.

How crypto scams start

The scammer will contact you and quickly try to get you to move to an encrypted messaging app such as WhatsApp, or try to get you to install special software to manage your crypto investments.

Scammers rely on you not knowing much

As an investment, crypto is very volatile and prices change a lot, up and down. As a result, scammers will use this to claim that your investment’s value has crashed, or use a similar excuse to convince you to purchase even more crypto because the price is sure to go back up again.

However, in reality the scammer has never bought any crypto at all and is just taking your money while purchasing nothing.

Fake crypto software infects your computer

If you installed the crypto scammer’s so-called management software, it will infect your computer with viruses and other malicious code. The scammer may be able to search your computer for personal details, steal your ID, and access your finances.

Well done!

This is the end of the What is a crypto scam? activity. You’ve learned what a crypto scam is, and the steps scammers use to make it work.

Coming up next is the How to identify a crypto scam activity, which will show you a case study of a crypto scam and all the steps involved.