Your Crypto Wallet Could Be at Risk – Here’s How to Protect It from Scam

Today, the growth rate of crypto adoption is peaking, with almost 10% of the world’s population being active crypto users. However, popularity often entails problems, and in the case of crypto, there is a growing number of scammers.

As the industry is comparatively young, users sometimes can lack important details and become easy prey for fraudsters. How to avoid it and save your funds — explaining in our article.

Why crypto is attractive for scam

Many people wrongly suppose that crypto is a scam. However, crypto itself as a payment method and a way to store your funds has nothing to do with it. The problem lies deeper, and first, it’s the anonymity of transactions. In comparison with traditional operations, cryptocurrency transfers do not require identification. This allows scammers to hide their identity and move funds practically without a trace.

As a consequence of anonymity, there is also irreversibility of payments. With the blockchain, it is almost impossible to return the transferred funds, and combined with anonymity, crypto becomes a paradise for fraudsters.

In addition, for now, there is a lack of strict regulation. Although the EU introduced its MiCa regulation and other directives that can protect both companies and end customers, not every region can boast the same. Where the laws are not worked out, scammers can feel especially free, creating dubious projects and pseudo-services.

Last but not least, an important problem is user illiteracy. Despite the growing popularity of cryptocurrencies, many people do not have sufficient knowledge about the security of digital assets. They can easily get caught on phishing websites or use unreliable wallets.

Real crypto fraudsters cases

If it is difficult to deal with first reasons, since they are inherent in the very nature of cryptocurrencies, then it is necessary to work with the technical illiteracy of users. The more they know about the risks, the more difficult it is for attackers to mislead them. 

To help you stay ahead of the game, our security team is sharing two unexpected scam tactics that fraudsters use so you know exactly what to watch out for.

Sending a fake token 

In the Solana blockchain or even other networks, you can create any token and name it whatever you want. Scammers take advantage of this by creating fake versions of popular stablecoins such as USDT. Then they send this fake token to the merchant and declare: "I sent you 1,000 USDT, here are the hash transactions, but the money didn't arrive!"

After that, the scammers begin to pressure the merchant, accusing him of fraud and demanding the return of the "missing" funds. However, when verifying the transaction, it becomes clear that the contract of this token differs from the original contract of the real USDT. Fake tokens have no value, and their purpose is to deceive the merchant and force him to refund the funds.

Money laundering

Crypto is also known for numerous money laundering histories. In our case, fraudsters were trying to legalize illegally obtained funds through a merchant's wallet.

How does it work? Our support specialist Anton Volochay expalins: “Scammers start sending small amounts at the merchant, testing the system. For example, they send $10 with a high level of risk. If the transaction goes through, they send another $10, then $20, $30, and so on, gradually increasing the volume of transactions. Thus, they mix their "dirty" money with the merchant's legal means.”

After that, the scammers order a payout. For example, if they have accumulated $100 of this money, then upon payment these funds are mixed with the merchant's main assets, reducing their risk level. 

“As a result, the risk-score of these coins decreases, but the merchant's wallet itself gradually becomes polluted. This may lead to the fact that over time, exchanges will refuse to swap his funds due to too high a risk,” adds Anton. 
To protect merchants from this attack, we have implemented an AML checker that analyzes incoming transactions and identifies suspicious transactions. If our checker detects a potential risk of contamination of the wallet, the merchant receives a notification and can decide whether to block the transaction, skip it, or return it to the sender.

Other potential scamming techniques

Scammers create clone phishing websites of popular crypto platforms that look almost identical to the originals. The user enters their username and password, thinking that they are accessing a real one, but in fact they are transmitting data to fraudsters. 

In addition, some "wallets" can actually be Trojans that immediately steal your private keys or SEED phrase and pass them on to scammers. Download wallets only from official websites, and never enter your private data in suspicious applications.

Scammers also use pump and dump schemes to create a token, artificially accelerate its price through marketing and fake news, and then abruptly sell all their assets, bringing down the price. Newcomers who bought the token at the peak are left with useless coins.

At PassimPay, security is our top priority. Our AML checker, risk analysis tools, and 24/7 support team ensure that your funds stay protected from scams.

If you ever suspect fraud or need assistance, our team is here for you:  [email protected]

How to avoid scammers

Protecting your crypto assets will not be difficult if you follow a few important rules. Use reliable ways to store funds and, where possible, enable two-factor authentication (2FA), a simple but powerful tool for protecting your accounts. 

Education also plays a key role: the more you know about fraud methods, the more difficult it is to deceive you, so teach yourself and your team. 

Be careful with tempting offers of easy money. If you are promised high returns without risk, it is most likely a fraudster lying to you. Therefore, always check the counterparties before starting cooperation — make sure of their reliability, examine the transaction history and reputation. 

And, of course, work only with proven cryptoprocessors that have a good reputation and offer additional protection mechanisms such as guaranteed deposits and transaction insurance.

Want to protect your business from scammers? Leave your contact details, and our manager will walk you through our security features.