How To Avoid Falling Prey To Crypto Fraud
*This is in partnership with BloombergQuint Brand Studio
India has seen a massive increase in the population of crypto investors over the last two years and today ranks 11th among 154 nations when it comes to cryptocurrency adoption, according to Chainalysis. While Indians had invested $923 million in crypto till April 2020, the trajectory rose sharply to $6.6 billion in crypto investments by May 2021, a 400% rise, year-on-year.
But as popularity of this new asset class skyrockets, some fraudsters see this as an opportunity to fleece investors. CipherTrace’s 2020 Cryptocurrency Crime and Anti-Money Laundering Report revealed that in 2020, major crypto thefts, hacks, and frauds totalled $1.9 billion. Indeed, Blockchain fraud vastly exceeded hacks and thefts in 2020, according to CipherTrace Cryptocurrency Intelligence. Though this figure is significant, it is a minuscule fraction of the total crypto valuation of $2.5 trillion. But small figure or not, no one would want to be defrauded out of their hard-earned investments.
Why Do Investors Fall Prey To Crypto Fraud?
Lack of awareness is a key issue. Fraudsters take full advantage of the fact that many investors are always on the lookout to make huge gains in the least possible time. Those who are not well-versed with the workings of cryptocurrency and market movements get hoodwinked with lucrative offers from scammers who promise to deliver windfall profits.
In some cases of shady coins, there is price manipulation, where instead of the market, the fraudster is in control of the coin value. Incentives and big promises are made to naïve users who invest in these shady coins and end up losing their money when the coin is devalued by the scammers.
Identifying Potential Crypto Fraud
Investors have to be wary of too-good-to-be-true offers and promises made by pseudo crypto channels. Unrealistic promises and claims are a key identifier of a potential scam.
To bring in a sheen of authenticity, many scamsters lift material from various research journals on crypto technology and use this when they reach out to less-informed investors. But most of this content is plagiarised and is manipulated to present a malicious coin as a lucrative investment. Reading the fine print before investing should be a cardinal rule for every investor. A simple internet search with keywords will lead to the original file for comparison.
There is also social engineering at play. If someone tries to coax out login information with claims of password resets and the like, users should be wary. Just as with banks, no crypto exchange will ask for your personal details over the phone.
Thwarting Crypto Fraud
Here are a few tips to avoid being a victim of fraud.
· Self-education is key. Gain a sound understanding of the basic workings of this new asset class. Knowledge will help you assess and analyse whether an offer is real or a scam.
· Awareness about crypto market fluctuations and pricing trends should be a focus, before committing to any coin buys.
· If invited to invest in a new coin, check historical data about the company creating it, along with its established user database and credibility. Read up to gain information.
Ways To Recover From Fraud
Although Bitcoin technology allows data to be available on a public-encrypted ledger, it is not easy to unearth a trail when it comes to fraud. Nevertheless, in India, complaints about fraud can be filed at the nearest cyber cell or even online at the official cyber cell website. Based on the magnitude of crypto fraud, one can also approach the National Cyber Crime Coordination Centre that has been set up by the Home Ministry.
Ensure all documents related to the fraud are at hand. Telephone numbers, screenshots of communication and other details will fast-track the investigation.
The WazirX Path To Ensuring Safety
As the leading crypto platform in India, WazirX has played its part in preventing crypto fraud and cyberattacks. Last year alone, WazirX blocked 14,469 malicious accounts as per the platform’s April-September transparency report, the first in India. The platform ensures due diligence norms and Know-Your-Customer or KYC processes are rigorously followed during the account-creation phase. WazirX has also put in place multi-pronged authentication to validate KYC with official national ID databases in a strong step towards halting crypto fraud at the starting line itself.
Being part of the Blockchain and Crypto Assets Council gives WazirX access to user databases for tracking any changes to related IDs. Since crypto is a deregulated asset, WazirX takes it upon itself to create policies and develop strong walls of encryption, thereby, acting as a regulator for its own domain. WazirX also promotes awareness of crypto knowledge through their social media platforms, events, and the website.
While fraud risks will always exist in any investment space, the truth is that cryptocurrency in its fundamental aspects is based on cutting-edge technology with security at the heart of it. So crypto is inherently secure. The key to safe crypto investing is educating yourself to grow your investment. And this isn’t rocket science. And then the other caveats in any investment class holds true—don’t share personal information, always proceed with caution and verify someone who claims to represent the exchange or any other authority, avoid get-rich-quick temptations from offers that are too good to be true and make sure you invest through a world-class platform that emphasises security and transparency.