Vladimir Okhotnikov is an investor, crypto expert, publicist, author of large-scale blockchain projects, head of Floralia expert center.
Vladimir Okhotnikov: Scam in Crypto Business
The cryptocurrency market attracts the attention of numerous fraudsters. This was inevitable; the appearance of a liquid asset could not go unnoticed. And if we add to this the anonymity of users, cross-border operations, the legislative failure to regulate the status of cryptocurrencies, the prospects for attackers are bright.
Imagine if you live in Europe and fall prey to crooks from somewhere in Africa, with a decentralized blockchain that has no localization or jurisdiction at all, who then can effectively investigate such crimes? In isolated cases, in mega-large cases, law enforcement agencies from different countries can work together and find organized groups of scammers. However, such cases are rare. And if the scammers have the support of some states (for example, North Korea), then fighting them becomes practically useless business.
In general, cryptocurrency has become an ideal target for scammers. The blockchain technology itself makes it difficult to find criminals, and its relative "youth" has not allowed the development of adequate counter-action tools. A simple example is: bank hacking with significant losses is almost a vanished exotic, while crypto exchanges lose billions of dollars in hacker attacks.
«Cryptocurrency is a young and complex asset around which a large infrastructure is quickly built. If non-cash fiat protection has evolved over decades, crypto protection has not kept pace with market growth and the introduction of new technologies. In this case, the fiat cannot be considered absolutely protected. Scammers work faster than those who confront them. It is an eternal struggle of defense and attack...»
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Vladimir Okhotnikov
There are two types of Scammers in the crypto world. The first are individuals or group of hackers attacking crypto exchanges, companies, or individual users. The second are fraudsters using social engineering techniques to gain access to users' wallets.
There is a third type of mega-scammers - these are large projects that attract millions of users and have multi-billion business. They are not necessarily initially conceived as fraudulent, but the final result is that managers get rich and investors lose money. This area is extremely large and requires a separate large article.
Hackers Attack Crypto
Blockchain often gives users the illusion of security. It has been argued that, for example, no one has ever broken the Bitcoin blockchain, so a priori it is believed that, as a security measure, it is sufficient to hide the keys and passwords in a secure place.
Unfortunately, we can only repeat it: it’s an illusion.
«First of all, you need to understand and accept that there is no absolutely secure software. Maybe you are safe on a computer that’s not connected to the Internet, devoid of communication ports and keyboards. Always take precautions. Blockchain is considered safe. Note: not "safe" but "considered safe". I know people who lost millions because they thought so..."
Vladimir Okhotnikov
Indeed, the blockchain of major cryptocurrencies is a highly secure system that is virtually impossible to crack (a 51% attack is still a theoretical option). There was a report that some hackers were able to use the Ethereum vulnerability, but the specifics on this event are not yet enough, and even if it happened, it can be considered an exception confirming the rule.
However, blockchain is only part of the infrastructure serving cryptocurrencies. Wallets, crypto exchanges, and a variety of crypto-services use its own software, which is the object of the attack.
Successful attacks rarely occur. However, attackers have a chance to get a very big win.
Social engineers
Methods of social engineering involve influencing a person to perform the intended actions. It could be a direct deception, or it could be a carefully planned multi-modal operation.
The main condition of your crypto asset protection is to understand in time that someone is trying to deceive you. And to do this, you should know the methods and technologies that use fraudsters.
"Methods of social engineering are extremely extensive, and are based on psychological impact. Technologies of such impact are well developed, used by professionals, and therefore it is difficult to resist it..."
Vladimir Okhotnikov
Almost all scam-schemes are based on the establishment of trust with the user. From this begins the acquaintance with the fraudster. The user receives a phone call, an email, a message in the messenger. It can be a surprisingly powerful message that attracts attention with promising information. You are offered what you really want: it can be unexpected wealth, acquaintance with interesting people, participation in a landmark project. Perhaps, on the contrary, you will learn about the unexpected threat. The main goal of scammers is to attract your attention and start a conversation.
Similar scam-schemes are known for a long time, fraudsters only adapted them to cryptocurrencies.
Romantic sсam
One of the most sophisticated, and perhaps the most difficult, in terms of implementation, is the so-called Romantic Sсam. In social networks, on forums, on specialized resources you can meet a person who seems to you a real ideal, those you have always dreamed of meeting …
Your communication can last for months, your network friend skillfully creates his image, adjusting to you, your desires and emotions. A web of lies is being woven in which you become more and more confused.
The job of scammers is to make you feel romantic and turn off critical thinking. And so, at some point, the person that you care about so much asks you to transfer him the cryptocurrency that he suddenly needed urgently.
It is possible that you will be offered to invest in a profitable crypto project, earn on it and go together to paradise island …
Sooner or later, your interlocutor will disappear, and you will be disappointed and forever lose faith in people...
It’s not easy, but you should be careful, even if your interlocutor seems so attractive.
Profitable business
When mankind came up with the business, then came this fraudulent scheme. Everything is very simple: you get an offer to invest in a super profitable project, so profitable that you unwittingly stop thinking rationally. You have to invest one Bitcoin and get a hundred, a thousand, tens of thousands! The main thing, you are convinced that the profit far exceeds the investment, and the risk is absent. You just need to pay...
The offer of a profitable investment may come not during communication, but when you visit specialized sites. Such sites look quite convincing, they are qualitatively designed, special terminology is used, examples of success of users are given. You can see attractive investment conditions, and send them funds... By the way, you can even get the first payouts to encourage you to invest more.
Of course, lucrative projects do exist. However, before making a decision to invest, you should carefully examine the project and understand what risks it carries. If you are promised high profits, always remember that high profits are usually combined with no less high risk. In case of fraud, the risk of losing funds is 100%.
False identity
This is another fraudulent scheme that existed long before cryptocurrencies. It’s up to the crooks to convince you that you’re dealing with powerful people. They may present themselves as police officers, Donald Trump’s personal secretary, Elon Musk’s assistant, employees of Binance, Microsoft and other business giants.
The main thing is to inspire your trust. It is possible that for special persuasion you are offered a gift.
Further scenarios can be a lot different, but what unites them is that at the end you will be required to transfer cryptocurrency.
Phishing
The goal of phishing is to force you to give the fraudsters keys to your wallets or other confidential information. To do this, there are special fake sites where you are offered to enter your wallet address... You do this, and soon you will find that the funds from it have disappeared.
Phishing techniques can be more sophisticated, but they all boil down to forcing you to enter data.
Simple information hygiene can counteract phishing, carefully watch which sites you visit and pay attention to unusual functionality.
Pump and Dump
This is a classic scheme of fraud, came from the "classic" stock trading.
Fraud consists in creating artificial excitement around a certain asset or project. Artificial purchases are organized, demand is maintained. When new investors invest in an asset, and its price rises sufficiently, fraudsters organize a sale, make a profit, and investors remain with a useless asset and sadly watch it depreciate.
«Paradoxically, one of the main motivators behind the blockchain was the fight against fraud. Satoshi Nakamoto offered technology to combat a specific scheme in which fraudsters revoke bank payments already made. In this case, over the past fourteen years, dozens of new schemes have appeared, focused on the blockchain. I have no doubt that there will be more and more such schemes. We, however, learn to live with them...»
Vladimir Okhotnikov
