The rise of fake cryptocurrency apps and how to avoid them

Scammers have been taking advantage of blockchain’s decentralized and immutable nature to swindle crypto investors since the advent of the technology.

And, according to the latest FBI fraud report, fraudsters are using fake crypto apps to steal money from unsuspecting crypto investors. It highlights that American investors have lost approximately $42.7 million to swindlers through fake apps.

The schemes reportedly take advantage of heightened interest in cryptocurrencies, especially during bull market runs, to beguile crypto users.

How fake crypto app scammers lure users

Fake crypto app scammers use myriad techniques to entice investors. The following is a breakdown of some of them.

Social engineering schemes

Some fake crypto app scammer networks use social engineering strategies to entice victims.

In many cases, the fraudsters befriend the victims through social platforms such as dating sites and then trick them into downloading apps that appear to be functional cryptocurrency trading apps.

The scammers then convince users to transfer funds to the app. The funds are, however, “locked in” once the transfer is made, and the victims are never allowed to withdraw money.

In some cases, the scammers lure victims using outlandish high-yield claims. The ruse comes to an end when the victims realize that they can’t redeem their funds.

Speaking to Cointelegraph earlier this week, Rick Holland, chief information security officer of Digital Shadows — a digital risk protection firm — underscored that social engineering remains a top strategy among crooks because it requires minimal effort.

“Relying upon the tried-and-true method of social engineering is far more practical and lucrative,” he said.

The cybersecurity manager added that social engineering makes it easy for scammers to target high-net-worth individuals.

Recognizable brand names

Some fake crypto app scammers have resorted to using recognizable brand names to push fake apps because of the trust and authority that they wield.

In one case highlighted in the latest FBI crypto crime report, cybercriminals posing as YiBit employees recently hoodwinked investors out of some $5.5 million after convincing them to download a bogus YiBit crypto trading app.

Unbeknown to the investors, the actual YiBit crypto exchange firm ceased operations in 2018. Fund transfers made to the fake app were stolen.

In another case outlined in the FBI report, phishers using the Supay brand name, which is associated with an Australian crypto company, swindled 28 investors out of millions of dollars. The ploy, which ran between Nov. 1 and Nov. 26, caused $3.7 million in losses.

Such schemes have been going on for years, but many incidences go unreported due to the lack of proper recourse channels, especially in jurisdictions that shun cryptocurrencies.

Cryptocurrencies are underpinned by relatively new technology, so it is only natural that there are teething problems when it comes to use and adoption. Unfortunately, in recent years, black hats have targeted naïve crypto enthusiasts using fake crypto apps.

While the problem is likely to persist for several years, increased scrutiny by tech companies is likely to temper the issue in the long run.