Cryptocurrency fraud is becoming increasingly prevalent, with criminals leveraging diverse strategies to cheat unwitting victims out of their money. Action Fraud, the UK’s national fraud disclosed that losses related to crypto have skyrocketed to over £114 million in 2020. A substantial rise from the £1.8 million reported in 2018.
The Case of Jared Ferguson
“Advance fee” and “pyramid scheme” scams are among the most common forms of cryptocurrency fraud. In the former, fraudsters guarantee high returns on investment in exchange for a fee paid upfront. In the latter scenario, the scheme persuades victims to invest with promises of substantial returns, ultimately proving unsustainable.
A recent case involving Jared Ferguson, who lost around £70,000 in a vicious sim-swap scam, highlights the growing issue. Ferguson is now pursuing legal action against Coinbase, the platform where his funds were held, seeking compensation amounting to at least three times his loss. This case underscores the lacklustre security measures of some cryptocurrency exchanges and the importance of protecting oneself from such fraud.
Understanding Sim-Swap Scams
A sim-swap scam, also known as a SIM hijacking, is a technique used by fraudsters. It targets the two-factor authentication (2FA) security process often used in financial and online accounts, including cryptocurrency wallets.
Fraudsters gather personal information about their victim, often through phishing emails or by purchasing such data from dark web markets. Armed with this information, they contact the victim’s mobile service provider, impersonating the account’s legitimate owner.
The fraudsters then trick the service provider into transferring the victim’s mobile number onto a new sim card. This process, known as sim swapping, effectively grants them control over the victim’s mobile number. Allowing them to receive calls and texts intended for the victim.
Once control over the mobile number is obtained, the criminals can then exploit the 2FA employed by cryptocurrency wallets. Given that most 2FA systems send a unique code to the user’s mobile phone number to verify their identity, the fraudster, now in control of the mobile number, can intercept these codes.
Therefore, even if the victim protects their cryptocurrency wallet with a password, the fraudster can still bypass it by using the 2FA code sent to the now-compromised phone number. Consequently, they gain unhindered access to the victim’s crypto wallet, leading to huge financial losses. It’s a cunning exploitation of security measures designed to protect users. Which makes understanding and guarding against sim-swap scams a crucial aspect of fraud prevention.
Strategies for Safeguarding Against Cryptocurrency Scams
Protecting your cryptocurrency assets requires caution and strategic measures. A secondary form of verification, such as a code sent to your phone, can thwart unauthorised access.
A hardware wallet, a physical device that keeps your private keys offline, significantly enhances the security of your cryptocurrency assets. This is particularly useful for those holding substantial cryptocurrency sums and seeking additional protection.
Furthermore, be wary of unsolicited messages, emails, or calls purporting to be from a cryptocurrency exchange or financial institution. Scammers frequently use these methods to access your accounts or personal information.
Addressing Cryptocurrency Fraud
The Financial Conduct Authority (FCA) has issued warnings and mandated cryptocurrency firms to abide by anti-money laundering regulations to combat crypto fraud in the UK. Meanwhile, the UK government is considering further regulation of the industry.
Reporting cryptocurrency scams prevents others from being targeted by the same fraudsters. If you suspect you’ve fallen victim to a crypto scam or fraud, promptly report it to the relevant authorities. In the UK, crypto scams can be reported to Action Fraud, the national fraud and cybercrime reporting centre.
