Financial fraud has been a part of transactional commerce since the dawn of transactional commerce. If you were unlucky enough to be on the other side of the an insurance contract with Hegestratos, he would have asked you to secure the corn cargo on his ship – then remove the corn, sell it, sink the ship and collect his payment. The year was 300 BC
Hegestratos later drowned after being caught red-handed and chased by angry victims. This represented a time limit: Hegestratos had to carry out his fraud in person. In the digital age, fraud is much more anonymous: a confident voice on the phone claiming to be from your bank, a strongly worded email demanding urgent action or your account will be closed.
Skilled scammers act without remorse for the pain and suffering inflicted on their victims and their families. They are experts at instilling instinctive fear and a false sense of urgency; the need to act NOW before taking the time to think things over and contact your financial institution to verify anything.
Everyone has an important role to play in preventing these frauds from happening. The good news is that the most powerful weapon against scams is universally available, free and simple: do not do anything. Ignore any unusual and pressured requests. Hang up the phone, don’t respond to the text or email.
Then contact the financial institution the scammer claims to represent (making sure to use the customer service number provided on the company’s official website). Customer service representatives will provide you with the accurate status of your account and will most likely confirm that everything is fine and no action is required on your part.
By Nick Percoco, Kraken Security Manager
Crypto scams are just a recent addition to the types of financial scams that have been around for millennia. If an asset has value, fraudsters will try to transfer that value to you by lying to you.
Social engineering plays an important role. Social engineering involves a scammer gaining the trust of their victim – often over a long period of time spanning dozens of back-and-forth communications – eventually persuading the victim to voluntarily send assets to the scammer.
This particular approach, taking time confidence, is called pig slaughter. The scammer, often through flattery and a seemingly intense interest in the victim’s hobbies and activities, “grows up” the victim over time. Only when the scammer feels able to extract a large sum of money does the role of “butcher” come into play. Days, weeks, months, even years: if the potential theft is important enough, scammers will take as much time as necessary to gain your trust.
Most crypto scams involve a scammer convincing their victim to share their seed phrase (effectively their password) so that the fraudster can access their crypto. Every time someone, under any circumstances, requests your seed phrase, they are asking for unrestricted access to your crypto. Stop. To hang up. Do not respond to the email or text message. Do not do anything.
Fraudsters know that if you do nothing, they lose. Sowing fear is an effective tactic to trigger immediate action from the victim. Scammers will pose as a frightened family member who urgently needs money to get home. Although a simple text message or direct call from the potential victim to that family member would instantly thwart this fraud, scammers are experts at keeping victims on the phone and in a state of panic. Hang up, stay calm, contact the family member independently.
Crypto fraud losses attract disproportionate attention, even though they represent only a fraction of government-issued currency fraud losses. Sending a unit of monetary value to another party is a largely similar process, regardless of the technology used to complete the transaction.
Another common scam angle is the unsolicited “opportunity.” High-pressure cold calls from “stockbrokers” in so-called boiler rooms have been around for decades. Same thing: for no logical reason, they call you, a complete stranger, to enrich you with an extraordinary opportunity to earn huge sums of money in a short time. Similar crypto scams exist.
Hang up, block the number, don’t answer. If you had a legitimate opportunity to double an amount of money in a matter of days or weeks, you wouldn’t pick up the phone and start trying to find complete strangers to talk about it.
Here are my tips to help you avoid scams:
- Trust your instincts – Be inherently skeptical of any offer, deal or opportunity that seems too good to be true. It’s also a major red flag when someone tells you that you’re “guaranteed” to succeed.
- Move Slowly and Be Deliberate – Doing nothing is a powerful weapon. Most victims act out of fear, panic or greed which can override rational decision-making. There are virtually no legitimate financial situations requiring immediate action. right away. Note the institution the caller claims to represent, call the customer service number listed on their legitimate website and ask customer service if there is a problem.
- Check before you trust – Just because someone tells you they work for a company doesn’t make it true. Most software vendors will not proactively call you on the phone to help you repair your technology. If someone has arrived at your home unsolicited, even if they are dressed in a uniform, ask for their personal identification, note their employee number and follow up with the company involved using their official communication lines . This may seem particularly paranoid, but scammers can easily purchase uniforms and fake IDs to gain the trust of their targets.
- Understanding your emotions – Fraudsters prey on human emotions that cloud their target’s judgment. If you feel pressure from a third party to quickly complete a transaction that causes you excitement, worry, or stress, end the transaction or correspondence. Do your due diligence as described above.
- Remember that scammers build trust – Scammers will ask you personal questions, such as if you have been married and for how long, and if you have children. The response will almost invariably be designed to create a connection: “Oh, that’s great, I’ve been married for 12 years here.” Little Jessica is 12 years old and Pete has just turned 5, isn’t that a great age? These lies are only designed to make you feel like you’re talking to a friend, someone like you.
- Passwords, PINs and logins are not intended for sharing – Whether seed phrases for a digital wallet or passwords for a bank account, your login information should always remain confidential. No legitimate company or service will ever ask you to share this information with them. The safest way to mitigate online risk is to have completely unique usernames and passwords, randomly generated by a password manager. This approach ensures that your credentials are both strong and non-identifiable, while also isolating other accounts if a provider is involved in a data breach or hack.
- Public profiles are also available to scammers – Carefully review the personal information you present in public forums, including social media. Although many of these sites serve different purposes, fraudsters use them to identify targets and extract information that could manipulate a future victim. Using the same username on many different sites? Scammers likely already know your username for the account they want to access.
- Check website URLs extremely carefullyy – Online fraudsters can now create sophisticated copies of websites that appear at the top of search engines. These fake sites may appear identical to the originals, except that the URL links will be slightly different. Do you know the site you want to visit? Forget searching on Google, just type the address directly into your browser’s address bar.
- Avoid the urge to respond – Responding to unsolicited emails and text messages, even to indicate your intention to unsubscribe, tells a scammer that an email address or phone number remains active. Have you ever received a text message from a number you don’t recognize that just says “hello”? Reply “Who is it?” » is often the first step towards contacting a scammer.
- Take everything you see with a grain of salt – With the rise of AI and deep fakes, it has never been more difficult to identify authentic information. As these technologies become more sophisticated, this will become more difficult. It is essential not to make financial decisions based on just one source of information. Take the time to verify information with a second or third source, or even check a random selection of online reviews from other customers who have used a product or service, to make sure something is authentic.
Anytime you have the slightest doubt about an incoming call, email or text message – especially if it is a request for personal information or an asset transaction – remember that your first and Best course of action is to do nothing at all: first, don’t do anything.
The holiday season is all about sharing time with the people we love most. Follow our simple guide and avoid sharing your crypto with people who wish the worst for you.
These materials are intended for general information purposes only and do not constitute investment advice or a recommendation or solicitation to buy, sell, stake or hold any crypto-asset or to engage in any trading strategy. specific trading. Kraken does not and will not endeavor to increase or decrease the price of any particular crypto-asset it makes available. Some crypto products and markets are unregulated and you may not be protected by government compensation and/or regulatory protection programs. The unpredictable nature of crypto-asset markets can result in losses of funds. Tax may be payable on any returns and/or increases in the value of your cryptoassets and you should seek independent advice on your tax situation. Geographic restrictions may apply.