Avoid Crypto Scams – Not A “How-To”, But Friendly Advice

A coordinated attack against social media platform Twitter (around July 15-16, 2020) led to a hack that targeted popular accounts. These were not just any accounts, but influential public figures. Included in that list were former US president Barack Obama, Microsoft’s Bill Gates and founder of Tesla and SpaceX Elon Musk. What makes this all the more interesting is that hackers used these accounts to solicit cryptocurrency, specifically Bitcoin (BTC). In the scheme, the hackers used the account to mention some feel good words about giving back to the community during the Covid-19 crisis and then requested people to send them BTC with a message of doubling whatever is sent to a given BTC address in the tweet.

These are your typical scams which many in the cryptoverse probably caught. Unfortunately not everybody did. The hackers made off with at least 12 BTC worth $100K+ in the initial stages after the attack was discovered. This sort of attack appears to have affected Twitter’s internal system, since only admin accounts have privileges to modify user accounts. Speculation is that a phishing attack or directed social engineering technique was used to gain access to Twitter’s backend system. This is definitely a cause for concern to everyone who has an account on Twitter because a repeat of this attack could compromise them. Once the hackers gained access to the backend, they targeted the accounts and began tweeting.

People who are caught up in the hype of cryptocurrency like Bitcoin will easily fall prey to scams like this. Noobs (newbies) who recently got in may not have enough education … meaning they don’t know any better what not to do. If someone, anyone, asks you to give them Bitcoin in order to double your holdings don’t be too quick to trust them. It really doesn’t make sense if you think about. Supposed you give 100 BTC, are you really expecting to get 200 BTC? This is a naive gambling mentality that can affect anyone’s logic if they are not aware of these schemes. Never give other people Bitcoin expecting more in return.

It is not even like investing because the public figures account tweets to just give them BTC and you get more in return. The problem with that should be obvious to the common person, but why would other people go along with it? This is why social media has such tremendous power when it comes to influence. The few people who gave their BTC away probably understood what they were doing, which is scary. They did it because they are firm believers of that person. Whether it was through charisma or just blind following, people probably acted subconsciously and just obeyed the tweet like it was an order. Greed is perhaps another motivator since it psychologically makes a person think about how easy it would be to get more crypto. It makes me wonder if the hackers had been more nefarious with the tweet, just think of how many people they could have put in danger or in harm’s path. It was good that it did not end up that way.

Bitcoin addresses are pseudonymous and cannot be directly linked to a person’s identity. That is the blockchain by design, so there would be no way to verify the Bitcoin address really belongs to the public figure. That is probably the biggest reason why not to fall for these scams. We don’t have any way of knowing if the address legitimately belongs to President Obama or Elon Musk. A Bitcoin address is just a hexadecimal string but it doesn’t link to the actual person like the way you can look up a person’s identity by their driver’s license number or social security number. That should have been the red flag that prevents people from giving their BTC.

The Bitcoin address the scammers used which begins with “bc1qxyp….” (I do not reveal the full address here, just a snippet) can be tracked on a blockchain explorer. It doesn’t specifically say the name of the owner of that account. What you can see though are the transactions in the account history, and it indicates the 12 BTC collected.

Note: The full Bitcoin address of the scammer/hacker is not revealed here.

In crypto the only way to really trace the identity of the account holder is if they cash out using a digital exchange. Users who use digital exchanges to convert crypto to fiat, require a KYC documents in order to comply with financial regulations (e.g. AML, Anti-terrorist funding, etc.). This is not revealed to the public, but if there were an investigation the digital exchange can release the personal information if they were required. Accounts created on digital exchanges are also linked to bank accounts which can be traced to a person’s identity. On the blockchain, the real way to prove identity would be with a digital signature using the private key from the user’s digital wallet. This is one way a person who claims to own a Bitcoin address can prove they are the true owner.

The lesson here is that scams are everywhere in our society. It even affects crypto. In fact there have already been 2 popular scams uncovered in the past – Bitconnect and OneCoin. They have not proven any legitimacy and quickly collapsed with their leadership no where to be found. These cryptocurrency promised people ridiculous returns, but many got into it anyway with the help of social influencers. Some of these influencers were just too convincing that it leads to a bandwagon or network effect of more people putting money in a system that is like a house of wax built on top of the sun. By the time it collapsed (no more money to give people) it was too late for many and they lost the money they put into the coin, perhaps never to be recovered.

To avoid scams ask yourself if the message you are getting is too good to be true. If it is do more research to verify it. Don’t just give your BTC to anyone and expect more in return. Those things just don’t really happen in the real world. If it does, then there is probably something you have to give back in return but it may not always have a good ending. It is like the car dealer telling you to give them your old car and you get a new car back. You do get your new car but then you end up with a mountain of costs you had not been expecting. It is always the unexpected things beyond our control. This is true with crypto as well, so be very careful next time you hear or see someone say “Hey, give me some BTC today and I’ll double it up for a good cause!”.

Note: This is not financial advice. Please do your own research to verify information.