The crypto airdrop — a marketing strategy followed by blockchain based services that helps crypto startups to stand out from the crowd — has become a way for scammers to lure people into a clicking frenzy with the goal of separating them from their assets.
The aim of crypto airdrops is to spread awareness about the cryptocurrency project and get more people trading in the token when it lists on an exchange as an initial coin offering (ICO). An ICO is like an initial public offering (IPO) and companies use this to raise money.
A legitimate crypto airdrop is purely promotional and does not seek capital investment in the currency. Airdrops are a part of a broader marketing strategy that involves social media promotions, blog posts and different levels of crypto-holder participation.
But these same crypto airdrops have become avenues for scammers and swindlers using pump-and-dump strategies – illegal schemes to raise the price of cryptos through false information and sell them to unsuspecting investors.
A typical airdrop scam entails minting a new malicious token, sending it to user accounts, and relying on curious users investigating what this mysterious token is to phish them.
Airdrop attacks rely on user behaviors such as checking block explorers for token balances, only to find tokens that are minted and with some value. On investigating the token, the user will mistakenly trust it and try to approve transactions using these tokens.
It is at this point that the user encounters an error and is sent to a phishing site that promises to help complete the transaction.
Such crypto scams often aim to gain private information such as security codes or trick an unsuspecting person into sending cryptocurrency to a compromised digital wallet. From October 2020 to March 2021, reports of crypto-related scams shot up. Nearly 7,000 people reported losses of more than $80 million, according to Federal Trade Commission (FTC).
Due to the rise in reported scams, investors should be aware of the common types of scams and things you can do to protect yourself.
Scammers pose online as billionaires or other big names and promise to multiply investors’ crypto investment. Instead, the scammers pocket the money. An example is this screen shot from a fake Cathie Wood account, where a scammer promises to give crypto to “her” followers and gives a link to a website for those who are interested. The real Wood is the CEO of Ark Invest, an investment management firm with $23.9 billion in assets under management.
Another crypto scammer uses Solana, one of the high-performing blockchains, to cheat unsuspecting investors.
In this screenshot, scammers used a fake Solana Twitter account and said they were giving away crypto to their followers, similar to the Cathie Wood impersonators. They then gave a link to a website for those who wished to participate.
When investors open the link, it lands them on the actor’s malicious website, where unsuspecting users are phished of their crucial online information.
This scam adds the unsuspectingTwitter users to a list and they receive a notification to get the airdrop (drop free crypto). The site wants you to send crypto and promises you’ll get back double what you invested, but nothing is sent back, similar to the case of the Cathie Wood fake Twitter account.
“If you would like to participate in the giveaway, it’s very simple. All you need to do is send any amount of Solana, (between 5 SOL – 10,000 SOL) to our official contribution address for this event, and once we have received your transaction, we will immediately send back(2x) to the address that you sent the SOL from,” wrote the Solana scammers.
There is a large interest in airdrops for people who are seeking to make easy money, and scammers have found an ideal way to dupe people
The scammers promise to give away Bitcoin and Ethereum cryptocurrencies and they immediately send back 2x to the address you sent it from. For example, if you send one BTC, you will receive two BTC at the address you sent BTC from. You can also participate using any wallet or exchange, according to the fake website.
Users are advised to be aware of such scams and only indulge in airdrops of genuine platforms listed on authentic websites.
It can be difficult tell whether an airdrop is safe or not, and investors should be careful. Here are a few things to do to stay safe from crypto airdrop scam giveaways.
Before connecting your wallet to a project, first look into the project and see whether it’s legitimate. Research and carry out due diligence on the company that is having an airdrop. It would be best to visit forums and official websites to check on the authenticity of an airdrop before participating in one.
If tokens get into your wallet through an airdrop that you did not initiate, it is best to wait before engaging. Some airdrops may prompt you to visit a website to sell or swap the tokens, but there is a possibility it is a phishing attempt to access your wallet and funds.
Do not give out your personal information such as email and phone number — some airdrop scams will ask for them. Some legitimate airdrops will also ask for personal information, therefore go the extra mile and check if the sources are official.
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Legitimate airdrops do not ask for private keys. Private keys are only supposed to be known by the wallet’s owner. Private keys are similar to a password and they are used in cryptocurrency transactions to show ownership of a blockchain address.
Investors should understand that if someone else can access your private key, they are able to access your wallet.
When researching, there are several red flags to be aware of. For instance, if a project airdropping tokens does not have a product, plan, or governance outline, it is a bad sign.
Sometimes, early crypto projects do not provide the full details, just a promise to give them later. Although this does not imply that it is scam, it is worth keeping in mind.
When people raise genuine concerns or issues on Discord or Twitter, project founders should be willing to answer their questions. If they are not, this could be a red flag.
If the project charges a fee when swapping or selling the tokens, or it does not allow you to swap or sell at all, then this is a red flag.
Image: Screenshot of an airdrop scam