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Cryptocurrency Fraud: In the Midst of a Gold Rush, Beware of Scammers

Bitcoin is the pioneer and obvious leader in the cryptocurrency market. But in 2017 alternative coins, or “altcoins,” began to transform the market. Nearly 1,500 cryptocurrencies are currently in circulation, and new altcoins emerge every week with Monero, Zcash and Ethereum among the top challengers to Bitcoin. 

Bitcoin is the pioneer and obvious leader in the cryptocurrency market. But in 2017 alternative coins, or “altcoins,” began to transform the market. Nearly 1,500 cryptocurrencies are currently in circulation, and new altcoins emerge every week with Monero, Zcash and Ethereum among the top challengers to Bitcoin. 

But beware. Much like opportunists who devised various methods to defraud individuals hoping to strike it rich during the California Gold Rush, cybercriminals have developed several schemes to defraud those looking to profit from the growth in cryptocurrencies. The most common methods used by these criminal actors include: account takeovers, mining fraud and initial coin offering (ICO) scams. Here is a quick overview of each.

Account takeovers: A combination of Bitcoin’s price hike and increased speculation of cryptocurrencies means that there are more online accounts available with a lot more money in them. This makes customer accounts on exchanges and trading platforms particularly attractive targets. Bad actors are selling access to these accounts online, including on criminal forums and on paste sites. How do they gain customer account details? Through phishing and credential stuffing – techniques that have served them well in other criminal activity. In the case of phishing, they send fraudulent emails to users that may include a link to a scam page that asks them to input their user name and password before redirecting them to the actual site. They may also use typosquatting to imitate the official domain, or spoof pages on social media to capture their credentials. 

Credential stuffing allows them to gain access to accounts by target trading platforms and exchanges directly. Through this brute force technique, adversaries can automatically inject large sets of credentials into login pages until a match with an existing account is found. There are many tools available that lower the barrier to entry so even less technical fraudsters can use this method.

Mining fraud: Like the Golf Rush where individuals mined for gold themselves, here those seeking to profit from the cryptocurrency boom “mine” for coins themselves. Mining is the process used to validate cryptocurrency transactions. Miners, or the operators of mining machines, receive digital coins as a reward for contributing to the integrity of the system. Ironically, they may use nefarious ways to mine – stealing computing power to engage in this resource intensive activity. They may use botnets they’ve established for other pursuits or engage in a popular method called crypto jacking where they use your mobile device/computer resources to install malware and mine cryptocurrencies. 

Initial coin offering (ICO) scams: ICOs are a way of crowdfunding cryptocurrencies. But as consumers rush to be the first to invest in a promising new cryptocurrency, their investments can instead go into the account of criminals. In the case of CoinDash, criminals compromised the CoinDash website in July 2017 and swapped the Ethereum address to one controlled by the attacker. Over $7 million had been transferred to the fake address before it was discovered. While this is an example of a legitimate ICO that was compromised, there are many instances of individuals creating entirely fictitious cryptocurrencies and performing exit scams. “Pump and dump” groups also exist that use social media and other outlets to spread news and inflate the price of lesser-known altcoins for profit.

As long as enough suitable targets exist and the profits to be made justify their time and effort, cybercriminals will continue to find new ways of making money. But there are steps that organizations, consumers and exchanges can take to protect themselves against cryptocurrency fraud. Here are just a couple of recommendations for each.

Organizations should:

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● Authenticate cloud services like Amazon WorkSpace (AWS) as criminals can steal your resources and mine for cryptocurrency. Amazon provides guidance on configuring AWS Command Line Interface and authenticating access to AWS.

● Blacklist C2 domains used by cryptocurrency botnets and mining tools. A good place to start is the CoinBlockersList project on GitHub, where new crypto mining domains are added daily.

Consumers should:

● Do research and be cautious before investing in new cryptocurrencies. Look out for red flags such as sites or sellers with unsolicited offers, or coins that guarantee high returns and hide behind marketing hype with no technical detail behind the cryptocurrency.

● Enable multi-factor authentication (MFA), where possible, on any online accounts used to handle cryptocurrencies. This includes exchanges and wallets. You can check whether a site offers MFA by visiting

Exchanges should:

● Guard against credential stuffing software like Sentry MBA, Vertex and Account Hitman. Web Application Firewalls can also be used to prevent account takeover from credential stuffing tools.

● Look for phishing sites. DNS Twist is a python script that can find phishing sites and typosquats based on your domains. Detect these before your customers lose out.

Finally, each of these groups should monitor for stolen credentials. Sites like HaveIBeenPwned monitor common dump sites and can be used to alert you if your credentials are leaked online. 

Despite the volatility and high valuations of cryptocurrencies, their adoption in both online and physical transactions will likely continue to grow as will activity by scammers. But with better security practices both on an individual and organizational level, you can mitigate the risk of cryptocurrency fraud while remaining an active user.

Written By

Alastair Paterson is the CEO and co-founder of Harmonic Security, enabling companies to adopt Generative AI without risk to their sensitive data. Prior to this he co-founded and was CEO of the cyber security company Digital Shadows from its inception in 2011 until its acquisition by ReliaQuest/KKR for $160m in July 2022. Alastair led the company to become an international, industry-recognised leader in threat intelligence and digital risk protection.

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