HomeNewsThe Key Issues of Cryptocurrency Exchange Fraud
The Key Issues of Cryptocurrency Exchange Fraud

The Key Issues of Cryptocurrency Exchange Fraud

Last updated 30th Nov 2022

There are multiple inherent risks when we dive deeper into the world of fraud. At the moment, crypto is worth roughly $1.3 trillion with around 6000 different registered cryptos. Needless to say, these numbers will continue to grow and so will the dangers of exchange fraud. 

The Risk of Using Cryptocurrencies

One of the most common types of fraud happening in North America and Europe has to do with the purchase of digital assets. Despite their apparent safety, a digital wallet is actually quite penetrable. 

Phishing, impersonation, preinstalled malware and fake emails are some of the most common ways of extracting personal information and stealing money from someone’s wallet.

It is estimated 32 per cent of virtual thefts involve the trade of cryptocurrencies meanwhile, 23 per cent had to do with the purchase of digital assets as purported investment opportunities.

There is also the issue of responsible crypto trading. Nowadays it’s easy to create a digital wallet to buy and exchange your first crypto. Even people as young as 12 or 14 can do it if they impersonate an adult or use someone else’s account.. Without a responsible course of action, thousands can fall victim to crypto exchange fraud

Let’s take a look at some of the main challenges when trading cryptocurrency. 

The key challenges for crypto holders

A fraudster can purchase stolen bank data from the dark net like the Silk Road 2.0 and create multiple accounts on a crypto exchange platform. The fraudster then buys a cryptocurrency and sends it to another wallet. The original user realizes that their card has been used for fraudulent transactions and initiates a chargeback. 

The challenge we must face is to prevent or suppress any suspicious activity that can come in our way. Why? Because the crypto market is less forgiving than the banking system.

Unlike with banks, cryptocurrencies are completely decentralized and hard to track or trace. This means that no one will take ownership or responsibility in case of fraudulent activities. Scammers and money launderers have the chance to establish multiple wallets or use tumblers to muddy up their trail. 

And the worst part is that transactions via Bitcoin or Ethereum cannot be undone or reversed.

How to prevent cryptocurrency fraud?

The short answer to this question is for crypto trading platforms to simply use dynamic friction. This basically means that crypto platforms have to have an invisible layer of security that helps mitigate risks without any UI interference.

People normally trade and exchange crypto to remain anonymous. Too much friction will leave customers looking for alternative crypto trading platforms. In order to balance account anonymity and to keep user account privacy, crypto traders should hire third-party solutions to mitigate the problem by enabling users to pay and transfer money. 

From a customer perspective, people should use platforms that ensure some form of safety through ID verification. As an example Binance and Revolut’s platform does allow you to purchase cryptocurrencies, but after a strict authentication process to create your initial account.


It’s not that fraudsters only need a laptop and wifi to break into your wallet but the fact that cryptocurrency platforms are far from being impenetrable. Cryptocurrencies are difficult to fully comprehend, which is why they tend to attract the attention of scammers and fraudsters. This opens the door to online thefts like fake coins, fake trading platforms, and Ponzi schemes.

Robert Kormoczi is a content distribution manager at SEON Technologies and digital marketing consultant focusing on online business development, content marketing, PPC and SEO.

News Desk

News Desk

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