The Web3 ecosystem is fast-paced and has witnessed a lot of innovation in recent years. Although it promises significant potential for financial transformation, it has its own security challenges.
Phishing attacks are one of the most prevalent security threats, causing millions of losses. These scams have become increasingly sophisticated, aiming to steal sensitive information and drain crypto wallets. It's essential to understand and recognize the tactics used in these attacks to protect your investments.
This article explores the nature of phishing attacks in crypto, the common methods used by scammers, ways of identifying potential threats, and proactive measures to safeguard your assets.
Phishing Attacks in Crypto#
Crypto phishing is a type of exploit in which scammers attempt to trick people into revealing private information about their crypto wallets. To carry out this scam, cybercriminals could pretend to be employees or agents of trusted apps or crypto exchanges. If they manage to obtain personal information, they have the ability to siphon off users' funds, leaving them irretrievably lost.
Web-based phishing attacks involve several social engineering tactics to gather information that grants access to their victims’ resources. The attackers develop several deceptive tricks to obtain sensitive data like usernames, emails, addresses, passwords, and other personal information.
For example, a phisher might send an email posing as a corporation or an exchange, gain the trust of their victims, and trick them into providing private keys. Once the attackers obtain this information, they use it to steal the victims' cryptocurrency funds. Given the irreversible nature of crypto transactions, prevention remains the only effective defense against such attacks.
Such scams have become increasingly common in the crypto world as attackers have grown more sophisticated. These scams often target wallets, cryptocurrency exchanges, and ICOs.
Smart contract phishing is the practice of deceiving users into interacting with malicious smart contracts that appear to be legitimate. These smart contracts can execute malicious code, leading to the loss of funds or data. Attackers may create malicious decentralized applications (DApps), fake token sales, or impersonate legitimate DeFi projects to deceive users. They exploit the trust users place in smart contracts, as well as the irreversible nature of blockchain transactions.
Similarly, there's an additional type of phishing attack which involves scammers creating a lookalike site or taking control of a legitimate site, impersonating a real entity. Users interact with the phishing or compromised site without knowing about its legitimacy. Then, the transaction meant for the genuine site gets overtaken by the ill-hosted site.
Some Usual Crypto Phishing Tactics#
Crypto phishing attackers use various tactics to trick victims into revealing their sensitive information or gaining unauthorized access to their wallets. Here are some common methods:
Fake Browser Extensions#
Cybercriminals often target browser extensions for popular wallets like MetaMask to steal user login information. For example, a fake Ledger Live plugin was available on the Chrome Web Store and advertised through Google Ads, managing to deceive over 120 users last year.
Mark Cuban, a billionaire investor, fell into such a trap and lost $870,000 worth of assets when he downloaded a fake version of MetaMask that he likely found from a Google search.
Deceptive Emails#
Scammers create convincing login pages for legitimate exchanges to collect user credentials. They also use domain names that closely resemble those of real companies to send phishing emails.
For example, an email with the link URL "support-neptunemutual.com" instead of the official "neptunemutual.com" domain can trick users into disclosing their information.
Spear Phishing#
Spear-phishing attacks are highly targeted and personalized, unlike mass phishing campaigns. Scammers send convincing emails to specific individuals or organizations appearing as trusted sources, urging recipients to click on malicious links or download malware.
DNS Hijacking#
Attackers hijack legitimate websites through DNS attacks and redirect visitors to a fraudulent interface that looks similar to the legit one. When users log in with their private keys on these fraudulent sites, the attackers steal their crypto assets.
A notable incident includes the DNS spoofing attack on the Galxe protocol. According to the protocol, an unidentified individual posed as a legitimate Galxe member and duped their domain service provider with fake documents.
MyEtherWallet and Balancer became a victim of BGP hijacking causing a loss of over $150,000 and $238,000 respectively. In both incidents, the hackers seem to have executed BGP route hijack and redirected the website traffic through malicious pathways.
Fake Software#
Scammers can clone open-source crypto wallet software to create fake versions and steal users' private keys. Similarly, fake dApps lure users into entering sensitive information on malicious platforms.
Phishing Bots#
Bots are frequently used for malicious purposes in the crypto world. These bots can drain funds from users' accounts by exploiting backdoor programs such as Trojan horses or computer viruses. By mimicking legitimate activities, these bots trick users into revealing their private keys or recovery phrases.
Fake Support Team#
Scammers often pose as support representatives on platforms like Discord or Telegram. They offer to help users with issues but instead aim to steal their private keys or recovery phrases.
Initial Coin Offerings (ICOs)#
Fraudulent ICOs promise groundbreaking technology and guaranteed returns but ultimately disappear with investors' funds. These scams attract unsuspecting investors with false information about the project's intentions.
Platforms like Twitter, Instagram, and TikTok are full of scams promising to double or triple the amount of cryptocurrency sent to them. Scammers design these fraudulent schemes to trick users into transferring their funds to them, resulting in significant financial losses.
Wallet Drainer Services#
Crypto wallet drainers use phishing tactics to steal from users. They either exploit vulnerabilities in DeFi wallet security or trick users into submitting their personal information through several tactics explained above.
Wallet drainers offer a paid service to their users, allowing them to carry out phishing attacks on their own. Furthermore, the platforms could claim 20–30% of the theft.
Identifying a Crypto Phishing Attack#
Crypto phishing attacks can be subtle and sophisticated, but there are several key indicators that can help you identify them and protect your assets.
Inaccuracies and Spelling Errors#
Phishing emails often contain spelling errors, awkward phrasing, or grammatical mistakes. Scammers may not be fluent in the language they're using, and they typically rush their messages, resulting in noticeable errors.
Scam emails could also have inconsistencies in tone, style, or content alignment. If an email looks or feels different from what you usually receive, it could be a phishing attempt.
Pressure to Act Quickly#
Be cautious of messages that insist on immediate action, such as downloading a new version of software or logging in to update your information. Scammers create a sense of urgency to prevent you from thinking critically. To verify the legitimacy of such requests, visit the site directly by typing the correct URL into your browser.
Legitimate companies will never ask for sensitive information like passwords, security codes, or recovery phrases via email or direct message. Be suspicious of any requests for such information.
Use of Public Emails#
Be suspicious of emails from public domains like "@gmail.com" instead of the company’s official domain. Scammers often use these because they are easier to create and disguise.
Offering Misleading Details#
Scammers often use complex jargon to confuse potential victims. If the details of an investment are overly complicated and difficult to understand, it may be a scam.
How to Prevent a Crypto Phishing Attack#
To prevent phishing attacks, crypto users must exercise vigilance and take a proactive approach to security. Treat every crypto transaction with caution to avoid falling into scammers' traps.
A fundamental principle to keep in mind is that if an offer appears excessively attractive, it is likely a scam. Scams like the 2x Bitcoin scam, which promises to double your crypto, are clear red flags.
Always verify the sources of links sent via email or external websites. Instead of clicking on a provided link, navigate directly to the official site by typing the URL into your browser. For example, to access Binance, type "Binance.com" directly, or search for it on Google to find the correct link.
Enabling two-factor authentication (2FA) adds an extra layer of security. While text-based or email authentication is a good start, using authenticator apps like Google Authenticator provides stronger protection if supported by the service. Similarly, using a hardware wallet along with software wallets is highly recommended.
Avoid reusing or sharing passwords across different accounts. If one account is compromised, reused passwords could give attackers access to other crypto applications. Use unique, strong passwords for each account to minimize this risk.
Conduct thorough research on the cryptocurrencies you invest in, focusing on reputable projects with strong security practices and active communities. This can help you avoid investing in fraudulent projects that may be more susceptible to phishing attacks.
Make sure that your private keys and recovery phrases are not exposed in any way. Steer clear of taking screenshots of these sensitive details, as they could be synced into the cloud and hackers could potentially access them. Instead, store them offline in a secure location.
About Neptune Mutual#
Prevention remains the most effective way to safeguard your funds from crypto phishing attacks. Despite taking all necessary precautions, phishing scams can still occur, resulting in millions of dollars in losses.
However, there's a way to protect your assets from such attacks, with DeFi insurance. By securing your investments with DeFi insurance, you can add an extra layer of protection, ensuring that you get reimbursed with payouts in case you lose your funds to such incidents.
Neptune Mutual is a unique protocol offering DeFi insurance solutions to mitigate the risks associated with crypto users. You can purchase cover policies from our parametric cover marketplace and receive payouts if your funds get hacked.
Our marketplace is available on the Ethereum, Arbitrum, and BNB Smart Chain networks. Projects can establish their own cover pools in these networks, allowing their users to purchase covers.
As a LP, you can also add liquidity to the available cover pools and yield high rewards.
To learn more about Neptune Mutual, follow us on X and join our Discord chat.
