Undeniably, the DeFi sector has witnessed tremendous growth over the past year. Numerous new projects have either gained widespread attention or continue to emerge rapidly. However, there’s a surge in DeFi scams alongside these legitimate projects. Shockingly, in 2023, the crypto community lost nearly $1 billion due to fraudulent activities.

It’s a common trend that as an industry gains traction, it attracts malicious actors. This phenomenon is particularly evident in financial domains.

Everyone is susceptible to mistakes, whether you’re an experienced trader or a newbie. To mitigate such risks, let’s explore DeFi phishing scams and strategies to evade them while using your preferred dApps.

Let’s first understand what DeFi phishing scams are.

What are DeFi Phishing Scams?

In DeFi phishing scams, perpetrators deceive users into linking their wallets with malevolent Decentralized Applications (DApps). Subsequently, scammers can access the user’s wallet and execute unauthorized transactions.

How Does The DeFi Phishing Scam Carried Out?

Step 1: Identifying the target.

Scammers utilize diverse strategies to attract unsuspecting victims. They might masquerade as credible figures or entities, presenting lucrative financial prospects. These fraudulent activities often occur on social platforms, messaging apps, or digital forums, where they engage with individuals eager for financial opportunities or DeFi insights.

Since many newcomers lack comprehensive knowledge of crypto and DeFi intricacies, they become easy targets. Some perceive crypto purely as a lucrative venture, readily heeding seemingly informed advice. Exploiting this vulnerability, scammers employ intricate technical terms, aiming to deceive the uninformed.

Step 2: Entrapping the target.

Upon gaining a victim’s trust, scammers navigate them through a sequence of steps, luring them into a captivating “investment venture.” Instructions may involve sharing an apparently secure wallet link to connect with a “DApp.”

Sophisticated scammers might provide links resembling legitimate company domains with minor alterations. Hence, it’s imperative to verify the authenticity of links before engaging with them.

Step 3: Stealing crypto assets.

Once the victim clicks the deceptive link and establishes a connection with the “reliable DApp,” scammers bombard them with fraudulent signature requests for specific smart contract procedures. Upon obtaining the signature, victims discover their assets have vanished.

Tips to Protect Yourself From DeFi Phishing Scams

• Exercise caution with unfamiliar platforms.

Avoid engaging with unfamiliar DApps or platforms. Prioritize reputable applications with a demonstrated history of safeguarding user interests.

Indiscriminately connecting your wallet to an unverified DApp based on enticing promises can lead to irreversible consequences. Conduct thorough research, avoid clicking suspicious links, and remain alert to potential warning signs.

• Avoid unrealistic profit claims.

Exercise skepticism towards ventures promising astronomical returns. Beware of exaggerated claims, such as daily returns of 3%, equivalent to an annualized rate exceeding 1000%.

If approached with seemingly unrealistic opportunities, exercise caution and skepticism.

• Stay vigilant with unfamiliar contacts.

Assessing the credibility of unknown individuals is challenging. While some may have genuine intentions, remember that crypto transactions lack reversibility. Exercise caution if unfamiliar individuals discuss investment opportunities or propose following specific instructions for substantial gains.

Conduct a swift online verification if someone purports authority or affiliation with a renowned entity. Adhering to these guidelines can substantially minimize the risk of succumbing to a DeFi phishing scam.

Stay aware, be informed, and safeguard your crypto assets.

After taking all the precautions, even if you have fallen for a DeFi phishing scam, here’s a list of things you can do.

If You’ve Fallen Victim to a DeFi Phishing Scam

• Disconnect your DeFi wallet from the fraudulent entity and promptly change your password. If your bank account is involved, suspend your cards and update your passwords.

• Notify local law enforcement and submit a comprehensive report by providing all pertinent details. This action enhances the likelihood of recovering your assets.

• Inform the platform where the scammer approached you first—providing details like the scammer’s profile and any additional information to prevent future victimization.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.