Fraud on Crypto Exchanges: How to Avoid Traps and Protect Your Funds

Crypto exchanges play a key role in the trading of digital assets, providing users with access to cryptocurrency operations. However, the development of this field has attracted the attention of criminals using various fraudulent schemes. Trading risks on such platforms include loss of funds, data compromise, and technical vulnerabilities. To protect crypto assets, it is important to understand possible threats and ways to minimize risks.

Crypto Exchanges

Crypto exchanges can be centralized and decentralized. Centralized platforms are managed by companies that store users' funds and ensure their security. Decentralized exchanges operate without intermediaries, and transactions are made directly between participants.

Despite the development of technologies, crypto exchanges remain vulnerable to fraud. The main problems faced by users include:

• Hacker attacks — hacks of exchanges aimed at stealing funds.
• Technical failures — errors in the program code leading to the loss of assets.
• Insider schemes — price and liquidity manipulations by platform employees.
• Fake exchanges — counterfeit platforms imitating real trading systems.

Market participants should consider these factors when choosing a platform to work with.

Fraud on Exchanges

Criminals use various methods to deceive traders. Among the most common schemes are:

1. Phishing attacks. Users are sent fake links leading to clone sites of crypto exchanges. After entering data, fraudsters gain access to the account and withdraw funds.
2. Pump & Dump. Groups of traders artificially inflate the price of an illiquid asset and then sell it en masse. Newcomers who bought the asset at its peak are left at a loss.
3. Fake ICOs and tokens. Launching non-existent cryptocurrency projects to collect funds and then disappear.
4. Liquidity manipulation. Exchanges or large players may create the illusion of high activity on the platform, attracting new traders, and then suddenly change trading conditions.
5. Withdrawal delays. Some dubious exchanges intentionally delay processing withdrawal requests to use users’ funds for their purposes.

Knowing these schemes helps minimize the risk of losses.

Trading Risks

Cryptocurrency trading is associated with various risks that can lead to financial losses. Among them are:

1. Exchange hack risk – even large platforms are susceptible to cyberattacks, which can lead to the loss of users’ assets.
2. High volatility – significant fluctuations in cryptocurrency rates can lead to losses with the wrong trading strategy.
3. Insufficient liquidity – with low liquidity, users may face problems selling assets at a favorable price.
4. Asset insecurity – the lack of regulation on many platforms makes it difficult to recover lost funds in case of

Crypto exchanges are specialized platforms for trading digital assets. They provide the buying, selling, and exchanging of cryptocurrencies, offering users convenient trading tools. However, the development of this sector has led to the emergence of many fraudulent schemes aimed at deceiving traders and investors. Security breaches, technical attacks, insider manipulation — these are just some of the risks users face.

The article reviews the main fraud schemes on crypto exchanges, potential trading risks, and methods for protecting crypto assets.

In addition to fraudulent activities, traders face additional risks:

• High volatility — sharp rate fluctuations can lead to significant losses.
• Lack of regulation — unlike traditional financial markets, many crypto exchanges operate without clear legal regulation.
• Liquidity — less popular cryptocurrencies may turn out to be illiquid, complicating their sale.
• Fees — hidden charges and high transaction costs can decrease trading profitability.

When participating in trading, users should consider these factors and develop capital management strategies.

How to Protect Crypto from Fraudsters

To minimize risks, it is important to follow precautionary measures:

• Choose reputable crypto exchanges with a high level of security and positive reviews.
• Use two-factor authentication (2FA) to protect your account.
• Check URLs before entering data to avoid phishing attacks.
• Do not store large amounts on the exchange — it is recommended to keep part of the funds in cold wallets.
• Study the information about tokens and projects before investing.
• Do not use public Wi-Fi networks to access your account.

Following these rules will help preserve assets and avoid financial losses.