“When the mafia kidnapped me, I had the choice to pay the ransom in either fiat money or Bitcoin. I did not hesitate before choosing the latter. Had I picked the first option, the criminals would have held me in a dark, damp cell for days in the Pacific Islands until the funds went through KYC, identity check, or, God forbid, the bank placed a hold on the funds. But after I paid, I was let go instantly. Who knew the network’s 10-minute transaction time and cross-border anonymity could be such a lifesaver?”
— Dr. Anon
In a report by Chainalysis, they say that by 2021, the intersection of cryptocurrency and crime will be worth $14 billion. Unfortunately, society isn’t perfect, and the rapid rise in the value of digital currencies has led to an explosion of crime against people who like blockchain. The good news is that the amount of money lost to crime as a percentage of the total value of crypto is going down.
When people sign up for crypto services, they put their trust and naivety into the hands of scammers. This is a common theme. The first step to making more money with crypto investments is to be very careful and not to lose your sense of alertness.
We’ve talked to three experts about how to protect one’s hard-earned money. There’s Dr. Anon, a member of the Cointelegraph staff. Before joining the company, the mafia tried to get him because of his knowledge of cryptography (as you may have gathered, his first security tip is to remain anonymous online to avoid letting bad guys know you even have crypto). People who work for Dr. Anon often travel for work. Dr. Anon had to think quickly to get out of a lot of dangerous places. In this video, he talks about why it’s important to stay low-key.
Don’t post online about your success in crypto
Dr. Anon:
There are still a lot of places in the world where people don’t know much about crypto.
They get their only information from stories about people who made a lot of money with Bitcoin or Shiba Inu.
When you travel to certain countries and say that you work or invest in crypto, the locals think of you as a „millionaire“ or „billionaire.“
It will make you much more likely to be robbed or kidnapped.
You should make up a story about what you are doing unless it’s someone you can trust.
In addition, some investors get very excited about their favorite coins, or they’re just plain crazy about them.
If you have a public social media account, be careful about posting critical comments, strong negative opinions, or facts about certain coins.
Some people who are very into the blockchain could doxx you, which means posting your phone number, address, spouse’s name, and so on to a wide (possibly crazed) audience.
If you have to say something that is very controversial on the internet, don’t say anything at all about who you are.
How to protect yourself from a $5 wrench attack
Dr. Anon: There are a lot of different ways someone can try to get your private keys, but one of the most common is when someone gets angry or threatens you and wants them to hand over your private keys. There are very few of these kinds of attacks that happen.
impromptu; that is, they are very complex and done by „professional,“ organized criminals.
Is it „your money, or your life“?
If you were kidnapped for crypto ransom, what would happen to you?
It’s likely that the people who did this already looked at your LinkedIn and Twitter profiles, as well as the public addresses on voter records, and planned the act for days, if not weeks, to make sure there would be enough time to get away.
There is only one way to get into a person’s private wallet: by giving them the keys. If someone doesn’t give them up, they can expect to get into trouble.
However, if you have a „decoy“ crypto wallet, you can significantly reduce the amount of money you lose. Don’t put all of your eggs in one basket.
One way to keep some of one’s crypto assets safe is to put a small amount in a separate, hard-to-lose account.
Then, if there were a robbery, kidnapping, or something else like that, you could just hand it over and call the police afterward.
It’s less of a loss than if you didn’t pay, and no amount of money is worth being tortured or killed for not paying.
Be on the lookout for signs of a rug pull.
Pulling the rug from under you
Personal safety isn’t the only thing that crypto investors have to worry about. DeFi rug pulls, hacks, phishing scams, and so on are all big problems for them.
In fact, Chainalysis says there were $2.8 billion worth of DeFi rug pulls in 2021, which is how much money was spent. Cointelegraph reached out to Hank Schless, senior manager of security solutions at Lookout, for his insight on crypto cybersecurity.
How to spot a potential DeFi rug pull
Hank Schless:
Rug pulls, which happen when a crypto developer or scammer stops working on a project and runs off with money from investors, happen a lot.
Most of the time, you can tell if a rug pull is going to happen by looking at how that crypto is traded.
In this case, if a small number of wallets hold a lot of the currency, or if its liquidity is unusually low, it could be a rug pull scheme.
Also, if the developer chooses to stay anonymous or the project seems to have come out of nowhere, this could be because the developer is malicious and wants to pull the rug out from under people for a quick money-grab.
Common traits of exchange hacks and protocol security breaches
Hank Schless: Cryptocurrency platform are attractive targets for a number of reasons, many that tie in with crimes against banks and their customers. Cryptocurrency platforms themselves have a lot of very private and personal information.
To sign up for most crypto platforms, people need to give their legal name, home address, and date of birth, among other things (and the last four digits of their Social Security number in the United States). They also need to link their account to a bank account and a debit card so that they can buy new crypto with cash.
phishing attacks that try to get the corporate login credentials of people who work at crypto platforms can be used by cybercriminals. To get into that employee’s account, an attacker needs these credentials. They can then move around the infrastructure until they find valuable data to steal, encrypt for a ransomware attack, or send customer funds to their crypto wallet.
The No. 1 thing to keep your crypto safe
Hank Schless: The first thing to do, which is not a new idea, is not to share your login information with anyone. As a personal investor, you trust trading platforms to keep your data safe. To keep attackers from getting their hands on your money, you should never click on a link or open an email that asks for your login. Send a text or an email to the platform you use if you get a message that says it’s from them and you want to check it out.
Keep your funds in cold storage — but even that is not completely secure
Hank Schless: There is no piece of hardware or software that is completely safe. There are going to be flaws in the code and the way things are made, which could lead to serious problems. But with enough time and money, anything can be hacked. There is a big risk when someone gets physical access to a cold wallet and can take the time to try to figure out its PIN. If you want to keep your money safe, though, you should still keep it in a cold wallet.
Social engineering and time pressures are ways to exploit the desire to get rich
Hank Schless:
When an attacker wants to get money from people, they know that crypto is new and unknown to most people. This could make people be less careful or have a hard time spotting red flags that show someone isn’t being honest. As a result, people have become very interested in crypto and the platforms that use it. They hope to make money from this new way of investing, but it hasn’t been as popular as it used to be.
There’s also a certain type of person who invests in cryptocurrencies, especially less well-known ones, because they want to take on more risk for a possible reward. Social engineering and the creation of fake apps that look real or promise better returns and more real-time data are now possible because of this.
Attackers will always try to put you in situations where you don’t have time to think about what’s going on. It’s important to take a step back, look at the situation, and look for ways to validate what’s going on.
If you’re ever asked to download an app or click on a link in this way, don’t do it. Keep yourself safe by having a mobile security app on your phone or tablet that will block connections to phishing sites and alert you if you download an app that isn’t safe.
A word on tax
Last but not least, even though most people in the crypto world don’t like taxes, almost all types of crypto acquisitions and sales are taxed events.
Despite the „Wild West“ regulatory environment, crypto investors can be hit with big fines if they don’t pay their taxes. So, it’s important to keep your tax affairs in order to protect your money.
In an interview with Cointelegraph, Andrew Henderson, an international tax lawyer and the founder of the Nomad Capitalist tax consulting firm, talked about how crypto tax transactions work and what could happen if you don’t follow the law.
Is there any way to legally avoid the tax bill?
Andrew Henderson: You pay taxes on pretty much everything you buy or sell. It’s like with fiat money:
If you live in the U.S. and get paid in euros, or even crypto, it doesn’t mean it’s not taxable. Other examples, like putting money into a DeFi pool or getting money back, are also income and taxed.
if you live in the U.S., have a green card, or are a citizen of any country in the world, you have to report your crypto income to the IRS each year.
It’s possible that you live in a country that taxes you based on where you live. This could be Germany, Canada, Australia, or pretty much every other Western country that isn’t the United States. They tax you on where you live and how much you make all over the world.
There’s no way to get around this: If you live in the country and keep all of your crypto in a bank account in Belize, that doesn’t help. You’ll still be taxed there. U.S. citizens who want to leave the country and no longer pay taxes must give up their citizenship or move out of the country and follow the rules to no longer be a taxpayer. Citizens of countries with residential taxes, like Canada and the European Union, must also follow the rules to no longer be a taxpayer.
Affluent investors can move to low-tax countries. Is there a trade-off?
Andrew Henderson:
I believe in the culture of a country, and I think that El Salvador is trying to move in the right direction, at least on the crypto front. El Salvador is a country that I’ve been to in the past. I found it to be an unworkable place. A few places in the world made me feel like I was in danger. San Salvador was one of those places for me. So, I think there’s a risk.
In a country like Estonia, when they announced their digital nomad visa, everyone thought that meant they would get citizenship, everyone could get a bank account, and there was no tax. This is not what happened, though. No, not at all. There is a tax that you have to pay. So, the Estonian residency visa was not nearly as good as it was said to be, but it was still a good deal.
The Cayman Islands and the United Arab Emirates are two examples of countries that only tax people in their own area. It’s tax-free or tax-exempt now that you can move to Portugal. You can also move to Italy, Greece, Malta, Ireland, and Malta now. All of these countries have tax breaks for at least a short time, at least. A lot of people have moved to Puerto Rico because they don’t have to pay as much in taxes there. It didn’t stop there. Puerto Rico raised the tax rate from 0% to 12.5%. You don’t have to go to places if you don’t like them; there are other places you can go.
Nomad Capitalist Live is the premier gathering of global citizens. Join us for four powerful days of “what’s working now” about creating a Plan B, second citizenship, offshore tax strategies, international investing, and the Nomad Capitalist Lifestyle.https://t.co/iqzErGYhQp
— Nomad Capitalist (@nomadcapitalist) January 14, 2022
The consequences of evading crypto taxes
Andrew Henderson: During their flight before they came to me, some people flew too close to the sun. People in Spain are very good at one thing, though. They can find you and get your money quickly. I mean, look at Wesley Snipes and other people who are good at what they do.
It could get you in trouble if you don’t report or lie on your tax return. Your passport might be taken away. You could lose your citizenship or passport. You’ll have a hard time getting a visa anywhere in the world if that happens. I don’t know if El Salvador would take you; some countries don’t ask for clean records.
Because even if you don’t pay and you haven’t been caught, it could hurt you in the long run. To move to Saint Lucia (a Caribbean island country), one of the questions is: Do you pay your taxes on time and in the right way? People can denaturalize you if you say yes, but later it turns out you’re not. You could become a stateless person if they do this. At the very least, you paid $100,000, and you didn’t get anything because you broke the deal. A lot of people will be affected by this.
To sum up: Small tricks can have a big payoff
We all love to show off our achievements in the crypto world, but remember that too much attention could put you at risk of a $5 wrench attack or being doxxed. You should keep as much of your public information hidden as possible, have a fake wallet in case you become the target of a crime, and give yourself a fake name when you’re in a less-affluent country.
Never give out your login information to anyone. Keep your money in a „cold wallet,“ which is a safe place. If you click on links in apps like Discord that lead to login pages, be careful, because these programs have been the target of phishing in the past, Even if the link is from an admin, his account can still be hacked. Always remember the official site link and cross-check it with the link you are clicking, even if the link is from an admin.
Keeping good records of your taxable transactions will make it easier when you file your tax returns in the end. People who live in countries that tax people on their income and capital gains can legally avoid paying taxes on crypto acquisitions and sales by moving to another country. In the long run, it’s better to use these methods and keep one’s mind at ease than to evade taxes and risk getting in trouble.
Frens, stay safe out there.
