According to Jeff Lunglhofer, Coinbase’s chief information security officer, social engineering scams are currently the biggest threat to crypto users and holders.
Lunglhofer spoke to crypto.news in an interview about the rise of such scams, which are a threat to both novice and experienced crypto users.
“Social engineering scams are by far the number one threat to crypto enthusiasts and crypto holders and investors today,” said Lunglhofer.
Three ways to avoid social engineering scams
Lunglhofer emphasized that although these scams are not unique to the crypto sector, their frequency has increased over the past several years. He suggested two primary precautions to avoid crypto scams.
First, ignore any unsolicited calls claiming to be from reputable exchanges — like Coinbase or Kraken. If you receive a call, hang up, go directly to the company’s website, and contact them through official channels.
This could prevent “up to 80%” of social engineering scams, according to Lunglhofer.
Secondly, crypto users must understand the difference between self-custody and exchange custody. With self-custody, like Coinbase Wallet, you control your assets and must protect your seed phrases, which should never be shared.
“You control [your wallet] — we have no control over that.”
Exchange custody is a type of crypto wallet where a third-party service manages your private keys. This provider is responsible for the security and management of your crypto assets.
A third piece of advice Lunglhofer shared is to avoid sending crypto to anyone you don’t personally know. Scammers exploit emotional connections through romance scams, especially in online settings where relationships often begin virtually.
“I feel like, particularly post COVID, people were just lonely, and were vulnerable to [romance scams], and it’s heartbreaking to see people go through that. They just they just want to be loved.”
The rise of deepfake technology
Lunglhofer noted the growing threat of deepfake technology, which scammers use to impersonate leaders and trick individuals into sending assets to fraudulent wallets. Lunglhofer stressed verifying video interactions, especially as AI-driven scams become more convincing, such as fake calls from family members asking for money.
Coinbase is seeing AI-use cases to detect fraud, according to Lunglhofer. Coinbase is also using machine learning to monitor user activities and support chats for signs of scams or account takeovers.
Cooperation between crypto exchanges
Beyond social engineering scams and deepfakes, Lunglhofer also pointed to broader cybersecurity challenges within the crypto space, including better cooperation among cryptocurrency platforms.
Coinbase is involved in initiatives like the Crypto Information Sharing and Analysis Center, which fosters collaboration between industry players to share information on trends, scams, and security vulnerabilities.
Lunglhofer, a board member of Crypto ISAC, believes that such partnerships are crucial to improving the security of the entire crypto ecosystem.
“What a great opportunity for crypto companies to come together to share information… share information about scams, trends that we’re seeing or vulnerabilities that might affect the broader crypto ecosystem.”
Cash is king in illicit activity
Lunglhofer also addressed concerns about crypto’s reputation, particularly regarding its use in illicit activities. He pointed out that while crypto like Bitcoin (BTC) has been associated with criminal activity, this narrative is often exaggerated.
“If you want to commit a crime and remain anonymous, the last place you’d do it is on a blockchain. The great thing about blockchain is every transaction lives forever. It’s available for analysis and perpetual review and transparency.”
