Binance CEO warns crypto community about new scam

Binance CEO, Changpeng “CZ” Zhaoalerted his followers on X — formerly Twitter — of a sophisticated and increasingly popular scam targeting the cryptocurrency community, using fake wallet addresses to scam users.

The scheme generates addresses with the same start and end characters as the user’s original address. After creating a duplicate address, the scammer sends useless transactions that will be reflected in the victim’s transaction history. If the victim copies and pastes an address from one of the transactions “dust”the funds will be sent to the scammer.

According to Zhao, The victim of this scam on August 1st was a very experienced cryptocurrency user who sent $20 million worth of cryptocurrency to a dust address. The user realized the error immediately after the transaction and asked Binance to freeze Tether (USDT) before it gets to the scammer.

I want to share this (fortunately) unfortunate but very clever and close scam incident from yesterday. Saved $20 million. I hope this can also save you one day.

The scammers are now so good that they generate addresses with the same initial and final letters, which is what most people check … https://t.co/DFpdX8aNay

— CZ Binance (@cz_binance) August 2, 2023

Fraud can be avoided by using a blockchain domain such as the Ethereum name service. Blockchain domains are similar to email addresses, allowing users to identify wallets using ordinary words instead of a long string of letters and numbers. Binance users can purchase domains through the platform.

Also, security experts do not recommend users to copy and paste the addresses of applications for transferring funds. Users are also encouraged to use strong and unique passwords for cryptocurrency accounts and enable two-factor authentication in apps.

Binance’s timely response helped the user avoid a major security incident, but others affected were less fortunate. Replying to Zhao’s thread, another user informed sending $20,000 to a dust address in a similar scam. However, after contacting Binance support within 20 minutes of the transaction, no option to freeze funds was provided. After almost 12 hours, the victim’s funds were transferred to the cryptocurrency mixer without the possibility of recovery.

Coinbase users have reported similar security incidents. Various victims have reported scams and phishing attacks related to the company’s services and applications, including allegations that scammers contact customers using the exchange’s domain name.

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