Avoiding The Nano S Ledger Scam

Investing in any market carries risk, however, the risks can be far greater when investing in cryptocurrencies but the rewards can also be far greater than other conventional investments. To put things into plain perspective; If you invest your capital with the banks in an ISA account, you might see a 3-6% return Per annum... but had you invested your capital in Ripple (XRP) in 2017 and you could have potentially seen a return of 55,000% for the same period. Currently, there is no other investment opportunity as rewarding as cryptocurrencies but unfortunately, it doesn't come without the risks.

There are endless ways of being scammed in the crypto markets and even myself - an experienced trader came very close to being scammed, so I wanted to take a moment to share my experience with you all and hopefully, it will save you readers from falling for the tricks people are using.

Buying cryptocurrencies isn't really that hard - in fact, on Coinbase you can buy some of the major cryptocurrencies like Bitcoin, Bitcoin Cash, Litecoin and Ethereum using your bank card. If you're looking for more altcoins, you will have to go to another exchange like Bitfinex, Bittrex and Poloniex to name a few - they won't accept your fiat currency, so you must first purchase BTC, Eth or Ltc through Coinbase or a similar service and then have the funds transferred to your prefered exchange.

Can I Keep My Coins On The Exchange Safe?

The simple answer? - No!
This is an unregulated market and the exchanges are clever in that they don't accept your fiat currency, otherwise, the FCA (Former FSA UK) would have raised their eyebrows to it a long time ago. There has been an overwhelming number of reports of users losing all their invested coins, getting locked out of their accounts for no reasons and even the exchanges themselves have reported multiple hacks where thousands of bitcoins have been stolen. I do believe the hacks are real because wherever there is money, there will be money-hungry criminals - however, at the same time I do not believe the exchanges completely have the users best interests at heart.

An exchange can quite easily say 'Sorry, we have been hacked and your coins are gone... goodbye' there is no one for you to turn to and in fact, if you run a quick search online you'll find endless pages of reports and comments from users that have lost very large investments.

So How Can I Protect My Investment?

Never keep your coins in the exchange for longer than necessary. It's as simple as that.
Cold storage using a Hardware wallet like the Nano S Ledger is going to be the most safest way you can store away your coins. If you lose your Nano S Ledger device, you can purchase another one and safely restore the lost coins using your 24-word Seed Recovery Phrase. The company Ledger actively works to update the Ledger device with new firmware and add new coin compatibilities. To see a current list of compatible coins, click here.

How I Nearly Get Scammed

I consider myself to be a pretty smart tech-geek; I've been building computers + websites for the last 16+ years, I've repaired automotive electronic parts (ECU's) and more recently consider myself to be a successful Forex trader - so I'm pretty comfortable around technology.

I've been thinking for a few months about getting myself a Nano S Ledger for cold storage and the idea was that I would buy on an exchange and transfer them straight over but I've just been really lazy about it. With the rising demand for the Ledger device I've seen an increase in the prices as well - before Xmas I could get a used Nano S Ledger for around £60 but now it's £110-£130!

Anyway, I went ahead and purchased one because Ledger themselves are not shipping any out until March and I don't want to keep my coins on the exchange for another two months. I've built up quite a portfolio and for the sake of saving myself £40 waiting for Ledger to ship in March, it's not worth the risk if the exhange is 'hacked' in that time.

My Nano S Ledger device arrived today and I was really excited to get started with it. The device came without the instructions manual (the seller did say he couldn't find it) but that didn't bother me. I powered it up and setup my pin etc and it said I'm ready to go... I saw options for Bitcoin, Litecoin, Ethereum, Steller, Ripple and Bitcoin Cash etc, all pre-loaded for total ease.. so I thought.

I sent a test transaction of 25 Ripples (XRP) to the device to ensure all was ok before I began doing large transactions to move my portfolio over until I realised, actually the device did not present me with a recovery seed!

Without a recovery seed, if the device was ever lost/stolen/damaged I would lose my entire investment and Ledger would have no way of helping me recover my losses due to the nature of the encryption on the account.

I did a quick search online and found an article about a reddit user who goes by the name of 'moodyrocket' - he also purchased a Nano S Ledger from ebaY, which arrived pre-configured and thinking nothing of it... he transferred his portfolio across. I believe the value of his portfolio was around $34k at the time. - The previous owner of the Ledger device used the recovery seed to gain access to 'moodyrocket's' account and withdraw all his assets to another device address and this was not the only case. There are many cases online where people have been victims to fraud of this nature.

Of course, on reading this I reversed the test transaction and then reset the factory settings on the device and re-installed all the applications again using a fresh install of the Ledger app from the manufacturers website. During the sign up process, I was presented with my recovery seed phrase and also the option to create a new pin.

I believe there have been attempts to modify the hardware inside Ledger devices as well but usually, a hardware modification would bring up a warning notice when connected to the Ledger app to notify the user that the device is not in it's original state. If you do see this warning, proceed with caution - my advice would be to contact Ledger before sending any coins to the device to ensure it is safe to do so.

What Is The Safest Option For Hodling?

Cold storage using a hardware wallet like the Nano S Ledger is definitely the most safest way to store your cryptocurrency investments. If you can get a new device direct from the manufacturer or an 'Authorised' distributor then this is the best way to go about it.

If they are out of stock and like me, you cannot wait - then buying a used Ledger device is fine but regardless what state the device arrives in (pre-configured or not) I strongly recommend you run a factory reset on the device and then re-install all apps and firmware updates using a fresh install of the Ledger Device Manager direct from the manufacturer website.

And Remember - If you see a notice warning you that the device may have been tampered with - Do NOT send coins to it until you have had it checked out by Ledger.

I hope this information has been helpful - if you've had any experience where you think there was a potential security breach and you've felt that details may/could have been compromised, please share your experiences below and hopefully we can learn from eachothers experiences to outsmart the crooks!