The advancement of blockchain technology and the cryptocurrency industry is fascinating. Technical advancements and the increasingly emerging modern trading model continue to draw huge crowds, but scammers are among them.
Over the years, a number of cryptocurrencies have made millionaires. They've built themselves as a lucrative venture for those looking to make a long-term investment.
This rise in valuation and adoption of core business has, however, had some unintended consequences. Although many people have good intentions and want to invest in order to make a profit and be a part of shaping the future of finance, some criminals cheat their investments.
Since the number of cases where people lose their cryptocurrencies due to fraudsters and robbers is steadily increasing, potential investors are often hesitant to invest in this burgeoning industry. These investments are also being avoided by older investors.
Common Crypto Scams
Fake Initial Coin Offerings
Building and marketing a bogus Primary Coin Offer project is the simplest way to pull off a con. The initial coin offering (ICO) has become a popular way for legal businesses to raise funds by crowdfunding.
Many fraudulent ICOs produce a white paper, launch a social media marketing campaign, post token details on stock exchanges, and hold a phoney token sale.
As a result, many new investors are duped by the prospect of a 1000 percent profit from these ICOs and end up purchasing worthless tokens.
In a 2017 report, 80 percent of ICOs were found to be fraudulent. Confido was a famous one.
They raised $375,000 in November 2017 and then vanished shortly after. The price of the coin dropped from $0.60 to $0.10 in less than two hours after word got out. After a few hours, it fell to a fraction of a percent.
An even bigger ruse Centra was an ICO that raised $32 million and was sponsored by DJ Khaled and Floyd Maver. The two founders were arrested in April 2018, and the coin, like Confido, lost almost all of its value after the news was published.
Cloned Fishing Website
It's crucial. With a little caution, the aforementioned con artists can be stopped. Phishing attacks, on the other hand, are difficult to detect.
These users post pages that look identical to the original site or a completely new site that collects the personal information and then uses it to hack into other accounts.
To steal funds and personal information, accurate copies of legitimate ventures, such as exchanges or ICO pages, are used.
Often double-check the URL and save the URLs of the websites you frequent. Cloned sites will use identical letters in their URLs to make them appear similar to the real URL at first glance, such as “m” instead of “n,” “0” instead of “o,” and so on.
Fake Support Team
Another type of phishing campaign involves impersonating a project support team and requesting personal information, deposits, or passwords.
You try to get answers to your questions from the stock exchange's telecommunication groups or administrators when you have a problem with them. These con artists are on the lookout for such people.
Fake Exchanges and Apps
Shadow exchanges abound in the cryptocurrency world, appearing and disappearing seemingly overnight. You must be extremely vigilant when dealing with these exchanges because they can involve your coins or money. Alternatively, after you deposit money, some of these exchanges charge exorbitant commissions or find withdrawing money extremely difficult.
Any of these exchanges make it appealing for new traders to use their site by charging no transaction fees or trading commissions at all. Instead, they make money by charging a fee to list any token (including bogus ICOs) on their website, while failing to provide enough trading liquidity for traders to freely buy and sell tokens.
Some of these tokens are finally frozen on these exchanges, leaving traders with their "evil coins" that they can't sell.
Some of these ICO tokens can even introduce security vulnerabilities in the exchange, jeopardising the database's overall security.
Cloud Mining Scams
Due to the higher cost of mining equipment and energy for individuals, cloud mining has grown in popularity, providing scammers with yet another simple way to defraud.
MiningMax, a cloud mining service, is a well-known example. For two years, it offered people $3,200 in exchange for a daily return on investment and a $200 referral fee for each personally hired investor, making the scheme appealing and understandable. The website defrauded investors out of up to $250 million.
Anyone with even a passing interest in cryptocurrencies has most likely heard of mining. If you're new to cryptography, you're probably confused about how mining works. As a result, these con artists attempt to sell your mining plans as lucrative investment opportunities.
Ponzi, Pyramid and Multi level
Ponzi schemes are investment frauds in which current investors are paid expected returns from funds contributed by new investors.
Bitconnect was the most well-known cryptography Ponzi scheme. Surprisingly, it was able to stay active for a year before the biggest exit scam ever.
Bitconnect had a market value of about $2 billion and a coin price of about $320 at the time of its demise. It fell to $6 in less than 24 hours, and the marginal market price was reduced to $40 million.
Bitconnect was a huge hit, and its promotion was meticulously planned, as is typical of successful pyramid schemes.
Finally, always think with your head, because if anything seems to be too good to be true, it most likely is.
Multi-level marketing's forefathers had good ideas. They used this marketing strategy to get their goods and services in front of a large number of people, resulting in increased revenue and business growth.
However, scammers used this marketing tactic in their illegal activities after seeing its popularity.
Fake Pool and OTC scams
Off-exchange transfers are sent in the appropriate cryptocurrency. You don't have a go-between. The transaction has a set cost. Fraudsters can deceive trusting users once more by offering unbelievable rates to buy or sell cryptocurrency.
Fake pools are normally coordinated using a telegram or “Discord” community chats. These organisations provide allocations for upcoming ICOs and ask you to submit money, typically in the form of Ethereum, to contribute to a pool that will later receive ICO tokens.
While some of these organisations are legitimate and require a high monthly fee, KYC, and a particular skill set to enter, the majority of them are simply scams.
Furthermore, due to the anonymous nature of cryptography, there is no way to get a "refund" if you submit money to a fake pool.
Pumps and Dumps
Pumps and dumps are groups of people who control the price and volume of a coin, typically a lesser-known coin. They first pump the price in a short period of time by arranging large-scale purchases, and then dump it.
The catch is that these classes are divided into tiers, with higher levels knowing which coin only swings to lower levels after they have purchased it.
These organisations use low demand limits to control coin values. It gives a digital token a "false agiotage." It is achieved by falsely inflating its value and trading price until you can make a profit.
Traders who act first benefit, while those who are a little late suffer a sudden drop in prices in a matter of minutes.
They often collaborate in "Telegram" or "Slack" groups. While it appears to be a fast way to make money, daily traders are typically slower than these groups that illegally manipulate the market.
Final Thoughts
Despite the numerous scams, schemes, and perpetrators of various fraudulent activities that exist in the cryptographic room, the best approach is a healthy dose of cynicism and caution.
Despite the large number of fraudulent ventures, there are numerous trustworthy and well-managed organisations and groups that invest in cryptographic currency at a low cost.
And there you have it; you've become more educated about scammers. A forewarning is preferable to a cure. If you've been duped, there might be no way to get your money back, so be cautious.
Never send money or cryptocurrency to anyone as a general rule, and you will never be duped.
