In the modern world, thieves highly value the cryptocurrency you own. When a cryptocurrency transaction is completed, one cannot undo it. It is also liquid and very portable. As a result, the digital world has been inundated by a surge of scams, including both time-honored favorites and new frauds targeted specifically at cryptocurrencies.
Crypto scams are emerging as the biggest threat to individual investors in 2022. Earlier this year, an annual survey of securities regulators by the North American Securities Administrators Association revealed that investments tied to cryptocurrencies and digital assets are by far the biggest threats facing individual investors in 2022.
Joseph Rotunda, Texas State Securities Board Enforcement Division director, warned crypto investors against crypto related fraud. Joseph said in a statement, “Before you jump into the crypto craze, be mindful that cryptocurrencies and other related financial products may be nothing more than public facing fronts for Ponzi schemes and other frauds.”
According to the UK-based financial security consultancy firm, MORGAN FINANCIAL RECOVERY, “the growing popularity of cryptocurrencies has given rise to several criminal actors who want to steal your crypto assets, by using fake websites, bogus apps, and harmful bots hiding on social media platforms.”
MORGAN provides investigative and legal solutions to victims of crypto scams. According to the company, Recovery from fraudsters can be difficult, and law enforcement often has problems identifying the scammers. Crypto recovery is not always guaranteed, however, hiring a professional recovery expert would increase your chances of doing it more quickly and securely.
Common Cryptocurrency Scams
Victims who actively engage in or use the new digital currency for transactions are the targets of crypto scams in which crooks steal their money.
Before beginning to invest in cryptocurrencies, investors should be on the lookout for the following crypto scams.
1. Market Manipulation
The intentional attempt to artificially sway or tamper with asset prices is known as market manipulation. Crypto scammers frequently manipulate markets to tip the odds in their favor and generate quick profits. This general word refers to several illegal trading practices, including:
● Spoofing: By placing fictitious buy or sell orders that are then canceled before being filled, spoofing gives the appearance that momentum is building. Crypto Scammers regularly use dummy accounts and trading bots to execute huge trades, giving the impression to other investors that demand is either rising or falling.
● Front-running: Trading based on anticipation of upcoming transactions is known as front-running. For example, miners or node administrators can see pending deals. They might then use their insider information to execute money-making trades before significant price movements.
● Churning: Churning is when a broker trades excessively in a client’s cryptocurrency account to earn more commissions. For managing cryptocurrency holdings, asset management companies may be paid. As a result, dishonest brokers might use a commission-based payment structure to exploit unwitting customers. In addition to unjustified costs, churning may result in unnecessary tax liabilities for the affected people.
Market manipulation is more likely to occur in cryptocurrency markets because they are still relatively undeveloped and have less regulation. There are techniques cryptocurrency traders can adopt to avoid falling for these frauds, though.
How to avoid market tampering:
● Be cautious of tiny market capitalization cryptocurrencies whose prices unexpectedly increase significantly despite their typically limited trading volume.
● Watch out for “false news” that promotes specific coins on social media.
● Before purchasing, carefully investigate the credentials of any cryptocurrency.
2. Ponzi and pyramid schemes
Ponzi and pyramid schemes are a little different from one another, yet because of their commonalities, we’re classifying them together. In both situations, the con depends on a participant recruiting new members with the assurance of enormous rewards.
● Ponzi schemes: You may learn of an investment opportunity with assured rewards in a Ponzi scheme (this is your first warning sign!). This scam frequently appears to be a portfolio management service. However, the “returns” obtained are just the capital of other investors, so there isn’t any secret formula at play here.
● Pyramid schemes: A little bit more labor is required of individuals interested in a pyramid scheme. The organizer is at the summit of the Pyramid. They will hire a specific number of individuals to work below them, and each will employ a different number of individuals, etc. You end up with a massive structure that expands rapidly and ramifies when new layers are added (hence the term Pyramid).
How to avoid Ponzi/pyramid schemes
● Watch out for bitcoin initiatives that urge you to bring on other investors so you can earn more money.
● Never put your faith in a scheme that offers rewards that seem unreal.
3. Fake Mobile Apps
If you’re not careful, it’s easy to ignore the warning signs on phony apps. These scams frequently provide their victim’s instructions to download harmful software, some of which look well-known.
Once the user downloads a malicious program, everything could seem to work as it should. But some apps are specifically designed to take your cryptocurrency. Unfortunately, there have been many cases in the crypto business where users downloaded bogus apps whose developers pretended to be a well-known crypto organization.
In this case, the user sends money to the fraudster’s address when they are instructed to fund their wallet or receive payments. So naturally, there is no way to reverse a transfer of funds after it has been made.
How to avoid it:
● To safeguard yourself against malware, regularly update your antivirus software.
● Please don’t download or install software unless you are sure it comes from a reliable, trustworthy source.
● Keep suspicious attachments closed.
Even those new to the crypto industry will likely be familiar with phishing. To obtain personal information from victims, the fraudster frequently assumes the identity of another person or business. It can happen across various channels, including the phone, email, fake websites, or messaging applications. Scams involving messaging apps are particularly prevalent in the world of cryptocurrencies.
Scammers don’t follow a set strategy while attempting to obtain personal information. For example, you can receive emails alerting you to an issue with your exchange account that has to be fixed by clicking a link in the email. This link will take you to a phony website that looks just like the real one and ask you to log in. The attacker will then be able to take your login information and some of your cryptocurrency this way.
How to avoid it:
● Verify URLs twice to make sure you’re seeing the right website at all times.
● Avoid clicking on dodgy links sent to you via email.
● Never divulge your secret password.
5. Fraudulent initial coin offerings (ICOs)
Each month, dozens of new cryptocurrencies are introduced, along with several initial coin offers (ICOs). After all, if investors seem to be willing to invest in a highly speculative cryptocurrency, they also appear to be doing the same when it comes to phony tokens or ICOs.
An initial coin offering (ICO) is the cryptocurrency counterpart of an initial public offering (IPO) for a stock. Companies can raise funds through an ICO to support a cryptocurrency development, such as a token, app, or pertinent service. The investor receives freshly minted coins in return for pledging funds.
Companies that pursue ICOs aren’t always in the same position as those that seek IPOs, which are often for well-established private firms. It can be a brand-new company with no prior working experience, making it challenging to distinguish between a legitimate offer and a scam. Like rug pull, ICO scams take early investors’ money to quit the project quickly.
How to avoid it:
● Before investing in any ICO, do your homework. Look at the project’s team, whitepaper, use case for the currency, underlying technology, and token sale details.
The procedures listed below can enable you to be as sure as you can be that you’re not falling for a scam, even if there’s no assurance that any cryptocurrency or blockchain-related firm will be legitimate or successful.
Discover the Team: Any ICO or cryptocurrency’s administrative and development teams are arguably the most crucial success factors. Major players control the bitcoin market, and superstar developers are capable of launching or breaking new projects merely by being named on a development team. Because of this, false founders and biographies for scammers’ ventures are becoming increasingly popular.
Study the Whitepaper: The skeleton of the project is a whitepaper for an ICO or cryptocurrency. Any blockchain technology project should outline its origins, objectives, strategy, issues, and implementation schedule in a whitepaper. Whitepapers may be highly illuminating; even businesses with fancy websites may not have a solid conceptual foundation.
Consider the Token Sale: Any ICO will rely on a token or payment system to make the crowdfunding process easier. Potential investors can easily observe the system itself and the status of the token sale thanks to legitimate businesses and endeavors. So watch out for the token sale numbers as the ICO progresses. Even better, keep track of the token sale’s development over time.
What Are Some Statements That Could Indicate a Potential Crypto Scam?
Even if there is a celebrity endorsement or testimonials, since these may be easily falsified, don’t accept such promises since they imply a scam.
● Large payouts with “guaranteed” returns are a significant warning sign.
● Free money:Free money promises are always false, whether made in cash or cryptocurrencies.
● Large claims without backing or justifications: Be incredibly cautious of such assertions.
Here are some additional suggestions for preventing cryptocurrency scams.
● If you don’t fully grasp how a virtual currency or cryptocurrency works, avoid investing money and never gamble with money you can’t afford to lose.
● Never buy or sell cryptocurrencies based on recommendations from someone you’ve only interacted with online.
● Do not trust posts on social media announcing cryptocurrency giveaways.
● Keep your “private keys,” which give you access to your virtual cash, in a secure location, and don’t share them with anyone (preferably offline, where they cannot be hacked)
In today’s digital age, adopting cryptocurrencies has become crucial, but defending your company from crypto scams is just as vital to maintaining your brand’s reputation. Therefore, people must always be on the lookout for scams employed by these parties to avoid falling victim to the most prevalent ones.