Cryptocurrency and scams are inextricably linked, as the nature of cryptocurrency—irreversible, anonymous, and global transactions—serves as a breeding ground for fraudulent activities. The absence of a robust legislative framework further exacerbates the situation, enabling fraudulent startups, digital asset exchanges, and individuals to exploit various schemes for illicit gains.
Scam Schemes You Should Know
Digital money, however, brings with it not only advantages for users in the form of simplification of payments and transfers of funds around the world, but also the risk of losing savings, for example, due to the fact that fraudsters take possession of a person’s digital profile, log in and password. In addition to hacker attacks on users’ electronic devices, there is a threat of hacking into the data storage center where citizens’ electronic wallets will be located. Let’s review other common ways people lose their cryptocurrency.
Pump and Dump
The fraud scheme here is quite simple and not new. In fact, this type of manipulation was used even before the advent of cryptocurrencies in the stock market. The scammers initially buy crypto at a low price, being careful not to create a rise in price. The organizers of a fraudulent scheme most often choose little-known cryptocurrencies (but this does not mean that the same cannot be done with well-known ones, the scammers just need more money for this.
The second stage is just Pump. Fraudsters are starting to spread “exclusive” information that this particular coin is about to rise in price. This is done through a huge number of “expert” groups on social networks or bloggers. If there are enough people who believe the information and want to get rich instantly, the cryptocurrency really begins to rise in price. Then, the fraudsters immediately sell all their coins, and the price goes down.
Using this scheme, attackers create an asset (often disguising it as popular tokens), for which they launch a trading pair and pool on a decentralized exchange. Other users add their funds. As a result, the organizers of the scheme abruptly withdraw them, leaving other users with depreciated tokens.
ICOs are used by all cryptocurrency companies because it is a way to receive investments for the further development of the project. But fraudulent sites also promise a discount on new cryptocurrencies in exchange for investments in existing cryptocurrencies or real money. There are many real cases where pre-sales turned out to be fraudulent: to deceive investors, the attackers did not skimp on advertising and quality design of their website.
Fake projects lack a road map, are unable to define their goals and objectives, and offer no true value. They merely entice with enormous payouts, but in the end, they steal cryptocurrencies and money, leaving investors with nothing.
A so-called “investment manager” contacts you out of the blue. They promise to increase your money but only if you buy cryptocurrency and transfer it to their online account. The investment website they direct you to looks real, but it is actually fake, just like their promises. If you log into your “investment account” you will not be able to withdraw your money at all or you will only pay high fees.
Scammers make big claims without details or explanation. No matter what the investment, learn how it works and ask questions about where your money is going. Honest investment managers or advisors want to share this information and will back it up with details.
The more popular cryptocurrency becomes, the more people try to get their hands on it. Many attackers continue to try to obtain BTC and other cryptocurrencies by fraudulent means. They create fake exchanges with attractive prices, and visitors think that they are getting a very good deal.
According to CoinMarketCap, there are now more than 300 cryptocurrency exchanges. However, not all exchanges have proven to be reliable. Many of them were hacked by hackers, and some turned out to be scams themselves. Perhaps the most famous example is Mt.Gox.
This scammers’ scheme is old and simple. Fraudsters use social media to advertise luxury goods – high-quality clothing and electronics brands such as Gucci, Louis Vuitton, and Apple, “selling” them at very “bargain” prices. Interested customers contact the seller via messaging service, seeking to negotiate a deal.
Using various excuses, they convince buyers to pay with cryptocurrency. For example, they cite the fact that they move between different countries and that it is expensive for them to deal with different banking service providers. As soon as a person sends crypto coins, the seller stops responding to messages and disappears from the platform altogether. Needless to say, the buyer will never receive the “purchased” product.
Access to Crypto Wallet
A cryptocurrency wallet is considered a secure means of storing investments, which is difficult to hack, but this does not stop scammers who have come up with dozens of ways to extract information from a person and steal their tokens.
Most often, people hand over account access keys to scammers themselves or inadvertently install malware that steals data from their computers. All these methods of theft can be countered if you follow the basic rules of cybersecurity: do not ignore updates, do not be lazy to come up with a strong password, correctly configure permissions for equipment and applications, and do not transfer data via email.
How to Avoid Cryptocurrency Scams
When it comes to cryptocurrency scams, people are left alone with their problems. Cryptocurrency scammers are difficult to track due to the anonymity and irreversibility of transactions. It is almost impossible to recover stolen funds.
When you choose an exchange or a crypto project to invest in or want to make a purchase with crypto, study all the available information and check what is known about the other party. You should not believe any “insider” or “exclusive” information about crypto, especially if it is presented through emotions. You should not forget to look at reviews, find out about the developer/providers/sellers, and check whether the company is legal. Choose trusted crypto exchanges like Binance to trade or crypto platforms like CoinDepo to safely store and earn passive income from your crypto holdings.
CoinDepo is a cutting-edge financial services provider specializing in lending crypto in the digital asset space. Users can earn guaranteed interest income on cryptocurrencies and stablecoins by depositing them into Compound Interest Accounts. The interest rates offered by CoinDepo are the most competitive in the industry, reaching up to 18% per annum + compound interest on regular cryptocurrencies and up to 24% per annum + compound interest on stablecoins.
To avoid potential cryptocurrency scams, it’s crucial to familiarize yourself with common warning signs and only engage with reputable crypto lending providers like CoinDepo.