Online trading has but one hot topic: crypto; an intelligent investor is sure to take their fair share of this piping hot cake. But often, this idea of quick riches robs one blind by exposing them to crooks leading them right into the ditch of cryptocurrency scams.
The volatile cryptocurrency market and its expected impact on the future of finance evoke quite a few similar sentiments. The alluring cryptocurrency market attracts retail investors, speculators, and various institutional investors and scammers.
What are Cryptocurrency Scams?
Cryptocurrency is a digital representation of value with no regulation or ownership by any government or bank. Regardless, it is used to make purchases and can be exchanged for US dollars or other currencies.
Virtual currency’s value is solely determined by supply and demand, creating wild extremes for investors. Either they gain grand profits or suffer from huge losses. Moreover, the regulation on crypto investments is not as robust as traditional ones.
Cryptocurrency scams have recently seen a new high, with FTC receiving around 6,800 crypto scam complaints from October 2020 to March.
Cryptocurrency Scams can be bifurcated into two main categories.
- First, to obtain account or security information via socially engineered initiatives.
- To make people send cryptocurrency to a compromised digital wallet.
Types of Cryptocurrency Scams:
Do not get hypnotized with the high-tech glitter of cryptocurrency; most scams are often the retouched versions of classic scams.
Some scammers pose as legitimate crypto traders or shady exchanges to entice people into giving them money. Or they pitch people with the “IRS approved” individual retirement accounts in cryptocurrency. At times, they even hack into the digital wallets of people.
However, if you fall victim to any of the following scams, know that many firms will help you recover from a cryptocurrency scam. They have trained officials who will guide you throughout the case and ensure that your money is safely back into your account.
Bogus Websites
Scammers often set up phony sites with fake testimonials and make fancy promises, guaranteeing huge returns if you keep investing.
Celebrity Endorsements
Scammers often pose as billionaires who promise to multiply your investment in a virtual currency. They may even use messaging apps or chat rooms to initiate rumors that some famous mogul has invested in a particular cryptocurrency. Then, after the investors buy and the coin price shoots up, the scammers sell their stake.
Virtual Ponzi Schemes
The scammers also take advantage of investors by selling investment opportunities that don’t exist. In addition, they create the illusion of significant returns by paying the old investors with new investors’ funds.
Romance and Online Dating Scams
Crooks now persuade people they meet on social media or dating apps to trade in crypto.
How to Identify Cryptocurrency Scams?
Reports of scams related to crypto have spiraled like anything the last year, with thousands of people reporting more than $80 million. The aggressive rise in reported crypto scams leads us to the inevitable now: awareness about the scams and how you can recognize them from a safe distance. Also, make sure that you check the Commodity Futures Trading Commission (CFTC), to ensure that the broker is not a scammer.
The Red Flags
Sudden Surge in Prices
If coins with no background reach an extraordinary high out of the blue, it is a red flag. For example, the squid token, a coin inspired by a very prominent Netflix series Squid Game soared to over $2856, later turned out to be a scam.
Exaggerated Promises
The high investment returns, fancy promises, zero risks, etc., are clear warning signals in the crypto arena. Scammers try to lure innocent investors by enticing them with high returns. Although there are cryptocurrencies with a good history of high returns, the market is volatile, and no one can guarantee you high returns.
Validation Requests Via Coins
At times, scammers promise cryptocurrency giveaways to ask you for a few coins stating they need it to validate address or avail of an offer. However, don’t go for it since they are likely scams and ask multiple users to make a decent collection of coins.
Suspicious Activity on Social Media
Do not trust investment opportunity messages from celebrities or well-known personalities; scammers often hack their accounts to attract investments. Be wary of such testimonials since it is very likely there is an imposter behind them. Instead, verify the background of the sellers.
Always verify if the individuals and firms offering the investment are licensed or registered.
Aggressive promotions on YouTube or Telegram
Aggressive promotions of a new coin on YouTube and Telegram often mean that it is fake. They try to lure the investors in by enticing them with the idea of great wealth. Too good to be true often means it’s false. Conduct rigorous research on the founders and the project. Do not fall for market rumors.
Learn everything about how blockchain and cryptosystems operate to spot the red flags and avoid falling prey to scams.
Summing Up
If you can stomach risks, cryptocurrency is for you. Unfortunately, as crypto gains momentum and grows in complexity and scale, it will attract scammers. Now you know the standard way the scammers get to your information and money. Hopefully, you can now spot a cryptocurrency scam from a safe distance before it affects you harmfully.
