Cryptocurrency, well known for its volatility in the market is a digital or virtual currency that has taken the world by the downpour.
There are numerous cryptocurrency brands, Bitcoin being the well-known one. Because of its lack of stability, absence of transparency, and no regulations, it is easy for anyone to develop a cryptocurrency. Currently, there are about 2500 cryptos available in the market, many of which are scams. As a result of this, it is so hard to spot the most profitable and favorable ones from the fake tokens.
Cryptocurrency is a delightful and profitable space, so you can't rule out the fact that scammers or fraudsters will leverage it as an opportunity to cheat inexperienced investors.
Due to the increase in popularity of cryptocurrency, lots of investors are investing in it and this has opened up a great opportunity for these criminals to commit fraud.
And so this guide was put together to give you the details of what cryptocurrency scams are, the common scams to watch out for and how you can avoid them.
Cryptocurrency Scams on the Rise
Cryptocurrency scams are simply investment fraud laid out to rob millions of people of their money, making it seem they are investing in the cryptocurrency world. The biggest cause of loss was accounted for by crypto scams while the second leading cause of loss is money stolen from cryptocurrency businesses.
Cryptocurrency fraudsters are successful in scamming due to their frequent advertisements on social media. These adverts offer fast and easy money-making schemes from crypto, which is just a means to lure people to obtain their personal information and steal their money. The critical aspect of these scams is that it is hard to trace and almost impossible to recover the money you lose to them.
Cryptocurrency scams are moving so fast behind the world of cryptocurrency which is growing rapidly. A huge amount of money has been stolen from millions of cryptocurrency investors. About $1.65 billion were lost to cryptocurrency-related fraud in 2018. Victims experienced a 79% rise in losses from cryptocurrency scams in 2020. Furthermore, these fraudsters stole almost $14 billion in crypto as of last year.
With its leap in recent years, the Federal Trade Commission has received close to 6800 complaints of these scams since October 2020 down to March last year. The fraudsters receive and deposit the funds they have stolen in the illegal wallet addresses they created to fraud people. There are several means through which these fraudsters use to scam and investors need to familiarize themselves with it.
10 Common Cryptocurrency Scams to Watch Out for in 2022
Here are the most common cryptocurrency scams to watch out for.
1. Fake Cryptocurrency Endorsement by Celebrities
To capture the awareness of prospective victims, these crypto scammers ascertain endorsement from famous artists, influencers, or business coaches/gurus. They do this by creating fake social media accounts or sometimes hack it. At times, it involves pitching nonexisting cryptocurrencies or investment schemes to beginner investors.
This type of scam can be so enticing in that they show you handouts and fliers that show endorsements from celebrities with familiar names.
2. Phishing Cryptocurrency Scam
This is one of the famous patterns of tricks used by scammers to target information about online wallets, precisely your crypto wallet private key. This is mostly done when you download a crypto wallet from unofficial websites.
These scammers also send email to people randomly offering an opportunity about crypto investment. Once you click on the email, it links you to their website that shows more promising and profitable information about the fake investment. Some scammers receive the money in crypto while some, in traditional currency. As soon as they receive your payment, they either block you or take down the website.
3. Pump and Dump Cryptocurrency Scam
This is a type of scam that involves fraudsters hyping a particular coin or crypto projects and encourages investors to buy or invest in them through social media or any false information.
As investors rush to buy the coin or invest in the project not wanting to miss the opportunity scale up the price of the coin, the scammers sell their share as they have accomplished their aim in inflating the price and then the coin value drops rapidly, leaving you with nothing.
4. Ponzi Cryptocurrency Scam
This is a type of investment in which fast-talking swindlers make an invitation to people longing to promise them fast and big returns. This scam doesn't give details on the investment but gives you a certain percentage return.
They operate on social media like WhatsApp, Telegram and so on. They get a referral code in which they share with investors hoping they join the group. Once they do, they give the investors more exciting news about it, give their bitcoin wallet to those that show interest and ask them to deposit. As soon as those that show interest deposit into the wallet, the scammers block them from the group and they become unreachable.
5. Fake Cryptocurrency Apps
This involves scammers putting different fake apps on popular places such as Google play and Apple store for people to download fraudulent programs. No matter how these programs are quickly discovered and removed, they still cause financial harm.
Bitcoin News recorded thousands of people who have downloaded fraudulent bitcoin apps. Investors on platforms as well as android users should be sensitive to knowing apps that can inflict harm to their money.
6. Giveaway Cryptocurrency Scam
This is a type of scam in which fraudsters promise to double the cryptocurrency sent to them. A fake social media account is used to send a clever and compelling messages about the cryptocurrency which would sound valid. This can cause people to transfer money hoping for quick return.
7. Fake Cryptocurrency Exchange
Fake exchange involves scammers luring people with emails or phone calls about a legitimate crypto exchange, promising them an extraordinary return. Many cybercriminals offer to duplicate or multiply the virtual currency given to them in other to draw the interest of potential victims. Well-crafted advertising from what appears to be a legitimate social media account may often generate trust and urgency.
Some will send pictures and videos of false bitcoin exchanges and how much return it brought. This is a bait to make investors rush into it hoping to make more money. Scammers sometimes use cryptocurrencies that are fast rising or new coins. When a crypto currency program offers to double your funds in one or two days you should beware of it.
8. Fake Cryptocurrency Websites
It is possible to find yourself on a fraudulent website even if you follow the advice of someone who is knowledgeable about cryptocurrencies.
Surprisingly, there are tons of fake startup websites on the internet today. However, these fake sites lack an important thing that supposedly should be a huge red flag for visitors and that is the HTTPS lock icon in the address bar.
It is also possible to be redirected from one platform to another even though the page looks exactly like the original. It is possible to click on a wrong letter or number in a URL, for example, which leads to a fake URL. Of course, you won't be able to access the investment option you've chosen via the corresponding platform.
9. Blackmail Cryptocurrency Scam
A blackmail scam is a type of scam where people are threatened and forced to pay a ransom in cryptocurrency. They do this by showing videos of you visiting adult websites and threatening to expose you to the police or the public.
10. Fake Cryptocurrency Press Release
This involves scammers succeeding in tricking journalists into releasing fake information. Investors rush into this when legitimate news sites produce information about famous companies accepting cryptocurrencies. Sometimes, it is associated with a press release based on a coin where people rush into it without double-checking and in the long run lose their money.
How to Avoid Cryptocurrency Scams
There's no way to stop these fraudsters from scamming but there's more of a way to stop investors from being scammed and one of the ways this can be is to know how to avoid the different kinds of scams used by these fraudsters. Below are ways to avoid crypto scam.
Take your Time to Do Thorough Research
Do not let anyone pressurize you into a quick investment. Any investment that is worth your money is worth your due diligence. If you come across any investment, and the person or company is asking you to pay instantly, take your time and do your research on them. Some might even offer you a discount just to convince you. Beware of this scammy tricks.
Take time to understand the fundamentals of crypto currency as a whole and study the coin bedore making any purchase.
Ignore odd Phone Calls and Emails
Be sensitive to calls and emails you receive out of the blue about crypto-investment opportunities. It might be a scam. Some people even send emails to tell you that you've just earned some amount of bitcoins without doing nothing. This is glaringly a scam. Do not give any stranger your personal information or fall victim to this tricks.
Beware of Social Media Adverts
Scammers often use social media adverts with endorsements from celebrities without their approval just to make their investments look valid.
Safeguard your wallet
Private keys that come with the wallet are needed to invest in cryptocurrencies. Anyone asking you to share your private key just to invest in crypto is a scammer. Run !!
Cryptocurrency scam activities is rapidly soaring as digital money becomes famous amidst investors. It's a natural feeling to want to buy into a top rising cryptocurrency at this time. However, becoming a victim of a crypto scam is shattering and that is why it is important to know different scams used and how to avoid them. With this information and your thorough analysis on cryptocurrencies, your cryptocurrency can be safe.