What to know about Cryptocurrency Scams and how to defend yourself?

In this article, we will see about cryptocurrency and cryptocurrency scams, cryptocurrency scam types, and how we can defend ourselves from crypto scams.

A cryptocurrency is a digital currency or a form of digital payment that does not require a bank or government for its transaction to be verified. Unlike other currencies, where a centralized authority verifies transactions, transactions based on cryptocurrencies are validated by a decentralized system. The system is also responsible for maintaining all the records related to the cryptocurrency and also for issuing a new unit.

The process by which digital currencies are generated is called mining. It is the method where computer power is used to solve mathematical problems and, thus, create coins. This digital currency derived its name from encryption, as it depends on encryption algorithms for its security and safety. This algorithm makes the currency nearly impossible to imitate or double-spend. It also enables secure online payments. Cryptocurrency allows investors to receive and send payments digitally from any corner of the world. It can be used to buy goods that are used in day-to-day affairs or to pay for regular services, but most people treat it as an investment option.

The 17 Biggest Cryptocurrency Scams: Why They Happen

biggest cryptocurrency scams
biggest cryptocurrency scams

In the period of digital advancement, digital currencies have become a popular mode of investment. Thus, making digital currencies susceptible to online scammers. Where the online perpetrators attempt online forgery, sharp practices on a regular basis, and lack of regulations or interference by banks or any third party has paved the path for cryptocurrency scams, making them more prevalent in this field. The maneuver of cryptocurrency fraudsters thrives on investors’ gullibility. However, being well informed about these scammers’ strategies can restrain these cryptocurrency scams.

Here are some scammers’ strategies to keep in mind,

  1. Be wary of illegitimate websites
  2. Malicious links and Phishing scam
  3. Pump and Dump: A common investment scam
  4. Squid Coin scam
  5. Affinity Group Fraudulence
  6. Extortion scam or Blackmail scam
  7. Scammers impersonating Government agencies
  8. Fraud related to Initial Coin Offering (ICO)
  9. Scammers promising investment recovery
  10. Fraudulent apps and scammers
  11. Scammers lurking in Dating apps
  12. Easy Money scams
  13. Payments in Cryptocurrency
  14. Unsolicited calls from investment managers
  15. Fictitious employers and job offers
  16. Malware in the form of software upgrade
  17. Giveaway scams

#1. Illegitimate websites:

illegitimate websites scam

There are plenty of illegal cryptocurrency trading platforms available on the internet through which investment scammers steal money from cryptocurrency investors. These fraudulent cryptocurrency trading platforms resemble legitimate online trading sites as they imitate their domain names. These sites offer a form of fake currency disguised as the crypto to investors. The fraudulent scheme permits its investors to withdraw money initially to garner investors’ trust and to lure them to invest more money and then disappear when they successfully garner the desired money.

#2. Phishing Scam:

Phishing Scam

An online investment fraudster’s common means of perpetrating mischief is email. The digital money of investors gets stored in a digital cryptographic wallet. When an investor loses access to his or her wallet, he or she loses the entire investment. Scammers provide malicious links in the emails they send to investors. These links redirect them to fraudulent websites that ask for private information. Scammers gather this information in order to get access to their digital wallets. Eventually, perpetrators insinuate into their wallets to access funds and eventually steal them.

#3. Pump and Dump Scam:

Pump and Dump Scam crypto
Pump and Dump Scam

The Pump and Dump scam is a clever scheme that investment perpetrators own to fool investors and create profits. As the name ‘Pump and Dump’ suggests, scammers who own this popular scheme buy digital currencies for a vast amount or sometimes spread false news and pump the price of the coins. Once they successfully inflate the price of the currency, they sell them at a high price and make a considerable profit. Subsequently, after the sell-off, the crypto’s pricing drops, making the investors panic and sell at a loss.

#4. Squid Coin Scam:

Squid Coin Scam derived its name from a popular web series Squid Game. Perpetrators have defrauded many people with the scheme. In this scam, the scammers initiate a game where they offer tokens to the people who are willing to participate. This game claims to give cryptocurrency to the winners. Instead, scammers in this game charged an amount for the token and escaped with the money.

#5. Affinity Fraudulence:

 Affinity Fraudulence crypto scam

In this scam, scammers get involved with an association or group that shares a common interest or is driven by a particular notion. Scammers garner the members’ trust by pretending to be dedicated to the particular interest the group shares. Perpetrators generally target the leaders of the group. They have faith in the concept that if they can manage to garner the leaders’ interest to invest, manipulating the followers will get easier.

#6. Extortion Scam:

Extortion Scam crypto

Extortion scam is another method of crypto scam that is often chosen by rookie scammers. In this method, scammers first gather sensitive information about the investors they target. Sensitive information such as victims’ visits to any adult websites etc. Sometimes, they even falsely claim to have a record of their data and threaten to expose them. The desperate victim seeking resolution later tries to extort their personal information related to their digital wallet.

#7. Impersonating Government Agencies:

Impersonating Government Agencies crypto scam

As cryptocurrencies are mined, maintained, and managed by decentralized authorities, the government has to do nothing with these digital currencies. Government agencies that call you and ask for your personal information related to your cryptocurrency wallet for safekeeping are scammers who try to impersonate the government agency in order to steal your money.

#8. Initial Coin Offering 2023 (ICO):

The method by which cryptocurrency start-up companies raise money to create a new coin is known as Initial Coin Offering or ICO. The company that tries to raise money with Initial Coin Offering (ICO) method offers returns to investors. It is advisable for the Initial Coin

offering participants to have a basic understanding of cryptocurrency wallets and exchanges before participating; otherwise, investors might end up losing money.

#8. Investment Recovery Scam:

Investment Recovery Scam

There are many investors who lose money while investing in digital currencies and stock markets. Some fraudulent companies see this as a golden opportunity and try to take advantage of it. These companies, disguised as investment recovery companies, promise these investors to help get their money back. They generally ask for money upfront. Once the investors paid them in advance, in expectation of getting their money back, the scammers simply escape with the amount, without any delay.

#9. Fraudulent Apps:

Not only fraudulent websites but there are also plenty of apps available on the internet that the fraudsters make use of to fool investors. The functioning of these apps is similar to the websites. These fraudulent apps via which scammers try to gather users’ private information and perpetrate mischief can be easily downloaded from the Google Play Store and Apple App Store.

#10. Dating Scam:

Dating Scam

In this period of time, people often resort to dating apps to find their soulmates. Unfortunately, dating scammers take advantage of it. They generally start having conversations with the victim through dating apps and try to build rapport with them. Once the connection has been created, they gradually insinuate the victim’s personal interests. Slowly they mold the victim’s interest towards digital currencies and other investment plans and disappear after they have successfully made the victim transfer money to them.

#11. Easy Money Scam:

Easy Money Scam

Cryptocurrency companies that offer substantial returns that sound too good to be true are likely to be illegitimate. It is advisable to avoid these offers. A corrupt, unlawful part of the organization lurks underneath these incredible offers. A majority of people tend to unsee these things and eventually fall into the trap put out for them.

#12. Payment in Cryptocurrency:

Though cryptocurrencies can be used for regular payments, to buy goods that we need on a daily basis, or to pay for regular services, there are very few people who use them as a traditional payment option. Most people treat it as an investment option. So the people who demand payments in cryptocurrency are likely to be cryptocurrency scammers. It is advisable to go for an open investigation before making any payment with cryptocurrency.

#13. Unsolicited Calls:

Cryptocurrency scam perpetrators contact investors out of the blue by pretending to be an Investment managers. They try to convince investors to buy cryptocurrencies and transfer them to their accounts by making promises to grow their money overnight. They often resort to illegitimate websites to maintain the pretense.

#15. Fake Job Offers:

Fake Job Offers scam

Sometimes scammers offer jobs to the victims. They claim that the job offer is for companies that deal with cryptocurrency mining, selling, and investments. These scammers claim themselves as the HR of the company and demand payments upfront for enrolling victims for the job. They only accept payment in cryptocurrency. Be wary of the job offers that ask for money upfront, as legitimate companies generally do not ask for money in order to recruit.

#16. Upgrade Scams:

Online cryptocurrency trading platforms are software that can be hacked anytime through the upgrades we install. Scammers fool investors with malware posing as software upgrades. Malware insinuates into the investors’ cryptocurrency wallets and steals all their private information.

#17. Giveaway Scam:

Giveaway Scam

Scammers sometimes pose as celebrities or cryptocurrency influencers to acquire people’s trust. They convince the potential targets to transfer digital currency to their wallets and ensure these targets that they can multiply them. Once these scammers make them transfer crypto to their wallets, they disappear with those currencies.

Precautions an investor needs to take to prevent cryptocurrency scammers

These ingenious scams thrive on investors’ gullibility. However, independent research is effective in restraining these scams from fooling people as it helps us figure out the nature of these cons. Furthermore, a skeptical approach toward these schemes serves as a robust antidote. It can save you from getting bankrupt.

Here are some of the things that you should be wary of,

  • Sense of urgency in tonality
  • Lack of information on the emails and messages they send
  • Investment procedures are not easy to comprehend
  • Dealing everything with patience
  • Grammatical errors and spelling mistakes
  • Vulnerability of online platforms
  • Skeptical approach toward investment companies

Sense of urgency:

A legitimate organization never rushes cryptocurrency investors to invest money with them. Scammers always deliver pitches with a sense of urgency when they try to convince investors. In addition, they often provide limited offers and deadlines, which suggest the possibility of the company being fictitious.

Lack of information:

Fraudulent websites, emails, and messages always lack contact information. A lack of contact information on the organization’s websites, emails, and letters suggests a lack of accountability. When the information is not easy to access, it will be hard to contact them if investors lose their money in the process. A legitimate company ensures investors’ convenience and avoids making it hard for their investors who may wish to get in touch with them. If the website you are investing through or emails you are trusting lacks this information, the chances of your money getting compromised are high.

Hard to comprehend:

Cryptocurrency scams often make their procedures complex to comprehend. They mention foreign or offshore investments as it is not easy to track down the money if they choose to disappear with that. The scheme of any organization that garners public funds for investment purposes should not be too complex to comprehend.

Patience is the key:

Always take your time before making any investment. It serves as a countermeasure for ingenious scams as it lends us hours for independent research on the scheme. In addition, it can help to reveal the nature of the organization’s strategies.

Imprudent Grammatical Mistakes:

Check for grammatical errors in the emails and messages you receive related to investments. A legitimate company makes sure that the messages and emails they are sending are error-free, whereas an illegitimate company only cares about stealing the money of the investors.

Online platforms:

In this period of time, the progress of online communication has given scammers an enormous platform to be more prevalent. Hence, be wary of online cryptocurrency scammers as they use the platform to perpetrate mischief.

Skeptical approach:

Skeptical approaches toward these companies effectively prevent them from defending their deception here they pretend to provide high returns with low or no risk; these fraudulent companies send a text that states how much profit the investors have made through time. They also come with exciting plans and offers from time to time in order to make the investors withdraw money less frequently.

FAQ: Cryptocurrency Scams

Q1. How are cryptocurrencies created?

Cryptocurrencies are created by mining. It is a method where computers, mining units, and power are used to solve mathematical problems thereby creating cryptocurrencies.

Q2. What are the uses of cryptocurrency?

It can be used to buy goods for day-to-day affairs or to pay for regular services, but most people treat it as an investment option.

Q3. How Can I Avoid Getting Scammed By Crypto Scammers?

Investors’ gullibility fosters the strategies of scammers. Knowledge about these strategies can restrain these cryptocurrency scammers from committing ingenious scams.

Q4. Who Verifies Cryptocurrency Transactions?

Cryptocurrency transactions are validated by a decentralized system. The system is also responsible for maintaining all the records related to the cryptocurrency and also for issuing a new unit.

Q5. What Are The Red Flags We Need To Be Aware Of Before Investing In Cryptocurrency?

Unsolicited calls from investment agencies, pitches delivered with a sense of urgency, and lack of contact information in emails or websites are some of the red flags that an investor needs to be aware of before investing.

Pramod Kumar Yadav is from Janakpur Dham, Nepal. He was born on December 23, 1994, and has one elder brother and two elder sisters. He completed his education at various schools and colleges in Nepal and completed a degree in Computer Science Engineering from MITS in Andhra Pradesh, India. Pramod has worked as the owner of RC Educational Foundation Pvt Ltd, a teacher, and an Educational Consultant, and is currently working as an Engineer and Digital Marketer.

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