4 the most common scams in crypto industry

Are you afraid of losing your crypto? Read these tips about most common cryptocurrency scam schemes to be ready for everything.

Many scams and phony cryptocurrency schemes have scared investors. Here’s a deep dive into crypto scams and how to avoid them.

Fraudsters have fooled millions of people around the world. In 2018, users lost 1.7 billion dollars in the U.S. alone due to cryptocurrency scams. Attackers use different methods, but for all their diversity, one of the most popular is the Ponzi scheme. In addition, the use of malicious software is also very common.

Besides fake crypto offers, scammers can also manipulate the market value of currencies by providing fake information. For example, there was one crypto scam that promised investors 1.2 percent of their daily income, but this statement was not supported by anything. Some scammers lie even brazenly — as in the case of OneCoin, which advertised a non-existent cryptocurrency. And for some reason, such projects are more effective in marketing. Let’s review some of the most popular scam options.

Fake ICOs

While some Initial Coin Offers (ICOs) may be an excellent investment option in cryptocurrency sphere, there are many frank scams among them. Such offers boil down to the fact that the company creating the new cryptocurrency is requesting payments in Bitcoin, Ether, Litecoin, or another proven coin in exchange for a discount on a new token it is developing.

The only problem is that sometimes such companies do not create any cryptocurrency at all or make no effort to promote it. ICO scammers are actively trying to make the project seem legitimate, and in some cases everything can look very convincing. Here are some tips to help you determine the legitimacy of an ICO:

• Read the ICO reviews to make sure there is no cheating, and make sure you read the reviews on verified sites;
• Stay away from ICOs that guarantee that their crypto will take off in price;
• Make sure you have enough accurate information about the coin. If there is not enough information about the cryptocurrency, it may be a scam.

Pump&dump schemes

Pump and Dump schemes are unlikely to affect Bitcoin, because this cryptocurrency has a very large market capitalization, but small altcoins are very vulnerable to such manipulations. The latter boil down to the fact that the cost of small altcoin is artificially inflated by deceptive claims. Fraudsters buy large quantities of cryptocurrency on the rise in price.

After earning a large sum, they sell the coin and investors remain with cheap coins, as the public loses interest in them. Although Bitcoin appears to be a successful virtual currency, some financial experts believe that even it can potentially be vulnerable to pump and dump schemes, but only on a smaller scale. Speculators may have some influence on its price, which may lead to losses for investors. Let’s learn how to recognize a pump and dump scheme:

• If you find that there’s too much positive information about the unknown altcoin, it’s better to stay away;
• If it’s obvious that there is one person or organization behind a significant portion of the altcoin investment, then it’s also a red flag.

Ponzi schemes

Ponzi schemes are very common in the world of virtual currencies. They allow those who invested in cryptocurrency at a very early stage to earn money, but not those who invested later. In fact, those who invest later pay early investors and pyramid creators without even realizing it.

The pyramid may not be discovered immediately, as early investors often do not realize that the funds come from late investors. However, sooner or later the scheme starts to collapse.

If it is not revealed by law enforcement agencies, the Ponzi scheme may collapse in several ways. In some cases, its maker may simply run away with the money invested in the cryptocurrency. This situation is known in the community as “exit-scam”. In other cases, new investors run out, at the expense of which the scheme could continue to work, and later investors start demanding their money back. During economic downturns, people may demand their money more often, which may lead to the collapse of the pyramid.

Fraudsters and impostors

Sometimes scammers pretend to be legitimate organizations. Often they sound very convincing. The impostors claim to offer Bitcoins, ETH or other proven cryptocurrency at a “discount”. In addition, these types of scams often use phishing, which allows you to access your passwords from wallets and crypto exchanges.

You should also be suspicious of anyone who calls or emails you, claiming to represent a reputable Bitcoin Exchange like Coinbase. No Exchange will contact you by phone or email without invitation, and such communications are obvious scams.

In some cases, scammers even impersonate the “CEO” of such organizations, and they have a “special offer” or “account problem warning” for you, but this is just another form of scam. Often such cryptocurrency scams create fake accounts in social networks, pretending to be the heads of large trading platforms.

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