Still Investing in Cryptocurrency? Beware of These Five Cryptocurrency Scams
Cryptocurrencies such as Bitcoin, Ripple, Ethereum and Litecoin have witnessed impressive growth in recent times, as millions around the globe have invested in them, and many other digital currencies. People tend to purchase a hefty volume of cryptocurrency as there exists a potential for growth and great rewards for its investors. Blockchain and cryptocurrencies dominated 2017 and partly revolutionised the digital currency sector, where investors put in millions of dollars in hope to rake in profits. But the glimmer and shine of cryptocurrencies have attracted a lot many scammers in the mix, which poses a danger to the investors and the currencies themselves.
If you are still investing in cryptocurrency and don’t want to be played by scammers, beware of these five cryptocurrency scams.
Fraud Initial Coin Offerings (ICOs)
Fake or fraudulent Initial Coin Offerings (ICOs) is one of the most common ways to pull off a cryptocurrency scam. These scams are getting more and more popular as ICOs are an innovative way to launch a new cryptocurrency. In an ICO, cryptocurrencies are offered to consumers to generate capital for the company, acting as a crowdfunding campaign. The scammers construct a fake ICO and market it effectively to vulnerable consumers, often projecting monumental returns and high profits, compelling people to buy and become a victim.
In a recent study published by Bloomberg, 4 out of 5 ICOs initiated in 2017 were a scam.
Many of these ICOs promised 100x gains in a matter of few weeks by just holding these tokens, scamming millions from investors. One of the most popular scams in 2017 was the Confido ICO scam. The cryptocurrency’s ICO raised nearly 375,000$. The team disappeared with the money soon after, and the coin lost its value in a matter of hours, plummeting to the ground. Many other cryptos such as Benebit and Centra Token made away with millions before the investors could do anything.
While the scam is quite common, many such fraudulent ICOs give away clear signs of their unreliability. A typical ICO scam fills the pictures of its team with stock images, along with the photos of athletes and celebrities. A simple reverse search on Google can help you check the authenticity of the ICO. Other red flags include a plagiarised whitepaper, no clear process of execution, full/half anonymous team and projecting unusual rate of returns in a short period.
Cloned Websites or Wallets
Clones of legitimate cryptocurrency websites and wallets are used to empty the accounts of investors and steal personal information. As the number of cryptocurrencies increase, many fake currency exchanges have surfaced as well. While these exchanges and wallets portray that you have control over your funds, in reality however, they are just waiting to drain you out of your savings.
To stay safe and away from such fake websites and wallets, it is always advisable to double check the URL of the website that you visit, and bookmark the legitimate websites to avoid accidentally visiting a clone. Cloned websites often use similar looking letters or numbers to trick the user into thinking that they are visiting the genuine website. For example, these websites use ‘0’ instead of an ‘o’, or ‘m’ instead of an ’n’. To illustrate, ‘bitcoin’ and ‘bitcoim’ look similar when not paying utmost attention and it can take the user to a cloned websites.
While picking a wallet app for your smartphone, one should not just go for any wallet from the app store, as chances are that it will be a fraud and you will lose your money. It is always suitable to check for the publisher of the application or get the download link directly from the legitimate website.
Impersonators
The impersonator scam is considered to be one of the most thoughtful and sophisticated types of fraud in the cryptocurrency world. In this, scammers will make a face social media account to impersonate a celebrity, an actual cryptocurrency project or the minds behind them. They may also act as crypto exchange support staff and ‘help’ you with your transactions to earn some coins. There are a huge number of impersonators on twitter who are claiming that they will provide free a specific amount of cryptocurrency free to some users who send a small amount (usually 5–10% of the offered amount) to their wallet for authenticity check. These often state ‘send .0001 BTC to this address and first 50 senders will receive 1 BTC in their wallet’.
Be aware of groups on leading social media websites that are actively spreading these fake profiles to lure in people and are making money off them. To conclude, Elon Musk, Bill Gates, Vatalik Buterin and Andreas Antonopoulos are not giving away free money.
Phishing
Phishing cryptocurrency scams are quite common nowadays. In literal terms, Phishing is an attempt to gather sensitive information from a user by copying a trustworthy entity through electronic communication. The sensitive information includes usernames, credit card details, passwords and more. In the realm of cryptocurrencies, scammers often try to extort wallet passwords and usernames, private keys and much more.
The most common mode of Phishing scams are emails. Scammers send alert emails which compel the user to open them and act upon them. These may include information on unusual activity on your account, unsuccessful login attempts, unrecognised transfer, etc. These mails alert the user that there is something wrong with their account, and to stay secure they need to change their password. The email provides a link and asks for your personal information. Vulnerable users click this link and enter their data, which is then usually followed by a thank you message. But in the backdrop, the scammers already have your password and username and are bleeding your wallet dry. By the time you check your wallet, your funds may have already been emptied.
To ensure safety of your account, beware of such emails that ask for your personal information. Only enter your account info on the legitimate website.
Ponzi, Pyramid and Multi-Level Schemes
Named after the Italian con artist Charles Ponzi, a Ponzi scheme involves the payment to existing investors (in the name of exponential returns) from the fund amassed through new investors. In a Ponzi scheme, there are no actual gains but the money from new investors is distributed to old ones. The scheme looks like a triangle where the higher the person is in the hierarchy, the more he gains from new investors. Crypto projects that focus more on the recruitment of new investors rather than working on a definite roadmap are part of this scam.
The most notable Ponzi scheme in cryptocurrency, named Bitconnect, was active for over a year before it was unravelled as a scam. Seconds before the collapse, each coin had a cost of $320 to its name and the market cap of the currency was just around $2 billion. As the scam broke out and people got to know that they have been duped, the market cap remained just over $40 million and the price of each coin plunged to a mere $6.
Conclusion
Scams are prominent in every industry and every day scammers are bringing innovative techniques into the mix to loot people off their hard earned money. Cryptocurrency being a hot market and an open source project is far more vulnerable to scams than many other industries. But through religiously checking sources of information and educating yourself about the latest scams, you can stay ahead of the game and keep your money right where it belongs. Check our info-graphic for potential red flags to keep an eye out for when investing in cryptocurrency.
