The digital assets market had its moments of glory a few last years and that attracted the sharks from all around — hackers, criminals and fraudsters, despite the current shifts, market dips and regulations, are still aim strong on luring the digital assets out of consumer wallets.
Basically, there is no shortage of ways of how to lose money in today’s crypto industry, which includes overestimated predictions, fraud commercials, Ponzi schemes and financial pyramids, an overwhelming number of ICOs made solely on purpose to make their creators rich, weak investment strategies and most importantly — the lack of market understanding.
Moreover, today’s crypto investors highly lack profile education as well as proper strategic thinking and, in turn, the market players capitalize on it big time.
Becoming an ICO investor is not so hard and overcomplicated as being the IPO participant due to numerous reason, and the entry barrier into the Blockchain niche is not high at all. However, the statistics show that the lack of knowledge and experience results in high losses and over-the-top revenues for ICO creators.
We need to consider the most known and usable cases of these fraud activities:
1) Overestimated false perspectives
There are numerous examples over the Internet where companies and specific people offer the so-called “investment boosts” or “the new strategies” to lure out trustful investors or enthusiasts.
That start’s at doubtful offers of participation in new Ponzi/Pyramid schemes (of course, they all seem legit and solid at the start) or mining bigt time-solutions and goes further with an invitation to invest in a new shiny fake coin to get huge profits in a long-term perspective.
Thus, an investor should be smart and careful in projects selection and not to overestimate the real possible profits of the industry in 2019 — nowadays, market and it’s returns are not skyrocketing as it had been last years.
Of course, these kinds of commercials visuals appeal to classic good old desires like shiny resorts lor luxurious life, or newly-born teenager millionaire stories or just something new. Anyway, if one’s not eager to lose the money he should not buy this and not participate in giving back to anonymous teams or getting involded in another become-a-millionaire-in-3-days-offers.
2) Simple phishing
So far, it is the oldest and most often used method of cyber fraud and crime — little wonder these things had reached into the crypto world. Phishing itself is the way of intrusion of the malicious programs, viruses or other programs aimed to harm your computer or digital device to your device while pretending to look at usual software. For this to work, things used as website creation to require the password, newsletter with viruses, open wi-fi networks, etc.
Moreover, cryptocurrency wallet prompts are often used for tricking out users to send their original keys to hackers. For example, the fraudsters targeted PCs using this Ethereum browser wallet to hijack the accounts by adding a window requesting users to «confirm» their seed phrase — as a matter of fact, that happened to MetaMask.
So, the phishing is a mass and often used method working on the large-scale, and it is not on the list of the witzy-looking fraud solutions.
3) Risky Crypto Exchanges
Basically, the exchanges at large are used to buy/sell and trade the cryptocurrency. Most people praise the Bitcoin, and a few main digital assets only and over time try to people trade the less popular currencies into Bitcoin or transfer it to traditional fiat currencies. Though even the most known and well-established exchanges with good reputation provide specific security options and look solid, holding the substantial amount of money on these accounts during the extended time is still a risky game — nowadays no can tell about the malfunctions, hacks or something worse.
Overtime as the crypto assets popularity rose to the moon, the amount of operating and fake exchanges increased as well. So, losing money had become even easier by participating in those shady exchanges operations and trading there only to find out soon enough that the funds you want to withdraw are no longer available.
4)Mining operations faked
Getting Bitcoins and cryptocurrency through mining operations had been trends years ago and building massive mining farms including numerous machines in the second- and third-world countries are things of one can hardly be surprised nowadays.
Thus, commercial offer for investing in those mining operation had become quite popular with shiny prospects and promises about the more and more improved and vast GPU processing units and power levels. No matter to mention the astronomic revenues from this activity.
Quite often, proofs are not provided and money requested are promised to return usually in a long-time perspective only — these make months if not years. Moreover, the payback never actually comes. Do notice the vital point — chances of getting robbed or lose the money increase the less control over your assets and money you have.
So, by attracting the funds to these companies and investing in their hardware one can only make rich the wrong people.
5) Lack of assurance
As the digital age advances, more and more fraudsters activities appear over time. However, the technologies like social engineering are still strong. In case one keeps little attention on what’s going on with his wallet and it’s actives, he’s surely making a perfect target and prey out of his himself.
Actually, the now-popular Initial Coin Offerings (ICOs) at large can as well be regarded as scam activities, and they even are getting banned in certain countries. However, before the industry boom in 2017, a lot of ICOs had made many people become millionaires.
ICOs rather represent a fundraising tool for innovative technology startups in the world of blockchain made to receive funding directly from the crypto enthusiasts and investors as well as future users. As it often happens, this became a convenient method for a lot of quick-thinking fraudsters to get their hands on a new shiny Lamborghini or a full-stacked island with a condo in the Pacific.
Of course, even right now one can still earn fat X’s for investing into the right project with decent team and perspective idea, or you can just accidentally invest into some joke coin and hit an unexpected price growth which makes you a millionaire.
How to get scammed?
So, what is the surest way of losing your money?
To invest in ICOs that without any innovative ideas, no website or media presence or advisors who are the developers. Whitepaper full of wordiness and no actual business model/tokenomics is another point to look out. Of course, the less you know about the people involved in the project and their plans, the better is for its scammy developers. What happens next? The coin’s price usually goes down in an instant as it hits exchanges. Its team disappears with profits leaving you empty-pocketed.
One part of the problem is a lack of care on the part of investors. This was an issue highlighted by Joe Rotunda, enforcement director for the Texas State Securities Board. Also, it’s an especially acute one set against the backdrop of a huge rise — and subsequent fall — in the value of cryptocurrencies over the past six months.
Coin Center director of research Peter Van Valkenburgh said that people get sucked into fraud — from exit scams to pump-and-dump schemes — merely because they’re looking to see a higher return on their investment.
“I think nobody should ever buy any more cryptocurrency, put anymore [into] cryptocurrency than what they are completely willing to lose … if you are willing to participate at all,” Van Valkenburgh remarked.
However, at all times the best strategy is to take any actions with a clear mind and always think in advance where your desires to get rich instantly can get you in the end.