How to Avoid These Crypto Scams
META: If you are thinking of investing in crypto, it would be best to keep a lookout for scams to make sure that you’re not making a bad investment.
Cryptocurrency is a very new concept, one made up of smart and innovative people doing a whole range of new things over the connected internet. So, it only makes sense that there are a few smart and innovative bad apples in the industry too. As much as crypto is already seen as a way to make money, some see it as a way to extort money.
There are two main types of extortion: either the scammer will coerce the currency out of the victim with false pretenses or they will gain login details and take whatever crypto they can find.
If you are thinking of investing your hard-earned money into crypto, it would be best to keep a lookout for scams to make sure that you’re not making a bad investment. Take a look at our guide to the most common crypto scams.
IMAGE: https://pixabay.com/photos/cryptocurrency-business-finance-3085139/ (Pixabay)
The first of these isn’t exclusive to cryptocurrency, and are common all over the world, and that is social engineering scams.
In general terms, social engineering scams are ways of scammers to convince their victims into volunteering their money or their login details with various methods of coercion. The most obvious method is romance scams, which you would know all about if you’ve ever been catfished. Scammers use dating sites and DMs to cultivate a long-term relationship with the victim and then ask for money. Cryptocurrency makes up around a fifth of the money stolen in romance scams.
There are also imposter scams, where scammers will pose as a celebrity, businessman or cryptocurrency influencer in order to extort money, or giveaway scams in which the scammer pretends to be collecting for charity or offering a “once in a lifetime opportunity” giveaway from a valid-looking social media website. In each case a different feeling is extorted, be it romance, influence from someone powerful, guilt, or a sense of urgency.
But it’s not just money, or crypto, that can be taken from these scams. Scammers will often ask for login details to e-wallets or bank accounts, then drain them dry. They can also blackmail the user with the threat of draining their e-wallets or exposing personal information, like logins to controversial websites.
With crypto being such a new concept, there is a lot of technology involved and a lot of new technology tied up in it. And with new technology come fakes.
For example, NFTs and ICOs are two new forms of investment that are quickly becoming attractive to scammers, mainly because they are difficult to understand so people’s naivety is being preyed upon.
NFTs, or Non-Fungible Tokens, use blockchain technology to identify cryptographic assets, usually a piece of digital art. Without the NFT technology, digital art is worthless as it’s a form of verification. Whoever owns the NFT is the only owner of that piece of digital art. This has caused NFT prices to skyrocket – and scammers to see an opportunity. They will instead send an unverified piece of digital art once they are paid.
ICOs, or Initial Coin Offerings, are in the same realm as stocks, in that they are a method of crowdfunding a business. However, ICOs allow the business owner to keep their entire share of the company. Fake ICOs are quickly popping up, asking for donations, and then vanishing with no intention of establishing a business.
The latest type of scam to hit cryptocurrency is the DeFi rug pull. DeFi is short for decentralized finance: the main appeal of crypto being that it is its own decentralized currency that bypasses the need for a bank. However, bad actors have used this important factor of crypto to take money from investors by posing as an influencer and trading crypto for a larger sum of money.
With that in mind, the question has to be asked: is Chainlink a good investment? The answer is yes, but you have to be smart about where you put your money. For example, keep a lookout for…
Pump and Dump schemes
If you’ve been watching YouTube lately, or you’ve seen The Wolf of Wall Street, you might have heard of Pump and Dump schemes. Once a forgotten aspect of the stock exchange, it is making a resurgence due to the unregulated nature of cryptocurrency.
In the days of the Wolf, Jordan Belfort, cold calls were made to various potential investors with exaggerated or untrue statements about the quality of the stock, usually claiming to know some insider knowledge. As time went on this method changed to spam emails, and eventually the practice became illegal – in stocks.
Today, crypto influencers with a following are using it to make a quick load of money. They will create a new coin, hype up their creation on social media, allowing their many fans to invest in it, and then selling their shares once the price reached critical mass and there are no more buyers, leaving their fans with nothing. Knowing full well that at least a portion of their fans love them or trust them enough to buy anything, influencers didn’t even need to exaggerate the quality of the coin, often saying that it was a joke, like Dogecoin.
You can avoid potential pump and dump schemes by being aware of unsolicited investment offers and keeping your investments to coins with qualified teams with experience you can look up and rely on.