According to statistics from the US Federal Trade Commission (FTC), from October 2020 to March 31, 2021, Americans lost more than $80million in fraudulent schemes with cryptocurrencies.
Compared to the same period in 2019-2020, the amount of damage increased tenfold. This surge can be explained by the unprecedented growth in the popularity of cryptocurrencies in recent months. In addition, the record rise in the Bitcoin rate, which rose to $63,000 in April 2021, also spurred on the criminals. On average, according to the FTC, one person lost $1,900 due to attacks by so-called scammers.
The FTC lists several types of cryptocurrency scams that have been especially popular with scammers over the period specified in the commission document. In this article, we will understand what a scam in a cryptocurrency is and what you need to pay attention to in order not to become a victim of scammers.
Those who complained to the FTC talked about the sites they went to on someone else’s advice. They offered to make money by investing in cryptocurrency.
Often such sites even create the illusion that your investments generate income, but at the moment when you are trying to take your profit, for example, you are asked to transfer more tokens to your account. As a result, you are left with nothing.
This type of scam includes fraudulent emails, phishing sites, and fake mobile apps. With the help of such schemes, criminals impersonate someone else (for example, a cryptocurrency exchange), gain access to the client’s information, or force him to transfer money to his account.
Advertising with “Celebrities”
Another variant of a fraudulent scheme is to use the image of a famous person who advertises, say, free distribution of cryptocurrency. Ransomware often pretends to be Elon Musk, Bill Gates, or Apple co-founder Steve Wozniak.
Of the $80million mentioned in the FTC statistics, $2million is money stolen through the illegal use of Elon Musk’s image.
Dating Sites and Apps
Another way to lure your coins out is through dating sites and apps. Fraudsters use them to make acquaintances with the user, and then advertise some “promising” cryptocurrency to him. The fake second half asks to transfer to him/her a certain amount of money (usually in digital assets), which he/she promises to invest in a promising project. Naturally, these funds do not go to any deposits.
Sometimes scammers act on a large scale and launch large crypto projects, which ultimately turn out to be a financial pyramid. New clients are lured there, I promise a fabulous benefit. But not now, but after a while.
An example is the OneCoin project that appeared in the mid-2010s, launched by a native of Bulgaria, Ruzha Ignatova. OneCoin was announced as an educational service for trading with its cryptocurrency. To get the OneCoin cryptocurrency, it was necessary to buy an educational course, which cost from €100 to €118,000. The more expensive the purchased lessons were, the more tokens supposedly had to go to the client. It was possible to exchange tokens for euros only through its own exchange OneCoin.
It turned out that OneCoin did not have a blockchain, that is, the tokens were just fictional. In 2017, the exchange stopped working without warning, and Ignatova is still hiding from law enforcement agencies. The damage from OneCoin’s activities is estimated at $4billion.
Another “high-budget” type of cryptocurrency scam is ICO fraud.
ICO is raising money from investors by selling them cryptocurrency tokens. There are several types of ICO-related scams, but the essence is the same. Fraudsters attract investors’ money and then disappear – naturally, not having fulfilled their part of the obligations.
In 2018, investors lost about $ 100 million on fraudulent ICOs.
Unlike the creators of pyramid schemes and ICO scammers, the creators of shitcoins do not formally engage in fraud. Sh*tcoin is a cryptocurrency that does not represent and will never represent any value.
Often, the main task of shitcoins is to cash in on inexperienced investors who have heard about cryptocurrency somewhere but have not done any market research.
As a result, such people invest in virtual currency, which was initially “dead”, but is cheap compared to BTC and ETH. Experienced investors “help” them in this. By agreement, they artificially pump up the value of a certain coin, attracting the attention of newbies to it. They then collect all dividends before the value of the cryptocurrency drops to near zero. This scheme is called a Pump and Dump.
How to avoid becoming a victim of a scam
The best advice is that you carefully study each cryptocurrency before investing in it, and tell your relatives about the methods of digital money fraud. After all, it is obvious that the more popular crypto becomes, the more speculators will appear who want to cash in on it.