Cryptocurrencies are more vulnerable to fraud as compared to other digital payment systems. Here are a few tips to recognize and stay away from these scams. No wonder, cryptocurrency attracts investors but it’s still risky.
Federal trade commission reported that more than $1 billion has been looted through cryptocurrencies from January 2022 to June 2022. Crypto scams can be carried out in different shapes ranging from phishing schemes to rug pulls.
Scammers can easily loot hopeful investors because cryptocurrencies blockchain systems aren’t controlled by a single power. The transactions of crypto are completely anonymous and can not be reversed so it’s very difficult to recover the stolen money.
Here are the most Popular crypto frauds and how to stay safe from them. If you want to learn more about bitcoin trading, you can visit various online resources and experts for guidance on how to invest in bitcoin wisely.
Why is Crypto Susceptible to Scams?
Scammers are mainly drawn to cryptocurrencies because of their decentralized control and their nature to keep the transaction anonymous and irreversible.
- Decentralisation: cryptocurrencies and other digital assets make use of a decentralised system, which means that the control of reviewing transactions is not in the hands of a single party.
- Irreversible: it is impossible to recover your funds once transaction activity has occurred because this is how the Bitcoin blockchain works.
- Anonymity: it is impossible to track a crypto user because the users communicate through their wallet addresses instead of their real-world identity.
However, the founder of Giftabit claims that these scams have been going on before the introduction of crypto, and crypto accelerated both the risk and bounties. He also said that there are always people who will misuse the new technology.
What are the Various Kinds of Cryptocurrency Fraud?
There exist a lot of unique fraud techniques in the crypto platform. Here is the list of the most common:
Exit scams occur when the creators of new projects deceive the investors by ensuring large profits, but then either scam the money or stop the projects before investors get any returns. ICO stands for Initial coin offering.
It is also called a “pump and dump” policy. Under this, creators assure the investors that their new cryptocurrency will yield huge profits and then run away with all the money by selling all the tickets.
Rug pulls, named after the phrase “pulling the rug out”, includes a creator manipulating the investor about the new project, then taking out the money before the plan is completed, abandoning the other investor with valueless funds.
Sometimes, creators also scam by attracting investors with fake financial promises. Celebrity support also sometimes comes into these scams.
The creators pay huge sums of money to famous personalities for promoting their new coins and platforms to attract investors and then pull the rug out. The scammers sometimes also scam people by creating fake images and videos of famous people advertising their coins.
Phishing scams have been going on for a long period. However, transactions are difficult to track and reverse in Crypto which makes it more convenient for scammers. These can look like job agreements or requests, through an anonymous phone or email account.
These offers or requests may take you to a genuine-looking Website where they would ask you to send money or ask for your personal details that are required to hack your crypto account and steal money from it.
Scammers may also try to replicate the famous crypto exchange wallets under the same domain to get the investor’s login details.
However, it’s important to report to the authorities about the crime if you got scammed or if you have observed any scam on the Internet. This will help the authorities to stop fraudulent organizations from scamming other people.