7 Types of Cryptocurrency Scams

Cryptocurrency investments are currently one of the trendiest subjects in the investing world. Investors purchase digital currencies such as Bitcoin, Ethereum, and Dogecoin through cryptocurrency exchanges such as Coinbase with the hopes of subsequently selling them for a profit.

 

Cryptocurrency, sometimes known as "crypto," is a legal but dangerous investment option. Because it is a highly speculative investment, you may make — or lose — a lot of money quickly. However, it also carries a greater risk: bitcoin frauds.

 

Hackers utilize a variety of methods to obtain your money, including stealing your cryptocurrency accounts and generating wholly fraudulent currencies. And, as cryptocurrency becomes more popular, so do crypto frauds. Before looking into the different types of cryptocurrency scams, it’s important to understand what exactly cryptocurrency is. Let’s get started.

 

 

What is Cryptocurrency?

 

Cryptocurrency is a collection of values. Whenever investors purchase a cryptocurrency, they are wagering on the investment's future worth, much as traders and investors make investments when they feel the firm will expand and share prices will rise.

 

Stock valuations are essentially deflated projections of a company's future cash flows. Since there is no fundamental corporation, there is no analogous information for economics for cryptocurrencies; the valuation of a cryptocurrency is solely determined by investor demand.

 

The value of a cryptocurrency is determined by one of two factors: the chance of other investors purchasing the asset or the functionality of the cryptocurrency's blockchain.

 

How Does Cryptocurrency Work?

 

Blockchain is the foundation of cryptocurrencies, but what exactly is a blockchain? Because the phrase has grown so popular, its meaning and importance are sometimes muddled. A blockchain is just a computerized document that contains information/records. 

 

This logbook (or database) is shared by a network of computer systems. There really is no one system in command of the logbook. Instead, a blockchain is kept operating and its transactions are authenticated by a decentralised network of computers.

 

Developers of blockchain technology claim that it could boost openness, trust, and security of information exchanged across networks. Detractors claim that blockchain is time-consuming, inefficient, costly, and consumes excessive amounts of energy.

 

 

Types of Cryptocurrency Scams

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Types of Cryptocurrency Scams

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The current attitude is giving rise to a slew of popular cryptocurrency scams that might infiltrate your life in the shape of bogus investment schemes, job offers, apps, and so on. Do you want to learn more about them now? 

 

Let's go through the seven most frequent cryptocurrency scams, in which a scammer would persuade you to participate in payment activities linked to some cryptocurrency and then disappear as soon as the money is successfully received in his/her account.

 

1. Disruptive Crypto-Investment Proposals

 

This sort of fraud can take the shape of Ponzi schemes, pyramid schemes, and other similar schemes. And the con artists behind such fraudulent schemes are adept at persuading you to invest in unsolicited business proposals just by:

 

• Mentioning celebrity testimonials or endorsements (on their websites) that are not legitimate, safe, or truthful.

 

• Then, these con artists would entice you with long-term benefits such as higher returns only after you make a bitcoin payment to their fake accounts.

 

As a consequence, instead of falling into their clutches and squandering your hard-earned money, you must report such frauds to law enforcement agencies or federal authorities. 

 

And, if necessary, follow-up via emails or chats. It will assist many others in avoiding such uninvited traps offering you bigger returns on your money in their offers.

 

2. Fake Apps/Website & Social Media Scams

 

Scammers are well aware that social media, apps, and websites are an inevitable part of their surroundings. According to Oberlo, there are already more than 3 million social media members worldwide.

 

From 1991 to 2021, consumers downloaded over 250 million mobile applications (Decibels), and around 1.88 billion web pages were viewed (Statista). All of this opens the door for fraudsters to:

 

• Create false profiles on Facebook, Instagram, or Twitter to steal information.
• Then, they will run a variety of advertising and offers with the sole intention of enticing you to give them money in the form of cryptocurrency.
• If they believe you are just not satisfied, they will offer you monetary assistance such as rebates and refunds through spurious shopping websites based on your selections and interests.

 

Aside from all of the above, they will not hesitate to share a love relationship with you so that you are drawn to their sense of humour, attractiveness, friendliness, and intellect. Instead of falling prey to these illegal online dating and romance scams, social media, or bogus websites/apps, avoid those crooks by refusing their online requests.

 

3. DeFi Cryptocurrency Rug Pulls

 

Such frauds occur when investors are drawn in by a DeFi scheme. This enterprise, built by shady developers, promises investors a bright future. Once the investors have amassed sufficient funds, the owner of this project (which may be referred to as a rug pull) and those developers:

 

• Cash out the funds, cancel the enterprise and flee.

• As a result, the Decentralized Finance (DeFi) sector is becoming increasingly vulnerable to dangers such as cash loss, personal information loss, and so on.

 

There are several cases of rug pulls that have occurred recently, and most of them have taken $2 million or more from investors who have invested in their ventures.

 

4. SIM Swapping Scams

 

These SIM Swapping Scams, also known as SIM Hijacking/SIM Jacking Scams in the marketplace, assist fraudsters and hackers in finding another means to access your crypto wallet or account. Consider how these frauds begin!! Initially, these hackers:

 

• Through social media sites such as Facebook and Instagram, you can find all of your personal information such as email, home address, and phone number.

 

• Then they locate the wireless service provider associated with your phone number, call him/her, and pretend to speak in your place. 

 

• Their purpose is to move your number to another SIM card ( SIM belongs to those scammers).

 

Instead of contacting you through fake attempts, they enter freely into your crypto wallet or account and deplete the wallet altogether in a fraction of seconds after the operation is completed.

 

5. Initial Coin Offering Scams

 

Though ICOs, or Initial Coin Offerings, can be utilised for philanthropic fundraising and business funding, they are also prone to outright frauds and scams. And, in general, these frauds are obvious to a variety of investors, cryptocurrency initiatives, and ordinary people as:

 

• Schemes based on pump and dump

 

• Securities Fraud 

 

• Exit Fraud

 

Scammers will make wild accusations in all of those forms, such as trying to talk about their interconnection with public figures. They will make you suspect that the entrepreneur they are running provides better returns to its clients once they engage in their cryptocurrency platforms such as Bitcoin and Ethereum. And, in the end, those fraudsters will flee with all of the investors' money, leaving them powerless!

 

6. False Cryptocurrency-Based Job Offers

 

Accepted a cryptocurrency-based employment offer over through the conversation but did not properly examine the organisation or the source available online? If this is the case, the odds of being duped by such cryptocurrency-based employment offers to grow, which will initially:

 

• Provide you with a position as a product designer, miner, crypto-investor, or recruiter.

 

• Now, those fraudsters will demand extra fees for you to apply for and be picked for the employment role.

 

Stop right here because as soon as it reaches a reimbursement to their crypto wallet or any other medium that receives those highly unstable crypto coins, they will begin extorting you, claiming that all of your personal information (such as your name, photos, and account information) under their control will be compromised on social media handles. 

 

As a result, rather than investing your heart and soul into all those job offers, conduct extensive research on the team members who are giving you those opportunities and be extra careful before making an investment!!!

 

7. Giveaway Scams

 

The giveaway scam is yet another common variation. Fraudsters disguise themselves as celebrities or well-known bitcoin investors and promise to assist small investors. They claim that if you send them your cryptocurrency, they would match it with some of their own to help you quadruple your investment.

 

In actuality, whatever funds you provide them go directly into the scammer's wallets. According to the FTC, scammers posing as Elon Musk defrauded investors out of more than $2 million in cryptocurrency in six months.

 

(Also read - Basecoin Vs Ether USDT)

 

 

Wrapping Up

 

As interest in cryptocurrency develops, so will interest in cryptocurrency scams. There will very certainly be additional frauds in addition to the ones listed here.

 

Fraudsters may modify current schemes, such as tax or utility frauds, to make them crypto-centric. Or they may devise whole novel ways that are difficult to foresee.

 

Being alert is the greatest approach to defend yourself from these rising frauds. To begin, study as much as you can about the many sorts of existing frauds. This will assist you in recognising them when they appear in new forms.

 

Increase your security procedures for other bank accounts, such as safe passwords and antivirus software. Maintain your cryptocurrency in a safe wallet, and keep numerous copies of the keys somewhere you can quickly access them but criminals can't.