10 Common Cryptocurrency Scams

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Scams using cryptocurrency are constantly evolving, tricking millions of investors. The scam artists persuade investors with their clever language and convincing demeanor. It frequently functions well. After defrauding a few investors, they repeat the same operation under a new guise. In this article, we will come across some of the common cryptocurrency scams that you should be aware about. 

10 Common Cryptocurrency Scams 

Investment Crypto Scams 

  • This is among the most common crypto scams where an “investment manager” you have never heard of approaches you with an amazing investment opportunity, according to the FTC.
  • Naturally, the first step of the procedure involves you depositing cryptocurrency to their online account or installing a wealth-boosting program, and you have to do this quickly.
  • These con artists frequently have authentic-looking websites that make use of technical investment lingo to appear authentic. 
  • However, if you sign into your platform account, you could not be allowed to withdraw money or you might only be allowed to do so after paying a hefty charge.
Common Cryptocurrency Scams
Common Cryptocurrency Scams

AI Scams 

  • With the increasing prevalence of artificial intelligence (AI), criminals are coming up with new ways to take advantage of the cryptocurrency market. 
  • Attackers can communicate with users with AI chatbots, promoting bogus tokens and providing assistance. 
  • These chatbots are designed to enlighten investors with profitable and easy-to-invest in opportunities that often turn out to be pump-and-dump scams designed to artificially inflate token values prior to a sell-off.

Phishing scams 

  • A phishing scam occurs when one individual impersonates another person, typically a business, with the intention of tricking you into disclosing personal information. 
  • Many cryptocurrency phishing schemes try to trick you into disclosing your private crypto wallet keys by posing as legitimate emails and requesting that you enter into your account.

Flash loan attack 

  • Flash loans are short-term loans used to fund transactions. 
  • These loans are common in the cryptocurrency market because traders utilize the money to purchase tokens at a discount on one platform, which they then promptly sell for profit on another platform. 
  • All of these profitable deals are completed in a single transaction, and the flash loan is paid back.
  • An attacker exploits the fact that it is not collateralized and does not require credit checks by taking out a loan and utilizing the money to influence prices on defi platforms.
  •  An attacker places several buy-sell orders to inflate the perception of great demand in order to manipulate pricing. 
  • When prices rise, the attacker then cancels orders, which instantly lowers the price. The scammer can then make a profit by buying at a decreasing price on a different platform.
10 Common Cryptocurrency Scams
Common Cryptocurrency Scams

Fake cryptocurrency exchanges 

  • Investors may be enticed by scammers with claims of a fantastic cryptocurrency exchange and maybe even some extra bitcoin. 
  • However, in actuality, there is no exchange, and the investor is unaware of its falsity until their money is lost.
  • Before inputting any personal information, conduct some research and visit industry websites to learn more about the authenticity and reputation of the exchange.

Man-in-the-middle attacks

  • Users’ sensitive and private information might be stolen by criminals when they connect into their bitcoin accounts in public. 
  • Any information exchanged over a public network, including passwords, bitcoin wallet keys, and account information, can be intercepted by a fraudster.
  • A hacker can obtain this private data whenever a user logs in by employing the man-in-the-middle attack technique. 
  • If trustworthy networks are nearby, this can be accomplished by intercepting Wi-Fi signals from such networks.
  • Using a virtual private network (VPN) to stop the man in the middle is the greatest defense against these assaults. 
  • All data transferred over the VPN is encrypted, making it impossible for hackers to access personal data or steal bitcoin.
10 Common Cryptocurrency Scams
Common Cryptocurrency Scams

Giveaway scams 

  • This kind of fraud offers you a reward—free money or something else entirely—if you comply with their requests. 
  • It can be challenging to tell what is real from fake, since fraudsters sometimes use celebrities or influencers as a way to trick unsuspecting victims into falling for their tricks.
  • For example, in an attempt to trick individuals into sending in digital assets, fraudsters targeting the cryptocurrency industry frequently pose as Elon Musk on social media and in videos. The first 1,000 new followers to join up for an Elon Musk “Freedom Giveaway” crypto fraud on Twitter were even guaranteed free cryptocurrency, but the entire scheme was a hoax.
10 Common Cryptocurrency Scams
Common Cryptocurrency Scams

Rug pulls 

  • Investment scammers that use rug pull schemes inflate the coin’s value artificially in order to raise money for a new project or non-fungible token (NFT). 
  • They take off with the money as soon as they get it. These investments are worthless since the code prevents investors from selling their bitcoin once they have been purchased.

Ponzi schemes

  • Crypto Ponzi schemes are dishonest investment plans in which the money used to pay returns to early investors comes from new investors rather than from actual investments or earnings. 
  • When there aren’t enough new investors to keep paying out, the plan collapses, leaving participants with substantial financial losses.
  • However, people may still utilize red flags to identify if a project is a Ponzi scam or not. 
  • Red flags include a focus on multilevel marketing structures or referral bonuses; a lack of transparency regarding the underlying investment strategy; claims of high and guaranteed returns; and pressure to acquire new investors.

Romance scams  

  • Another one in common crypto scams list are the Romance scams. These scams are nothing new to dating apps.
  • These frauds center on relationships where one side takes time to win the confidence of the other, usually across vast distances and exclusively online. 
  • One person gradually persuades the other to accept or give money in cryptocurrency.
  • The dating scammer vanishes after taking the money. Another name for these con games is “pig butchering scams.”

Conclusion

The variety and extent of frauds relating to the crypto have increased along with the growing popularity of digital currencies. Rug pulls and giveaway scams are examples of common cryptocurrency scams, as with more conventional schemes like Ponzi schemes and phishing scams. Although the rules regulating each cryptocurrency scam vary, their common goal is to trick gullible investors and embezzle their money. As a result, cryptocurrency users must be cautious and follow security protocols.

Which cryptocurrency frauds are the biggest in history?

The OneCoin fraud (estimated $25 billion in losses), the BitConnect scam (about $4 billion in losses), and the Bitclub Network scam (up to $722 million in losses) are a few of the largest cryptocurrency scams in history. Samuel Bankman-Fried was also accused at the end of 2022 over alleged fraud at FTX Trading Ltd. (FTX), resulting in losses for customers exceeding $8 billion.

How to report crypto scams? 

It is your responsibility to report cryptocurrency scams, regardless of whether you think you have seen one coming or you’ve fallen victim to one already. You may assist in placing con artists behind jail by contacting the following people:

  • U.S. Securities and Exchange Commission (SEC) at sec.gov/tcr
  • Federal Bureau of Investigation (FBI) at https://www.fbi.gov/contact-us.
  • Internet Crime Complaint Center (IC3) at ic3.gov/Home/FileComplaint.
  • Commodity Futures Trading Commission (CFTC) at CFTC.gov/complaint
  • Federal Trade Commission (FTC) at ReportFraud.ftc.gov.

What is the punishment for cryptocurrency fraud?

Different penalties apply to cryptocurrency fraud depending on the nation. They might consist of civil penalties, asset seizures, fines, and jail time.

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Neha Varshney
Neha Varshney

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