Top Five Crypto Scams and How to Avoid Them

In the modern world, thieves value the cryptocurrency you own very much. Once a cryptocurrency transaction is completed, one cannot undo it. It is also liquid and very portable. As a result, the digital world has been overrun by a surge of scams, including both old favorites and new scams specifically targeting cryptocurrencies.

Crypto scams emerge as the biggest threat to individual investors in 2022. Earlier this year, an annual survey of securities regulators by the North American Securities Administrators Association revealed that investments linked to cryptocurrencies and digital assets were by far the biggest are threats that individual investors face. 2022.

Texas State Securities Board Enforcement Division Director Joseph Rotunda warned crypto investors against crypto-related fraud. Joseph said in a statement: “Before jumping into the crypto craze, be aware that cryptocurrencies and other related financial products can be nothing more than public fronts for Ponzi schemes and other frauds.”

According to UK-based financial security consulting firm, MORGAN FINANCIAL RECOVERY, “the growing popularity of cryptocurrencies has given rise to various criminal actors who want to steal your crypto-assets using fake websites, fake apps and malicious bots lurking on social networks . media platforms.”

MORGAN provides investigative and legal solutions to victims of crypto scams. According to the company, recovery from fraudsters can be difficult, and law enforcement often has trouble identifying the scammers. Crypto recovery is not always guaranteed, but hiring a recovery professional will increase your chances of doing it faster and safer.

Common Cryptocurrency Scams

Victims who actively engage in or use the new digital currency for transactions are the targets of crypto scams in which crooks steal their money.

Before starting to invest in cryptocurrencies, investors should be on the lookout for the following crypto scams.

1. Market manipulation

The deliberate attempt to artificially sway or tamper with asset prices is known as market manipulation. Crypto scammers routinely manipulate markets to tip the odds in their favor and generate quick profits. This common word refers to several illegal trade practices, including:

● Fraud: By placing fictitious buy or sell orders that are then canceled before they are filled, fraud gives the appearance that momentum is building. Crypto Scammers often use dummy accounts and trading bots to execute large transactions, giving the impression to other investors that demand is either rising or falling. For example, miners or node administrators can see pending transactions. They can then use their inside information to execute money-making trades ahead of significant price movements.● Churning: Churning is when a broker trades excessively in a client’s cryptocurrency account to earn more commissions. Asset management companies can be paid for managing cryptocurrencies. As a result, dishonest brokers can use a commission-based payment structure to exploit unsuspecting customers. In addition to unjustified costs, withdrawal can lead to unnecessary tax liabilities for the affected people.

Market manipulation is more likely to occur in cryptocurrency markets because they are still relatively undeveloped and have less regulation. However, there are techniques that cryptocurrency traders can use to avoid falling for this scam.

How to avoid market tampering:

● Be wary of tiny market cap cryptocurrencies whose prices unexpectedly rise significantly despite their typically limited trading volume.● Be on the lookout for “fake news” promoting specific coins on social media.● Before purchasing, investigate the credentials of any cryptocurrency carefully.

2. Ponzi and pyramid schemes

Ponzi and pyramid schemes are a bit different from each other, but because of their commonalities, we classify them together. In both situations, the downside depends on a participant recruiting new members with the assurance of enormous rewards.

● Ponzi schemes: You may learn of an investment opportunity with guaranteed rewards in a Ponzi scheme (this is your first warning sign!). This scam often appears to be a portfolio management service. However, the “yield” obtained is only the capital of other investors, so there is no secret formula involved here.● Pyramid schemes: A little more work is required of individuals interested in a pyramid scheme. The organizer is at the top of the Pyramid. They will hire a specific number of individuals to work under them, and each will employ a different number of individuals, etc. You end up with a massive structure that rapidly expands and branches as new layers are added (hence the term Pyramid).

How to Avoid Ponzi/Pyramid Schemes

● Be on the lookout for bitcoin initiatives that encourage you to attract other investors so you can earn more money.● Never put your faith in a scheme that offers rewards that seem unreal.

3. Fake mobile apps

If you’re not careful, it’s easy to ignore the warning signs on fake apps. These scams often provide their victim with instructions to download malicious software, some of which looks familiar.

Once the user has downloaded a malicious program, everything seems to work as it should. But some apps are specifically designed to take your cryptocurrency. Unfortunately, there have been many cases in the crypto business where users have downloaded fake apps whose developers pretended to be a well-known crypto organization.

In this case, the user sends money to the fraudster’s address when instructed to fund their wallet or receive payments. So of course there is no way to reverse a transfer of funds after it has been made.

How to avoid it:

● To protect yourself from malware, update your anti-virus software regularly.● Please do not download or install software unless you are sure it comes from a reliable, trustworthy source.● Close suspicious attachments.

4. Phishing

Even those new to the crypto industry will likely be familiar with phishing. In order to obtain personal information from victims, the fraudster often assumes the identity of another person or business. This can happen across multiple channels, including the phone, email, fake websites or messaging apps. Scams involving messaging apps are especially common in the world of cryptocurrencies.

Scammers do not follow a set strategy when trying to obtain personal information. For example, you may receive emails alerting you to a problem with your exchange account that needs to be fixed by clicking on a link in the email. This link will take you to a fake website that looks just like the real one and ask you to sign up. The attacker will then be able to take your login information and some of your cryptocurrency this way.

How to avoid it:

● Double-verify URLs to make sure you’re always seeing the right website.● Avoid clicking on unclear links sent to you by email.● Never reveal your secret password.

5. Fraudulent Initial Coin Offerings (ICOs)

Dozens of new cryptocurrencies are launched every month, along with various initial coin offerings (ICOs). After all, if investors seem willing to invest in a highly speculative cryptocurrency, they also seem to do the same when it comes to fake tokens or ICOs.

An initial coin offering (ICO) is the cryptocurrency counterpart of an initial public offering (IPO) for a stock. Companies can raise funds through an ICO to support a cryptocurrency development, such as a token, app or pertinent service. The investor receives freshly minted coins in exchange for pledging funds.

Companies pursuing ICOs are not always in the same position as those seeking IPOs, which are often for well-established private firms. It may be a brand new company with no previous work experience, making it challenging to distinguish between a legitimate offer and a scam. Like backtracking, ICO scams take early investors’ money to quickly exit the project.

How to avoid it:

● Before investing in any ICO, do your homework. Check out the project’s team, white paper, use case for the currency, underlying technology and token sale details. The procedures listed below can allow you to be as sure as you can be that you are not falling for a scam, even if there is no assurance that any cryptocurrency or blockchain-related firm will be legitimate or successful .

Discover the team: Any ICO or cryptocurrency’s administrative and development teams are probably the most important success factors. Big players control the bitcoin market, and superstar developers are able to launch or break new projects simply by being named on a development team. As a result, fake founders and biographies for scammers’ businesses are becoming more and more popular.

Study the White Paper: The skeleton of the project is a white paper for an ICO or cryptocurrency. Any blockchain technology project must outline its origins, goals, strategy, issues and implementation schedule in a white paper. White papers can be very enlightening; even businesses with flashy websites may lack a solid conceptual foundation.

Consider the token sale: Any ICO will rely on a token or payment system to make the crowdfunding process easier. Potential investors can easily observe the system itself and the status of the token sale thanks to legitimate businesses and efforts. So keep an eye out for the token sale numbers as the ICO progresses. Even better, track the development of the token sale over time.

What are some statements that could indicate a potential crypto scam?

Even if there is a celebrity endorsement or testimonials, as these can be easily faked, do not accept such promises as they imply a scam.

● Big payouts with “guaranteed” returns are a significant warning sign.● Free money: Free money promises are always fake, whether made in cash or cryptocurrencies.● Big claims without backing or justifications: Be incredibly wary of such claims.

Here are some additional suggestions for avoiding cryptocurrency scams.

● If you do not fully understand how a virtual currency or cryptocurrency works, avoid investing money and never gamble with money you cannot afford to lose.● Never buy or sell cryptocurrencies on land from recommendations from someone you’ve only interacted with online. .● Do not trust posts on social media announcing giveaways for cryptocurrencies.● Keep your “private keys”, which give you access to your virtual cash, in a safe place and do not share them with anyone (preferably offline, where they cannot be hacked)

Closure

In today’s digital age, cryptocurrency adoption has become crucial, but defending your company against crypto scams is just as essential to maintaining your brand’s reputation. Therefore, people should always be on the lookout for scams employed by these parties to avoid becoming victims of the most common.

Also Read: How to Protect Yourself from Bitcoin and Crypto Scams?