Crypto Scams- Identifying and Avoiding them

The growth of the cryptocurrency space and blockchain technology is undoubtedly impressive. The technical innovations and the new trading paradigm that’s changing rapidly is attracting huge crowds, but this has also cleared the path for scammers. Over the years, a number of cryptocurrencies have helped people become millionaires. However, this increase in value and widespread adoption has had some consequences as well. While people are interested in investing in cryptocurrencies in order to make a profit, the criminal elements consider this as an opportunity to deceive these investors. If you take a look at the numbers, you will notice that the number of crypto scams has risen significantly in the last few years.

Since 2017, there has been an increase in the number of people jumping on the crypto bandwagon and this has also provided cybercriminals with more opportunities to scam others. So, where to find a crypto scam list in order to be aware of common scams and avoid them? You can read on Xtrgate and find out some of the most notorious scams that are routinely done in the crypto space:

Fake ICOs

The easiest way to scam anyone in the crypto industry is to develop and market a fraudulent crypto project. ICO refers to Initial Coin Offering and it is a legal way for businesses to use crowdfunding to gather funds for taking their project forward. There have been numerous fraud ICOs where people came up with a fake whitepaper, developed a strong marketing campaign on social networks, posted token information on stock exchanges and then conducted a fake sale of tokens. Hence, a lot of new crypto investors are deceived by the promise of making massive returns from these ICOs and end up purchasing useless tokens that cannot be sold in the future or generate any returns.

In 2017, a study was conducted, which showed that 80% of the ICOs were fake. Confido was one of the most notable ones, which had raised $375,000 in November, 2017 and had disappeared soon after. As soon as this news had spread, the price of the coin reduced to $0.10 from $0.60 in less than two hours and went down further after a couple of hours. Centra was an even larger scam, which raised $32 million and had the support of celebrities like Floyd Maver and DJ Khaled. The two founders were arrested in April, 2018 and the coin lost its entire value after the news release.

How to Avoid this Scam?

  • You should check the whitepaper quality before investing in any coin. Does the whitepaper appear authentic or is it full of mistakes? Is it offering reasonable returns or does it seem too good to be true?
  • There should be a legal roadmap for the token, along with proof of concept.
  • You should ask appropriate questions about the project like its future expectations. Make sure the team answers your questions. If they are ignored, consider it a red flag.
  • Take a look at the exchange on which the coin is listed. You need to know its trading volume before investing in it.
  • Do your due diligence by asking friends and family or the community in general.

Cloned Phishing Websites

One of the most challenging scams to detect are none other than phishing scams. These involve the use of websites that look exactly like original websites that capture your personal information and then use it for hacking into your other accounts. Accurate clones of legitimate and renowned websites, which typically include ICO sites or exchanges, are used for stealing confidential information and funds. You should make it a priority to double-check the URL and websites that are visited frequently should be bookmarked. Cloned websites tend to use similar letters in the URL to confuse people and can be difficult to identify at first glance.

How to Avoid this Scam?

If you don’t want to be a victim of this particular scam, there are a couple of things you should do:

  • Never open any unrecognized links, especially those that you receive via email.
  • Every time you visit a website where you have to enter sensitive information, don’t forget to check the link in the address bar to confirm it is correct. Make sure there are no special characters in the URL and there is nothing off about it.

Fake Support Teams

This is also another kind of phishing crypto scams that happen routinely. There are groups pretending to be a project’s support team and ask you to provide personal information, passwords as well as deposits. It is normal for people to get in touch with support teams or customer care representatives of a service when they have any issues. These scams are designed to target such individuals who are seeking assistance. When people face any problems while using exchanges like Bitbns, Binance, Coindelta, WazirX, Koinex and more, they automatically get in touch with their support staff.

Cybercriminals use the same image, similar usernames or the display name and logo of the exchange to confuse these people. These fake support teams either as people to share their personal information or request them to deposit some ETH or BTC to resolve the issue. They will just vanish with the funds, never to be seen again.

How to Avoid this Scam?

When you are choosing an exchange, it is always a good idea to choose reliable and trustworthy names like Binance, Coinbase, Bitfinex, Kucoinand more. Moreover, you should also keep track of the legitimacy of apps that you are downloading on your browser or phone.

Fake Exchanges

The crypto world is brimming with shadow exchanges that pop up every now and then and disappear overnight. You need to be very cautious when it comes to these exchanges because they can steal your money or cryptocurrency. There are also some exchanges that charge hefty commissions once you have deposited money with them or make it difficult for you to withdraw your funds. These exchanges are able to lure in investors to their platform through attractive propositions like charging zero trading commissions or transaction fees.

Then, how do they earn their income? They charge a fee for placing any token, which includes fraudulent ICOs, on their platform and do not provide proper trading liquidity to traders for buying and selling tokens freely. Some of these tokens are frozen on exchanges and traders are stuck with them without being able to liquidate. As a matter of fact, there are also ICO tokens that may compromise the security of the exchange, thereby putting the entire database at risk.

How to Avoid this Scam?

If you don’t want to fall for such scams, there are some steps you can take to avoid it:

  • Always verify the existence of the company’s legal addresses and also confirm their authenticity through regulatory authorities.
  • Be on the lookout for any suspicious and unrealistic spikes in trading volume, especially if the exchange has just launched its operations.
  • Do some research on the internet to see if there are any articles about the exchange.
  • Look into the team behind the exchange in order to ensure they are not anonymous. A legitimate exchange will have a transparent team that are forthcoming about all relevant details.
  • The markers listed on the exchange should be examined to ensure their security.

Cloud Mining Scams

Scammers have found another easy opportunity to cheat with the rise in popularity of cloud mining. The higher cost of electricity and mining equipment has boost cloud mining’s popularity, but there are risks associated with this process. MiningMax is a very well-known case where this cloud mining service requested people to invest $3,200 daily for a return on investment, along with a referral fee of $200. The scheme was quite attractive and went on for 2 years during which it scammed people for up to $250 million.

Anyone who has heard about cryptocurrencies has also come across the concept of mining. There is a good chance that if you are new to the crypto world, you don’t have a lot of knowledge about mining. Thus, these scammers take advantage of this lack of knowledge to sell you mining plans that seem like generous earning opportunities.

How to Avoid this Scam?

You should make it a priority to not respond to unwanted or strange messages. Even if you do respond, don’t share any cryptographic correspondence and not store your cryptocurrency in a wallet over which you have no control.

Ponzi, Pyramid and Multi-Level

Investment frauds that involve the payment of expected returns to existing investors via the funds that are received from new investors are referred to as Ponzi schemes. Bitconnect was the most notorious Ponzi scheme in the world of cryptocurrency. Surprisingly, this scheme was able to stay active for over a year, which has made it one of the biggest crypto scams till date. When the scam collapsed, the market value of Bitconnect had reached $2 billion and the price of the coin had hit $320. It took less than 24 hours for the price to fall to $6 and the marginal market price reduced to $40 million.

Bitconnect enjoyed a lot of popularity and its marketing had also been done quite well, as is the case in most successful pyramid schemes. Those that were behind the concept of multi-level marketing had great intentions. They introduced this marketing method for bringing their products and services in front of a large audience for increasing the sales and growth of their businesses. However, this tactic was later adopted by scammers for promoting these Ponzi schemes.

How to Avoid this Scam?

You should check the legal status of the company, feedback on forums and blogs and check the background of the founders or team before investing in them.