Cryptocurrency Scams: Goodbye, Money
- Sylvia Rose
- Mar 23
- 5 min read
Cryptocurrency attracts investors and enthusiasts with its decentralized setup and potential for high returns. Troubling reality emerges as the qualities appealing to investors also attract fraudsters.
Cryptocurrency scams have nearly tripled over recent years, prolific on social media, online forums and investment sites. Some are run from scam centers by involuntary fraudsters, others from the comfort of home.
About Cryptocurrency
Cryptocurrency is a digital or virtual currency secured by cryptography. It's nearly impossible to counterfeit or double-spend. It uses a decentralized technology called blockchain.
The blockchain is a distributed public ledger recording all transactions.
Decentralization removes the need for traditional intermediaries like banks, offering users greater control and potentially lower fees.
Bitcoin, the first and most well-known cryptocurrency, pioneers the way for thousands of others. Cryptocurrencies exist entirely in a digital format. The most recognized include Bitcoin, Ethereum, and Litecoin.
Types of Crypto Scams
Pump and Dump Schemes: Scammers artificially inflate the price of a lesser-known cryptocurrency (often referred to as a "shitcoin") by spreading false or misleading information. Once the price peaks, they sell their holdings, leaving other investors with significant losses.
Fake ICOs (Initial Coin Offerings): Scammers create a false cryptocurrency project and launch an ICO to raise funds. They vanish with the money, leaving investors with worthless tokens. Some ICOs are legit, but others have no intention of delivering a viable product, raising funds just to defraud the unwary.
Phishing Scams: Scammers send fraudulent texts or emails, or create fake websites mimicking legitimate cryptocurrency exchanges or wallets. They trick users into revealing private keys or passwords then appropriate the funds.
These are common online scams often asking a user to supply information in order to retrieve a compromised account, such as with Amazon, Paypal or a bank. The notice might even bear the hallmark of the business used.
Fake Exchanges: Criminals create fraudulent cryptocurrency exchanges to entice users with appealing rates or features. Once individuals deposit their funds, the exchange vanishes, and victims lose their investments.
Romance Scams: Scammers build online relationships with victims, often through dating apps or social media, and eventually convince them to invest in a cryptocurrency scam.
Pig Butchering: Romance scams fall under this category, however it can also be based on an online "friendship" or professional relationship. The scammer builds trust, then suggests an investment. The scammer continues to draw money out of the person, even up to $1 million.
Ponzi Schemes: These schemes promise unsustainable high returns, paying early investors with money from new investors. Eventually, the scheme collapses when it can no longer attract new participants.
Rug Pulls: In Decentralized Finance (DeFi) applications, developers create a seemingly legitimate token, attract investors, and then abruptly close down the project, taking all the funds with them.
Imposter Scams: Scammers impersonate famous figures, celebrities, or CEOs on social media, promoting fake cryptocurrency investments or giveaways.
Prevalence of Crypto Fraud
Rapid expansion of the cryptocurrency market evades regulation, making it an easy target for fraudsters. The anonymity offered by cryptocurrencies complicates transaction tracing and scammer identification.
The complex and ever-changing nature of blockchain and cryptocurrency can confuse even knowledgeable investors, leading them to make bad decisions in a 21st century market.
Greed and FOMO (Fear Of Missing Out): The promise of quick and easy profits can cloud judgment, leading people to invest without proper research, especially if everything looks good on top.
Luring Victims
Guaranteed High Returns: Promises of unrealistic returns are a common red flag. No legitimate investment can guarantee a specific outcome.
Celebrity Endorsements: Scammers often use fake endorsements from celebrities or influencers to lend credibility to their schemes.
Fake Celebrities: Does not always involve crypto but scams of this type are common. Recently a French woman in her 50s makes headlines when she's duped by "Brad Pitt." He's sickly and in love with her. She sends over $1.2 million to the swindlers. They use fake selfies generated by AI to trick her.
"Bratt Pitt" is not the only celebrity impersonated by scammers online. Others include "Johnny Depp" and "Keanu Reeves".
Social Proof and Testimonials: Scammers engineer fake testimonials or use social media to create a false sense of legitimacy, convincing people to invest.
Limited-Time Offers: Creating a sense of urgency can pressure people into making hasty decisions without full information.
Websites: Professional platforms invest in user-friendly experiences; however many scammers have the technology to mimic professional sites. This can be a problem even for experienced investors.
The Scammers
Crypto scammers operate across the globe, leveraging the borderless nature of the internet. They range from those working alone to organized crime rings with sophisticated infrastructure and technical expertise.
Some operate from countries with lenient laws regarding cybercrime. Many use sophisticated methods to steal personal information and funds from their victims. Certain countries are notorious for scammers.
Scam centers in Southeast Asia are responsible for many frauds. These operate where law is shady and strife rampant, such as at the Myanmar Thai border.
Stolen cryptocurrency is laundered through various methods
Mixing Services: These services obscure the origin of cryptocurrency transactions by mixing them with other transactions.
Decentralized Exchanges (DEXs): DEXs offer a degree of anonymity, making it easier for scammers to convert stolen cryptocurrency into other assets.
Offshore Exchanges: Exchanges operating in countries with weak regulations can be used to cash out stolen cryptocurrency.
Signs of a Scam
Unrealistic Promises: Too good to be true always is. It's easy to get carried away by the seller's enthusiasm and encouragement.
Lack of Transparency: Projects lack clear information about the team, technology or business model. Authentic cryptocurrencies and exchanges should provide clear, accessible information.
Pressure to Invest Quickly: Scammers try to rush a decision, citing time limitations or potential for better return.
Unsolicited Offers: Be suspicious of unsolicited emails, messages, or phone calls promoting cryptocurrency investments.
Requests for Private Keys: Never share private keys with anyone.
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