Cryptocurrency is a new and fast-moving sector, which is probably why it hasn’t been covered in previous posts. After all, where does one start?
Luckily, this question was answered last week after we found evidence of people being duped into handing over large sums. Unsurprisingly, the swiftly-expanding nature and popularity of cryptocurrencies have led to a rapid increase in cryptocurrency scams.
Furthermore, the rising value of this sector suggests huge returns and cryptocurrency mining “fortunes” for investors. But the sector is totally unregulated. As a result, the risk of falling victim is very high because potential scammers will always have the upper hand.
If you’re considering entering the crypto currency market for the first time, it’s important to remember that you will never meet the person you’re doing business with, and have no:
- Idea what they look like
- Way of verifying their name or address
Tracking down such an individual would be challenging.
Globally, investors lost £14billion to cryptocurrency scams in 2021. Clearly, awareness around this topic is still in the early stages.
If you discount the most obvious signs, it’s incredibly difficulty to spot a scam. Fans of popular YouTuber Paul ‘Ice Poisedon’ Denino discovered this the hard way. Last month, Denino admitted encouraged them to invest in a long-term project only to withdraw all the funds when the project had accumulated US$500,000.
The rules surrounding traditional investments apply here too, due diligence is essential. To help ensure that you don’t fall prey to the crypto hype, we’ve compiled a list of the most common crypto scams.
Cryptocurrency scams: what to look out for
- Ponzi: We’ve posted previously about Ponzi schemes, which usually offer extraordinarily good prospects and promises. Any scammer can claim they’re utilising cutting edge technologies because falsifying data is much easier when the money is virtual
- Pump and Dump: These scammers use false information to encourage investors to buy ‘crypto assets’ in little-known projects. Scammers sell their own shares when the asset price rises, making a profit, and leaving victims with worthless shares
- Fake celebrity endorsements: Scammers hijack or fake celebrity social media accounts to promote a con. Last month, thousands of people received an email falsely claiming that England football manager Gareth Southgate endorsed a crypto trading platform. Similarly, scammers used tech entrepreneur Elon Musk’s name on a Bitcoin address to fleece £2million from investors
- Fake exchanges: Emails promising access to virtual money stored on a ‘crypto exchange’. The catch is users must first pay a ‘small fee’
- Fake apps: Cryptocurrency apps are often replicated and uploaded to app stores. If installed, personal information and financial data may be stolen, and malware could be planted to trick users into paying for non-existent services
- Fake press releases: Scammers occasionally trick journalists into disseminating information. E.g. legitimate news sites were duped into writing fake stories claiming that a well-known retailer was preparing to accept cryptocurrencies
- Phishing: A widely known form of deception involving fake e-mails, texts, and social media posts that appear to come from legitimate and trusted sources.
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