We all dream of that inevitable day when our bitcoins will one day liberate us from the daily suffering and monotony of doing jobs we hate.
So we dream that our small cryptocurrency fortune will deliver us to one day walk the path of financial freedom. We dream of the day we might walk into our boss’s office (or zoom), and give them the proverbial bird and yell, “I QUIT!”
It’s those exact feelings that might lead us to make rash, emotional decisions and ignore red flags.
There are nefarious people out there that are always looking to part suckers from their money. Luckily you’re not a sucker! (because you’re reading this)
- Ponzi, Multi-level, Pyramid Schemes
- Pumps and dumps
- Fake wallets and ICOs
- Bot Trading “Schemes”
- Signs of a Cryptocurrency Scam
- Once a scammer, always a scammer!
- They ask you for security phrases, private keys, and passwords.
- They require you to invite more people before you get to join.
- They promise returns that are too good to be true.
- They are not too keen on disclosing information.
- Anonymous teams
- PATH – Protecting yourself from blockchain scams
Ponzi, Multi-level, Pyramid Schemes
Despite being one of the more tasteless but most well-known crypto scams, it is still common inside blockchain ecosystems. This scam works by promising existing investors a fixed return from new investors.
The whole thing eventually collapses when they can’t find new suckers to continue the scheme. The cycle would ensue, leaving everybody a loser except for the scammer. Remember this guy?
Hello my old friend I’ve never met! It’s me, your Nigerian Prince…
Remember those spam emails? Well, they’ve evolved into more sophisticated systems now.
This type of scam usually occurs when the scammer pretends to be a reliable source:
- Similar or compromised domains – A popular crypto wallet’s DNS records were changed for a couple of hours a few years ago, and its community lost millions! Others can be a simple misspelling in the domain’s name.
- Suspicious emails – They’ll send you some innocent-looking email asking you to click this link to claim your free bitcoin or your account was suspended (blah blah blah!)
- Fake Login Screens – These mimic the normal login pages of real projects. But as soon as you enter your credentials (perhaps, after receiving an email about limited account access), you become a sucker!
- Social Engineering – Pretend agents of the project calling you to confirm your personal information
There are so many ways scammers can try to manipulate you into giving up your precious coins.
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Pumps and dumps
P&D’s are your classic securities fraud. It represents the height of stupidity in the real world (you go to jail). But in true crypto fashion, it’s one of the most common things scammers get away with.
Small market cap coins are generally more vulnerable to these attacks than well-established coins because of the capital required.
They artificially inflate the price of a coin through false or sometimes misleading “news” claims. This can be a HUGE partnership that supposedly will be announced in the future, a low-key breakthrough adoption channel, or even a simple psychological price floor:
“Once it hits $.05 it’ll moon!”
The Pump: starts by launching a coordinated attack across several public forums and communities. Once the price (and time) is set, they begin the pump. Now the attackers start pooling their resources into the coin, launching it to the “moon.”
Everyone outside of the attacking group sees double and triple-digit gains and begin to invest in the excitement!
These folks are either already in on the scam or are about to be scammed.
The Dump: just like a game of musical chairs, the attackers eventually hit their price target and begin selling or unloading their positions to unsuspecting buyers.
What follows next is a truly horrific scene as the price breaks gravitational velocity and crashes back to its starting price. Sometimes it does not stop and continues well below the starting price.
The communities who have been victims of these schemes sometimes never recover from these attacks.
Fake wallets and ICOs
It’s obvious you want to protect your information.
And you were probably taught to store a copy of your most sacred data on a physical wallet- a USB drive or a hard disk. And now you think you are completely safe.
Not really! The USB that you are using may not be safe, depending on where you got it. Some hackers are known for selling completely normal-looking hard wallets with built-in software that lets them steal your information while you store your private keys.
So make sure you get your wallets from reliable sources!
An initial coin offering or an ICO scam involves “rug pulls” or “exit-scamming,” a community of investors. This is achieved by the anonymous team publishing fake websites that look like legitimate ICOS, and then when investors deposit their cryptocurrencies, the scammers siphon them into their own wallet.
Bot Trading “Schemes”
This scammers’ main point is to get investors to sign over their assets into bot trading “schemes” that promise huge ROI.
Most, if not all, of these “schemes” are usually fake. In the first few days, they will report how great your returns have been. Then, they will try to convince you to put more money in for even greater returns. And then, POOF!
Like the typical computer malicious software, crypto-malware also comes in spyware, viruses, or ransomware. They usually mess with your systems or credentials as you transact or exchange with a certain type of project or asset.
A well-known malware will wait silently in the background and activates when you copy your wallet address. Just when you’re about to paste your address into the receivers field, it swaps your address with theirs.
And if you don’t double-check the address, you inevitably send your funds to their wallets when you hit transfer or send.
Admit it; you’ve been fooled at least once in your life by a clickbait article. Or maybe one of those Youtuber apology videos. Crypto scammers use clickbait to capitalize on promotions and giveaways that attract investors. These usually end up having the fooled parties be involved in Ponzi schemes and other social engineering tricks.
Signs of a Cryptocurrency Scam
It’s time to be a bit more cautious and vigilant when approaching new crypto projects.
Once a scammer, always a scammer!
Seasons change; people don’t. Some never actually really learn from being scammed, and some folks never stop scamming.
If there were previous accusations towards a project developer or start-up team, that instantly should be a no-fly zone for you and your assets.
Don’t get fooled by easy retirement and hopium!
They ask you for security phrases, private keys, and passwords.
Would you give a total stranger your social security number? How about you’re credit card info? No person in their right mind would ask for your personal security codes in exchange to be a part of their project. Make sure to keep all your information on a secure, safe hard wallet, and make sure only you can get into it.
They require you to invite more people before you get to join.
Crypto is big on the concept of decentralization and free will, so it’d be pretty ironic if devs and startups would ask you to rake in a certain number of people before you can actually start investing. When that happens, run fast and run far.
They promise returns that are too good to be true.
When the numbers seem to be too unreal, you are probably right. A little bit of skepticism goes a long way. Please don’t fall for get-rich-quick schemes that are too easy; they’re built that way for a reason.
They are not too keen on disclosing information.
A company should always be transparent with their consumers. You should be able to ask the company for information and receive it in a timely manner. If they sidestep, or just not respond back, that’s a sign that they are up to something.
Anonymous teams may be commonplace in the crypto ecosystem, but not all of them are nefarious. For example, Bitcoin is being run by Satoshi Nakamoto and a team of people that only he knows of (this is one of the only articles he wrote about bitcoin).
The problem with this set up for start-ups that you’re looking to invest in is that they’d be hard to track once they decide to screw you over with your investments and assets. There would be no ramifications for them, public or legal, as they can easily run away from you and turn the project into a shit-coin. s
PATH – Protecting yourself from blockchain scams
Keep in mind the PATH method, a nifty little acronym that will save you a lot of time and trouble (and money). It’s what you should do after someone says Do Your Own Research (DYOR).
Check if the project has real people by doing a bit of research on them. Have they published any papers? Do they have a linked-in? Facebook and other social profiles? Check out their network, sponsors, supporters, and partners if they are all trustworthy. Finally, make sure the project has a detailed timeline and road-map instead of just a concept or idea.
Nowadays, almost anyone can raise millions of dollars with a simple white paper. And an anonymous person with millions of public funds can easily become greedy. Queue, exit scams.
There are a few reasons why a crypto project might not be a good choice.
The two most important ones are: it’s dead or most likely a scam.
The best places to check and search for answers would be the project’s Reddit page, their community network, telegram, discord, and forums.
But most of the time, it’s simply checking the project’s public Github repository. You can look for commits over a period of time to verify important information: (i) how long the developers have been working on the project (ii) how active the project has been.
To really ensure you’re putting your money in the right opportunity, you want to see how the team would directly answer community questions.
Verify if the blockchain is actually solving a problem that people are struggling with while also looking at competitors trying to achieve the same goals.
The token’s economics (tokenomics) should help you better assess the project’s overall vision, utility, and value. Some DeFi projects make it a priority to serve their community by implementing deflationary reward systems. Others might have a better way of balancing the ecosystems using novel utility functions like the minting of tokens that can be redeemed for a service.
If there are no signs of usefulness here, you should be suspicious.
A quick dive into the past would help a lot for the present and the future. Check on the project and the developers’ objectives and goals. Learn about the team, how they work, and how their overall vision has changed.
Also, check if their mission and vision have been altered through the months or days. From here, you would easily spot if something is sketchy. Remember, nothing is guaranteed!
Now, you can confidently navigate the crypto world without falling for scams! Just remember, scams are always changing and evolving, but these steps will help you stay one step ahead of these scammers.
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