Most people that know about cryptocurrencies are very eager to get involved with it but are not sure how to enter the coin market. Many are concerned about the many scams associated with the industry and wouldn’t want to lose their money to crypto scams. So what is a cryptocurrency scam?
A scam as we know is any scheme used to cheat others of their money. A cryptocurrency scam essentially involves cheating people by presenting dubious cryptocurrency-related opportunities.
Generally, cryptocurrency scams take advantage of people’s desire to make or save money. Scammers thrive on people’s ignorance.
There are many types of cryptocurrency scams that people fall prey to. In view of the explanation so far, what is a cryptocurrency scam and how do you identify and avoid them?
One thing you need to know about crypto scams is that the likelihood of recovering your money is slim if not non-existent. This is why you must be careful with these scams.
1) Crypto (Bitcoin) investment scam
All over the internet, thousands of scam websites dedicated to stealing people’s digital currencies spring up daily. Their purpose is to take advantage of people’s ignorance of the workings of cryptocurrencies to steal their coins.
Cryptocurrency investment scams usually ask people to invest bitcoins which is the most popular coin, promising them large return on investment.
These bitcoin investment schemes are usually high yield investment program (HYIP) that give people impression that if they invest on the sites that they would earn huge profits such as 20 to 100 percent within a short period of time.
These scammers make it seem that they are making a lot of money through some activities such as mining. In reality, they are just waiting for the uninformed investor to send in money that will never be returned.
Common claims by these scammers is involvement in cryptocurrency mining, trading or arbitrage. The victims feel that they have hit some jackpot but when they send their money to the scammers, they simply disconnect them from the site or stop responding to their demand to be paid.
Some of the scammers will even start giving excuses on why the victim cannot be paid and there is little such investors can do because they do not know where or how to find the scammer.
Some of these scam site dupe people of thousands of dollars by cleverly paying a few early investors of their schemes. They are aware that paying the early investors will create goodwill and publicity for them.
The early investors that were paid will simply spread the word about an investment that pays people good profit. The new set of ‘investors’ join to participate in the ‘mining pool’ or ‘lucrative arbitrage’ but in a few more weeks or even days, the scammers are gone with all the money invested.
Some are more daring, they will continue with the old trick but this time, they will have ‘eveidence’ that their investment works. Remember that they have already scammed hundreds of people, so they will start displaying their crypto wallets to entice new victims.
2) Bitcoin Doubler Scam
Bitcoin doubling scam entails scammers building sites with the purpose of stealing Bitcoin from people ignorant enough to believe that it is possible to double your Bitcoin (money).
This class of fraudsters has also morphed to asking people double their ethereum in what is called “Ethereum doubler”. It is possible that more of this scam will be developed for other coins in future.
Now why would anyone double your crypto for you? If they have means of doubling Bitcoin or Ethereum, they would double theirs quietly and keep doing it secretly without letting you know about it.
3) Bitcoin Generator Scam
This is very similar to Bitcoin doubling scam except that this particular scam starts by telling you to key in the amount of bitcoin you want the site to generate for you.
If you type in that you need say 0.3 bitcoins, the site responds by churning, giving impression that it is mining crypto for you. When it is done it displays that your 0.3 btc is ready. Then prompt you to pay some transaction fees which if you pay, you’ll wait forever for your 0.3 bitcoins.
Cryptocurrency Service Scams
There are many internet based services that demand payment or pay users in cryptocurrencies.
A scam crypto service site takes advantage of the fact that there are many users of the internet who will never research on a site to know its legitimacy before trusting such sites with their digital currencies.
Some popular crypto scam service sites are:
4) Scam Gambling Sites
Ordinarily, crypto gambling sites will pay you in cryptocurrencies when you win a bet but scam gambling sites are just there to steal your crypto.
Some do worse… I have encountered a fake gambling site that will intentionally make stakers win bets and then turn around to demand that they submit funded wallets to their phishing site to getting paid.
Giving them details of such wallets by logging using malicious browser extensions they suggest will literally hand them your private keys and coins.
This is why you must be careful the sort of crypto service sites that you even submit details of your public key to. Dealing with scam gambling sites is equivalent to making donations to them.
5) Scam Escrow Sites
Escrow sites are sites that act as intermediaries in trades. They usually hold payments made by the payers until the payee meets the requirements of the transactions.
If something goes wrong, the paying party should be able to get their money back less the escrow service fee, but if the escrow service is operated by scammers they simply steal the money entrusted to them.
This is why you must research and ask questions before entrusting your money to any crypto escrow service on the internet.
6) Scam Bitcoin Mixing Service
People have long realized that Bitcoin is not anonymous as previously thought. Transactions on the Bitcoin blockchain can actually be tracked and there are blockchain analysis companies committed to doing that.
These companies help the government and law enforcement agents to keep an eye on cryptocurrency blockchain to check suspicious activities such as money laundering, tax evasion, terrorism financing and other crimes.
This is the reason Bitcoin mixing services exist. They essentially dissociate the transaction history of a new wallet from an old one. So if you have bitcoins that came into your wallet from a tainted source or just want to maintain your privacy, you simply go to a cryptocurrency mixer and obfuscate the transaction history of your wallet.
Your coins will be as good as new if you used a good bitcoin mixer, but problem arises if you encounter a scam mixer. If you send them your btc or any other cryptocurrency, they won’t be doing any mixing for you neither will you get your coins back.
So before you use any crypto mixing or blending service, be sure that you are not dealing with a scam site.
7) ICO Scams
Initial coin offering is an unregulated program through which entities raise funds in crypto by selling tokens. It is very similar to companies that sell stocks and equities to share holders except that entities behind ICOs are barely liable if anything goes wrong.
The ideal scenario is that funds contributed are sent back to the investors if the ICO doesn’t meet its objectives. This happens if the promoters were unable to deliver on their promises, but reality is quite different.
Fraudsters mostly have literally taken it over stealing billions of dollars from investors.
At Cryptoinfowatch, we track scammers to ensure that investors do not lose their crypto. We also advise investors to look before they leap when it comes to making any crypto-based investments on the internet.
8) Crypto Exchange Scam
Crypto exchanges can be classified as centralized or decentralized based on the sort of platform they operate on. However, it is important to research about new exhanges that have no reputation in the market before attempting to use them.
Scam crypto exchanges will take the crypto you send them and there is little you can do. There have been cases of exchanges that sieze crypto assets of clients claiming the funds were not legitimately earned of incomplete KYC. Just be sure that you go through reviews before using new exchanges.
Are there any other scams you know about or maybe you were scammed of you cryptocurrencies. Let us know about it in the comment box.