As cryptocurrency is a digital and modern way of making money, it has the potential to yield high profits, but scams in cryptocurrency are also a big problem. Scammers get interested in cryptocurrency after seeing its increasing popularity in the financial world. There are many examples in which investors have been scammed out of a lot of money in the cryptocurrency world. There is a need for increasing knowledge about this online currency to understand its way of working and to protect yourself from cryptocurrency scammers.
Definition of Cryptocurrency Scams:
Any illegal or deceptive activity to gain profit by manipulating or misleading an individual can be called a fraud or scam in cryptocurrency. Due to its decentralized nature, it is very difficult to recover or restore cryptocurrency scams. People are mostly scammed by fraudulent promises of high profits that are nearly impossible to achieve. Scammers in the world of cryptocurrency scam investors in different ways like Ponzi schemes, Phishing Scams, Fake Crypto Wallet Scams, Pump and Dump Scheme etc. Let’s study each type one by one.
Types of Scams in Cryptocurrency:
When money is your concern, scammers and fraudsters always follow you. The same is true with cryptocurrency. There are different types of scams in cryptocurrency, some of which are as follows;
Ponzi Schemes:
Ponzi schemes are one of the oldest and most common types of cryptocurrency scams. In this scam, scammers make fake promises about high returns with little to no risk. They paid early investors with the money of late investors, creating the image of a profitable scheme. Bernie Madoff’s Ponzi scheme is an example of a Ponzi scheme. In his scheme, Bernie Madoff scammed about 10 billion dollars from the people who invested in it.
Phishing Scams:
The type of scam in which, by using reputable websites or individuals, they steal people’s sensitive information and use this information is called phishing Scams in cryptocurrency. Fraudulent SMS or E-mails with irrelevant links are examples of Phishing Scams.
Fake Initial Coin Offering Cryptocurrency Scam:
The type of scam in which scammers create fake IOCs (Initial Coin Offering Cryptocurrency Scam) offer non-existing coins and get huge investments from investors. After raising a large amount of money, fraudsters disappear, leaving investors with cryptocurrency coins that are now worthless to them. Centra Tech is one of the biggest examples of IOCs, They scammed investors out of about 25 million dollars, and it is one of the most prominent scams in cryptocurrency in the whole world.
Pump and Dump Schemes and Scams in Cryptocurrency:
In the Pump and Dump Scheme, fraudsters increase the value of infamous and low-value cryptocurrency coins through fake news or rumors. Once the value reaches its peak point, scammers sell all their holdings, and the price of the coin falls once again. And the investor or buyer of those coins faces serious losses from this cryptocurrency scam. GAW Miner and Zenminer are two companies that scammed people by faking the value of their coins and getting millions of dollars
Cloud Mining Cryptocurrency Scams:
People are scammed by giving them fake promises of high returns and also offering them cloud mining contracts. These are just some ways of getting a high amount of investment because, in reality, they don’t have such a type of hardware or anything to complete their promises. Hashocean is the brightest example of a cloud mining scam in cryptocurrency; it was a cloud mining platform that operated between 2014-2016. They offered cryptocurrency mining to investors, and their first focus was Bitcoin mining. They promised high returns to the investors, but everything was fake, and investors got nothing. The exact value of the stolen money is unknown, but it is estimated to be in the billions of dollars, and it is one of the biggest scams in the cryptocurrency world.
Crypto Wallet Scam:
In this type of scam, cryptocurrency fraudsters use fake cryptocurrency wallets. They make fake promises, get investments, and also get private information about investors, and then disappear or wallets will not get active for a longer time. Several fake wallet apps on the Play Store are examples of these crypto wallet scams. In Pakistan, in 2018, by using a Binance wallet, fraudsters scammed people and got the benefit of 100 million dollars.
Social Engineering Scams:
This type of scam involves manipulating the owner to reveal personal information like passwords, etc. This can be done through blackmail or psychological manipulation. Fake Tech support calls or fake messages are examples of these types of scams.
These are some types of scams in cryptocurrency, with these scam techniques, people are being scammed and losing billions of dollars. Some scammers are caught by the authorities and sentenced to jail. When dealing with any type of cryptocurrency, one should have proper knowledge of it. It will decrease the chances of fraud.
