Johann Wilfred
As cryptocurrency continues to grow in popularity among investors looking to diversify their asset classes away from traditional stocks and bonds, the market is still rife with scams and malicious actors. Today, there are several categories of crypto crime to be informed of, making it essential for the new enthusiast to stay informed.
A Chainalysis report on crypto crime trends found that scams still remain a substantial portion of all proceeds from various types of crime related to digital assets. The report also noted a shift away from BTC towards stablecoins, suggesting that cyber criminals are adjusting their approach to conduct illicit operations.
- Investment scam
Investment scams are usually conducted by companies that claim to offer high returns to unsuspecting investors looking to earn a return on their hard-earned money. These companies invest a lot of money into marketing and launch investment schemes that ultimately don’t deliver any returns to their clients.
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They also try to represent that they offer exposure to Bitcoin, Ethereum, and other blue-chip cryptocurrencies without having any of the infrastructure in place required to service clients’ buy and sell transactions.
- Phishing scam
Similar to regular phishing scams, people receive emails from addresses that redirect them to a website, where users enter their private key information. Hackers then take this information and drain a person of everything in their cryptocurrency wallet.
- Romance scam
Romance scams are often long-drawn-out processes in which the scammer in question cultivates a long-term relationship with his/her victim. They praise their victim and play the part of a friend, loyal advisor, or even love interest. They also put on an appearance of being rich, often using fake profiles and pictures to do so.
Eventually, the scammer will tell the person he/she knows an expert or a crypto investment platform that can triple or quadruple their money. After they receive funds, they disappear, or buy time and request more money, further draining the targeted person of their money.
- Pig butchering
Pig Butchering scams are similar to a romance scam, except in this type of fraud, the scammer is not interested in cultivating a long-term exploitative relationship. They typically target and attempt to cheat people within shorter time frames. Instead of behaving affectionately to gain trust, they appeal to the victim’s desire to make money and refer them to fraudulent crypto investment platforms and schemes.
- Impersonation scam
For this form of fraud, the person carrying out the scheme will claim to be from a legitimate organization or will pretend to be a popular personality. They then use the identity to push people into giving out their personal wallet keys or user information or financial information to hack into their cryptocurrency or fiat currency.
- Memecoin scams
Due to the volatile nature of memecoins, they are often used as a hub for scammers to take advantage of cryptocurrency trends to make money. Memecoins are often mascots for prominent celebrities and other symbols. Organizations or individuals with ill intent will create lookalike meme coins in an attempt to cash in on an opportunity presented by the market with no intention of returning investors’ money.
- Rug pulls
A common type of cryptocurrency fraud, rug pulls are usually large-scale scams, where a person claiming to be the founder or the CEO of a startup will offer a token for investment purposes. They will repeatedly promote the token and fake the use cases for such an investment, often fabricating whitepapers or false roadmaps to convince investors of its utility. Finally, when the company has made enough money from a large number of investors, they often disappear with no further communication with their customers.
8. Pump and dump schemes
Similar to a rug pull, pump and dump schemes artificially cause the value of a token to rise through simulated buying, with the inflated price finally passed off onto a buyer who is unaware of the scheme, giving the scammer his profit.
9. NFT wash trading
A highly popular scheme among NFT traders and bad actors, digital collectibles pass through several accounts in this scheme in an attempt to make an NFT look like a high-demand asset. The value of the good is artificially inflated and the last buyer is left to face the loss due to the collectible only having simulated value from repeated trading.
10. Giveaway scams
Giveaway scams often occur through social media accounts that falsely claim they will multiply a person’s cryptocurrency if they send it to a particular address. After the money is received, there is no further contact with the account.
With so many scams out there, how can serious buyers avoid them?
For readers interested in investing in crypto, proper verification is important. Avoid calls from unknown numbers or emails asking you to reveal private information. When choosing to make an investment, go only for regulated exchanges with government licensing.
