One of the reasons why governments around the world have banned or restricted digital coins is due to a growing risk of crypto scams.
If you’re already investing in cryptocurrency, that means you could be at risk. If you want to start investing, you should know the risks beforehand so that you’re not jumping into open waters where the crypto scammers swim. Fortunately, these scams are getting easier to recognize and that means they’re becoming easier to avoid.
Fake wallets are just that – cheap imitations of real ones. The danger of fake wallets is that they look professional and credible like existing ones, and aren’t always easy to tell apart from the reputable ones.
What’s happening is that customers are falling for these fake wallets, depositing their coins into them and, sadly, are losing their coins to thieves. For example, one Reddit user admitted to losing 19 bitcoins to theft after depositing them into a BreadWallet imitation.
To avoid being a victim of a fake wallet scam, make sure to verify the credibility of a wallet first. You can do that by checking out trusted wallets listed on Bitcoin.org and checking for a link to the wallet’s website (the fake wallets often don’t have these links) in an app store. Along with this, one of the best ways to verify a wallet’s trustworthiness is to read its reviews.
From the beginning, shady coin exchanges have stood in the way of investors as a cryptocurrency scam to worry about. These scams work similarly to fake wallets in that they appear to be authentic, luring people to deposit their coins into the exchange.
Of course, what happens is that the exchange runs off an investor’s coins. Even scarier are ‘good’ exchanges gone ‘bad’. In these cases, the once-trustworthy exchange begins stealing from investors if those running it can’t scale the company or if they start losing their place in the market.
In terms of avoiding shady exchanges, the best way to protect yourself from these scams is to tread very carefully. Some experts say to avoid exchanges altogether. Again, you should read reviews that others post about a particular coin exchange, and read up on lists of exchanges that have been busted for fraud.
A particular dangerous crypto scam is the fraudulent ICO. Why? Because ICOs often slipped through regulatory “cracks”, and look very credible. Not only do they pass government regulation, they also build major media hype and forge their way into the public eye with big marketing campaigns.
But it’s all smoke and mirrors. These fraudulent ICOs tend to operate exit scams where they ask for investors to buy fake coins and essentially run off with their money. There have been a few notable cases over the years such as the Benebit scam which resulted in the loss of $2.7 million and the PlexCoin scam which resulted in losses of $15 million.
Detecting a fraudulent ICO is tricky but there are some signs to look for. A major red flag is a plagiarized whitepaper. This might take a bit of detective work, but discovering a whitepaper that’s a shameless copy of an existing cryptocurrency should be a strong indicator that you’re dealing with a fake ICO.
There’s been a ton of news headlines about the dangers of impersonators. These are essentially scammers who to create fake Twitter and Facebook accounts to pose as the real creators of cryptocurrencies and blockchain projects.
In this era of “fake news”, crypto impersonators are able to create hype with announcements that are completely untrue. Unfortunately, those who aren’t on their P’s and Q’s fall victim to them by believing these reports, and may invest in false opportunities. Or they might get excited over an event that’ll never take place.
A relatively simple way to avoid falling prey to impersonators is to get your news from trusted and verified sites dedicated to delivering cryptocurrency news. And if you’re active on social media, a simple way to verify if a tweet or post is true, is to enter that announcement as a Google search. You’ll likely get confirmation of its accuracy in seconds.
MLM Crypto Scams
Multi-level marketing scams aren’t limited to selling body care products. They’ve made their way into the world of cryptocurrency, and have led to major busts (and losses) for investors who fell for the schemes.
Keep in mind that despite MLM’s negative reputation, it’s a legal business model. It’s just that there are cryptocurrency MLM scams that are offering investors opportunities that are too good to be true. They usually involve ‘high-investment’ return opportunities that offer very little rewards, if any at all.
These crypto scams follow typical MLM schemes where participators need to recruit several members to join their downline to earn an income. Maybe not all cryptocurrency MLM opportunities are fraudulent, but if the offer seems too good to be true, then you should follow your gut and look the other way.
Invest In Confidence, Not Fraudulence
Cryptocurrencies have given people an alternative in terms of investing, and provides opportunities to become part of something that will transform finance (and more). Unfortunately, there are scammers out there who just want to take advantage of people with harmless intentions.
If you’re investing in cryptocurrency, make it your goal to do so safely and to keep on the lookout for signs of fraudulence. Not only will you have peace of mind, but it’ll save you from losing your precious investments.