Don’t be tricked into these cryptocurrency scams
Learn about these deceptive bitcoin and cryptocurrency scams before you invest
Cryptocurrency and blockchain technology have revolutionized the world’s financial ecosystem. Bitcoin and over 1,500 altcoins have created a new and innovative financial industry. Not only has this brought great wealth to many early developers and investors, but it has also made it easier for small businesses in underdeveloped countries to trade globally.
Unfortunately, with the benefits that cryptocurrencies bring, scams relating to cryptocurrencies have increased to an all time high. While brilliant smart tech-savvy inventors have created block chain to solve some of the problems we face as a society, there are many individuals that have turned to exploiting their creation by tricking uninformed new investors.
Sadly, scams are becoming more prevalent each day. Therefore I want you to be aware of these scams before you get started with bitcoin and cryptocurrencies. I want you to be aware of the dangers of investing in cryptocurrencies.
I personally have been scammed. A colleague introduced me to an “online crypto investment platform” – one that claimed to provide their clients an average of “15% return per month”. At first, I was a little skeptical, but my colleague showed me a reputable media outlet site which had an article that validated the investment platform.
In hindsight I should have realized that 15% return per month is too good to be true. I also later discovered that the media outlet site that my colleague showed me, was in fact a fake site, made to look and feel like a genuine reputable news outlet.
Nonetheless, the brain is easily persuaded into believing 15% return on capital every month is achievable. Why not, when the value of bitcoin was soaring? Why not, when you hear that many of your friends are profiting from bitcoin and you are being left behind?
In addition, I trusted my colleague who introduced me to the online cryptocurrency platform. I even used the demonstration tools on the site and it appeared to be authentic, trustworthy and honest.
I am not wealthy, but I do want to get a head in life, and desperately want to be financially secure. After depositing $10,000 into “my account”, I was excited to check my return after the first month had past. Even if the return was only 10%, I could cash out $100.
But when it was time for me to receive my first month of earnings, I was advised that I could not withdraw due to a “system upgrade”. I would have to wait for the second month to be able to withdraw the earnings. Initially this did not worry me, as I trusted my colleague and system upgrades/maintenance is quite common (so I thought to myself).
As the second month past, I again attempted to withdraw my earnings. I was then advised that I could not withdraw my funds because the platform operator had entered into a partnership with a UK based tech company to expand their business. In other words, they needed my money to support their expansion!
I began to realize, that I had been scammed! Needless to explain any further, I lost $10,000. I fell into the trap of trusting my colleague. Looking back at why I got scammed, I reasoned that there were several factors. Firstly, I was going through a hard time and I looked for something sustainable and workable. Secondly, my colleague knew this, and took advantage of me. I now have a hard time reconciling with myself knowing that I should have had more common sense.
The last thing I want is for others, like yourself, to fall for this scams.
Please read on. to learn more about cryptocurrency scams and how to avoid them.
Scam 1. Fake Cryptocurrency Exchanges
There are many fake bitcoin and cryptocurrency exchanges!
Fake cryptocurrency exchanges are the most common scams. They are the most simple to start for con artists, and prey on investors that are new to the industry. Many investors are unaware of what to look for, in ensuring that a cryptocurrency exchange is safe and secure. You need to find cryptocurrency exchanges that are licensed and regulated (ideally in your jurisdiction). But even that doesn’t guarantee safety and security.
The concept behind a cryptocurrency exchange scam is very simple. They market their “exchange” with the free digital coins, promising high earnings to make a profit. They also illegally use the profiles of well known celebrities in their marketing. This generates a feeling of trust among new investors, believing that the exchange is endorsed.
Do NOT be deceived by fake exchanges. They trick you into believing that they are trustworthy, with big returns, especially through using high profile celebrities in their marketing. Make sure you research and review any cryptocurrency exchange you want to deal with, and even use your friends as sounding boards.
Scam 2. Fake Wallets
Not all wallets can be trusted, even those from Google Play or Apple iStore!
The second most common cryptocurrency scam is the “fake” wallet.
A wallet is a place of storage for your cryptocurrency public and private keys. These keys can be considered similar to the passwords to your bank accounts. It is therefore vital that these keys are stored on a safe and secure wallet. If anyone has access to your cryptocurrency keys, they can steal your coins.
Wallets can be found on Google Play or Apple iStore. Now, there is nothing wrong with downloading an app to manage your cryptocurrency investments. In fact, there are plenty of good digital wallets which are safe and secure, effective and convenient to use.
But a great number of fake wallets have been discovered on Google Play and Apple iStore. As an example, the most popular digital wallet – Trezor – was cloned. The moment you send money to any of these fake wallets, it melts into nothingness!
A wallet is essential for investing in bitcoin and altcoins. But make sure you use a genuine wallet that is truly safe and secure. Take the time to research and review wallets thoroughly.
Only download and use a wallet that has been thoroughly reviewed and recommended by many users. Do NOT simply trust your financial advisor or friend. Choose from our recommended list of online wallets if you are unsure.
Scam 3. Pyramid Schemes (Ponzi)
The signs of Ponzi Schemes are unrealistic promised returns. They appear to be proven by other users who have been paid out.
Charles Ponzi was a handsome, smooth talker. He was the brain child behind the concept of pyramid schemes (a.k.a Ponzi schemes). In a pyramid scheme, you are promised great returns. At first, the returns appear to be real because some investors are being paid out. But, in fact, these pay outs are subsidized by new coming victims of the scam. It is their money, cash flow in, that is being used to pay out early investors.
Through this scam, the scheme builds. The cash flow coming in must exceed the cash going out by delaying payments and by continually growing the base of new investors. The existing investors see good returns, continue to market the scheme and draw in more new investors to support the scheme.
Eventually, however, the flow of cash coming in will not support the cash required to be paid out. There will be a time when new investors cannot be found, and pay outs will no longer occur. It is the last man standing (in fact many) who are left in ruins.
Do NOT fall for false promised high returns, even if an existing investors shows proof that they have achieved incredible returns.
Scam 4. Targeted Profiling
Look out for people who are targeting you via profiling
Profiling is a strategy of cryptocurrency scammer that is very difficult to detect when it is happening to you. The scammers build a profile of you, and connect to mostly via social media or dating sites. They build a relationship with you, then ask you to send funds via cryptocurrency to “help” them in their time of need or to invest in their ideas. Often, this scam is successful because it preys on the victims belief of a genuine relationship. Cryptocurrency is used as a means of transferring funds because it aids with being anonymous.
As mentioned previously, it is very difficult to detect targeted profiling because these scammers have built a connection over a long period of time. Trust is established and the victim of the scam loses their ability to see through the lies.
Do NOT fall for any story that seems too good to be true. Seek support from friends and family, and trust that they can see through the lies and deception of a scammer.
Scam 5. Fake ICOs
It can be dangerous participating in an ICO. Be careful and research thoroughly.
Let’s first explain the concept of ICOs (Initial Coin Offerings). An ICO is a crypto fundraising event for a new start up. The investor injects cash into the company and in return are issued with coins. The coins behave like shares in a company. In a company that has issued share, once profitable, the value of the shares will increase. But in an ICO, it is the value of the coins that will increase (not the shares). This is why blockchain technology is also referred to as smart contracts. They cannot be replicated and can be assigned to a person. Therefore a successful start up that has issued coins through an ICO, will see the value of its coins increase in value.
While some ICOs are indeed genuine, several of them are fake. These fake ones even go as far as using celebrities and prominent businesses (without their authorization) to lend credence to their scams. In Australia, fake ICOs have used the names of Waleed Aly, Dick Smith, Deborah Meaden, Peter Jones, Lord Sugar, and Michael Rowland, among others.
The operators of these fake ICO’s lure investors with low seeding capital, high projected return on investment, and quick returns. They also have great marketing incentives such as free coins. The moment you make a payment to a fake ICO, your capital is irretrievable. The operators of the ICO will give excuses and stories explaining why you can’t withdraw. After a while, they will eventually not even reply to you, and you will be unable to track them down.
An ICO is an inherently a risky proposition. Do your homework thoroughly and invest small, do NOT invest big.
Conclusion
Cryptocurrency scams are becoming more common everyday. In summary to avoid scams, take heed of the following:
- Research and do your homework before creating an account at a cryptocurrency exchange.
- Find a safe and secure way to store your coins. Don’t just use any wallet.
- Know the tricks of fake ICOs. They promise rewarding free coins, and investment in “exciting and innovative” crypto start ups.
I hope you learn from my mistakes. It can be easy to fall for many scams, as they can be so persuasive.That said, I also hope that this does not deter you from investing and using cryptocurrencies. The benefits that they bring to society are immense, just be careful when getting started and good luck!
