It isn’t a secret that knowledge is power. And when it comes to crypto investments, this couldn’t be truer. It is reported that last year, as much as 1.7 billion US dollars were lost to Crypto Scams. That’s why educating the public on what these crypto scams are and look like is so important. The crypto scammers are forever becoming more and more wise, continuously coming up with new ways to scam clients. People need to stay alert and aware of what these crypto and trading scammers, in general, are planning.
What might a crypto scam look like?
Below are some of the most common types of crypto scams
- Fraudulent ICOs
The biggest scam out there by far in terms of crypto scams is ICO-Initial Coin Offering. What happens is in order to raise funds for a start-up the start-up will instead “offer their own brand of ‘tokens’ in exchange for popular cryptocurrencies such as Bitcoin (BTC) or Ethereum (ETH) [Znet.com] “. The scammers offer investors millions of dollars worth of their new cryptocurrency in exchange for money to fund the startups. The difference between ICO’s and IPO’s is that IPO’s are regulated by the SEC which means the financial authorities ensure that regulations are abided by and everything runs above board. An ICO is not protected by any financial authority and therefore can mean that the funds are not recoverable and the people who started the startup can quickly disappear and run away with the money
- Fake Exchanges
According to the screen, it appears as though you are buying bitcoin or other types of cryptocurrency, but there is no reality beyond the pixels of the screen. No exchange is actually taking place! It is kind of like playing a computer game. You think you are trading and buying a real cryptocurrency when in fact you are just trading on a totally made-up screen that has been programmed to go up and down at random, not connected at all to the movements of the real crypto exchanges.
- Fake Wallets
Cryptocurrency wallets, like regular wallets, are used to store your ‘cash’. Just like you want your regular wallet to securely store your cash, you want a strong cryptocurrency wallet that will keep your bitcoin or forex secure. Visit a reputable site and get recommendations for a safe wallet before you buy one.
- Ponzi Schemes
A Ponzi scheme will encourage investors to recruit others to invest in the same cryptocurrency company in order to increase profits. Ponzi schemes often promise extremely high returns in a short space of time. Ponzi schemes are not specific to Cryptocurrency but they have made their way into the crypto world too.
- Phony mobile apps
Scammers create mobile apps that very closely resemble the app of a reliable crypto company. Be sure to look out for misspellings in the app as well as the coloring. Even once the app is deleted, it could still cause trouble. So definitely make sure that you have selected the app you think you are selecting before you actually download it.
- Fake websites
Like mobile apps, scammers create websites that look very similar to their reliable counterparts. Do not be fooled, ensure the website is secure (see below for how to tell a secure website from an insecure website). But beware, the initial website may be ‘secure’, but you may be directed to an insecure webpage for payment. Be aware of this trap every step of the process.
Protect yourself and do your homework.
Questions you should be asking about the website before buying bitcoin, forex or any cryptocurrency.
- Does the web address start with https or Http? The ‘S’ makes all the difference. The data you send to a website starting with Http, not https, is insecure.
- Is there an image of a lock on the top of the webpage (in the address bar of the browser)? If so, or if the word ‘secure’ appears, it is likely the website is secure. Look out for this little icon.
- Does the website’s URL have any obvious spelling mistakes? If it does, this may be a red flag.
- Does the website promise unusually high returns in a short amount of time? This is a common indicator of a scam.
- Is there an “About Us” page? Does the website indicate where the company is registered? If there’s little or no information about the company and the people running it, it may be a sign that this is an unreliable website.
- Do legitimate, reputable websites link to this site? This may mean that the site is trusted and respected.
- What do other users say about the website? Are there any negative reviews and, if so, what do they say? The crypto community is usually pretty quick to spread the word about scams.
- What do the reviews say? Are there any negative reviews? Be aware that positive reviews may not be legitimate, and may have been written up by the scammers themselves.
- Is there anything else about the website that raises red flags? Does it seem too good to be true? Things that seem too good to be true usually are. Trust your instincts!
What can crypto scam victims do?
- Call Action Fraud, a police agency and report the Fraud.
- Call the FCA (Financial Conduct Authority) and tell them you’ve been scammed.
- If you used a debit card to buy your cryptocurrency, you could request a chargeback, although this does not guarantee that your money will be recovered. If this is applicable click here.
- If your payment was made via credit card for your cryptocurrency payment, you might be able to use Section 75 of the Consumer Credit Act to get your money back, but again this is not guaranteed.