Cryptocurrency is regularly in the news these days. Whether it’s the rise and fall of BTC, Elon Musk’s tweets about Dogecoin, or the latest NFT art auction, there’s a lot going on in the industry. You might feel like the time is right to finally buy some crypto yourself. But how do you know if you’re making the right choice? Funds-Back, a firm that helps scam victims recover their money, shares some of the most common crypto scams.
Pyramid and Ponzi Schemes
Many cryptocurrency scams are variants on the old fashioned pyramid and ponzi schemes, which rely on constantly recruiting new “investors” in order to pay out promised gains to the original investors. These schemes make lots of money for the people on the top by taking advantage of the people at the bottom, before eventually crumbling when they can’t recruit enough new victims. Funds-Back warns to be aware of any “investment opportunity” (crypto or otherwise) that relies heavily on you recruiting new members. These schemes often disguise themselves under names like multi-level marketing, network marketing, and other similar titles.
OneCoin, the subject of the popular BBC podcast The Missing Crypto-Queen is one high-profile example of a cryptocurrency ponzi scheme, but there are many others out there.
Pump-and-Dump
Pump-and-Dump schemes involve a group of people hyping a specific cryptocurrency, encouraging everyone to buy it with promises that it is about to take off. If the scheme succeeds, the coin does in fact take off for a time being — before the organizers of the scam sell off their massive holdings, leaving everyone else holding the bag. These scams can either be perpetrated by the creators of the coin, or by outsiders who have simply identified a low-cost coin with a catchy name that they think they could make go viral. Funds-Back recommends being wary of any investment opportunity being promoted by a random person on Twitter.
Scam Exchanges
In order to trade cryptocurrency, you have to sign up with a crypto exchange. There are many exchanges out there, catering to different coins, trading styles, and level of expertise. Many of these exchanges are legitimate businesses providing a valuable service; others are fronts for a scam.
Dishonest exchanges will give people the opportunity to buy cryptocurrency, but then make it difficult or impossible to withdraw the currency. These scams will continue for as long as they can, stringing people along with the occasional successful withdrawal, before one day closing down and disappearing with users’ funds.
In order to avoid this scam, Funds-Back recommends that users first choose a well-established, reputable exchange, and that when they are not actively trading their funds, they withdraw them from the exchange and store them in their own wallet.
Phishing Scams
Phishing scams take a myriad of forms. One way or another, these people are trying to gain access to your crypto. They might impersonate the support team at your chosen exchange, in an attempt to get you to share your password. They might impersonate someone you know, asking you to send them some crypto real quick because they need to pay for something. Or they might even hack a celebrity’s Twitter and claim to be giving away Bitcoin. Scammers are always looking for new ways to get your crypto.
Funds-Back says that the best way to avoid phishing and many other scams is to always be suspicious. Ask yourself why this person is contacting you. Are they acting like themself? Contacting you in the way they normally would? Are you really the person they’d come to for help?
Crypto scams are everywhere, but with a little common sense and a dash of suspicion, you can avoid many of them.
Hi there! I’m Sethu, your go-to guy for all things tech, travel, internet, movies, and business tips. I love sharing insights and stories that make life more interesting. Let’s explore the world together, one article at a time!
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