Beware of cryptocurrency scams

Cryptocurrency scamsThere are a lot of people trying to scam people out of their hard earned money by putting up a new coin for sale and then making an ICO (similar to an IPO for stocks) to draw unsuspecting people in on the prospect of making massive money.

Anyone can make a new coin, either buy forking it from an existing coin or by programming it themselves.  It costs around 25k to do this and is very unethical.  The fraudsters will create this coin then pump it up by advertising the ICO on social media sites.

The general public will get taken in by the prospect of making 500 to 1000% on their initial investment and buy up the ICO in large amounts and then just after the ICO the fraudsters will sell all of their coin’s that drives the coin price way down and it becomes worthless.

At this point if you have bought you might as well cut your losses and sell as well or just forget that you had invested in that in the first place.  Currently there is little to no laws and regulations surrounding the crypto currency industry and so these scammers and fraudsters can get away with doing this.

Other ways that you can get scammed out of your crypto currency:

  • Shady exchanges

These exchanges are either setup to scam you with high transaction fees or they could even just transfer their exchange wallets to their personal wallets – however this is different from the recent nicehash wallet hack and the previous Mt Gox hack, where bad cyber security practices led to peoples bitcoin and other crypto being stolen.

Join Coinbase a well known scam free site and earn $10 USD when you signup

A well known scam exchange is yobit.net

Yobit - cryptocurrency scam

  • Ponzi or Pyramid Schemes

In the spring of 2017, a Mumbai-based company called OneCoin was delivering a sales pitch to a room of investors. Indian financial enforcement officers raided the meeting, ultimately jailing 18 OneCoin representatives for operating a cryptocurrency Ponzi scheme. At the time of their arrest, OneCoin had already moved over $350 million through a payment processor.

Investors had been duped through a combination of enthusiastic upselling, lack of knowledge of the technology in front of them, and a lot of positive media coverage (of both the project and booming cryptocurrency prices).

A lot of people lost a lot of money. And we like to think we’re clever enough to spot a scam when it is front of us. But cryptocurrency is creating new scams, using jargon and technology most people have never heard of, let alone truly understand. Even grasping the basics of blockchain technology and smart contracts is difficult for the layman.

  • Pump and Dump

Many financial experts have dismissed cryptocurrency as a scam. While some compare Bitcoin to other safe haven investments, such as gold, others believe it is merely a speculator’s heaven, ripe for pumping and dumping.

Groups of scammers will announce that they are going to be pumping up the price on social media and that others should join them in making thousands on their scheme.  They will usually choose an altcoin that’s a worth a few pennies and pump it up and then as soon as the price is high enough they will dump all of their coins.  This is similar to the ICO scam mentioned at the top however they are doing it to well known and good projects with a continuing project time line.  Now that Bitcoin futures has been implemented – well known bitcoin advisors such as Ronnie Moas have been saying that we will see similar schemes against bitcoin which will cause people to panic sell their bitcoin – he advises to buy in the dips when this happens.

  • Fake coins or coins that don’t exist

In August, 2017, the City of London Police shut down a “cryptocurrency business” that was cold-calling people to sell fake digital currency. Victims were cold-called and persuaded to purchase non-existent cryptocurrencies. Nine victims came forward to the U.K. firm, Action Fraud, with combined losses exceeding £150,000.

The man who allegedly set up the scam used a central London address, in financial center, to lend the scam authenticity.
Real investors will not cold-call you to offer an opportunity, cryptocurrency or not. If you receive a call asking for your investment in a project, note the name of the caller, the company name and address, and put the phone down. You next call should be to the SEC to report potential securities fraud.

Other fraudsters are trying to impersonate well known exchanges or well known crypto with scam sites to draw people in to buy from them and in turn taking all their money.

 

References:

5 Common Cryptocurrency Scams and How to Avoid Them

https://steemit.com/blockchain/@thejavith/dont-use-this-exchange-complete-scam

Scamcoins

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