Cryptocurrency has already gained a lot of attention worldwide. When blockchain technology was in its infancy and Bitcoin and other early cryptocurrency were being developed, the number of people who had invested in the field was small compared to today. The number of people who have invested their money and are earning from cryptocurrency has grown impressive. It is enough to make thieves and scammers start plotting their next loot considering the amount of money in cryptocurrency. With every development of a new way to make money, several people always want to make quick cash and steal from people in one way or another. When cryptocurrency investing became a good idea for people to make money, scammers developed ways they could make money from investors rushing to invest in the next big thing. This article thus tries to warn new and old investors and people adopting cryptocurrency about some scams that have been pulled out and may have huge negative impacts on the investors. Some of the most common scams include;
The Ponzi Scheme
Ponzi schemes are prevalent worldwide. Each Ponzi scheme varies depending on how much time and energy the scammer spends on developing the scheme. Still, the skeleton of every scheme includes people investing their money for huge returns. The scheme starts with a person seeking investors in a product, in this case, cryptocurrency investment. They ask the investors to refer to the investment opportunity. When the people referred decide to invest, their money is used to pay the old investors. This business goes on as long as new investors join to provide money to pay the old investors. Once new investors stop joining the business, there is no more cash flow, leading to the entire business’s collapse. A few cryptocurrency Ponzi schemes have been created and successfully stolen funds from investors and people who want to adopt cryptocurrency. Some of the most recent and common cryptocurrency Ponzi schemes include; the first some lending services. Some lending platforms ask investors to invest their money and get huge returns from their investments. At times the interest rate goes as high as 40% per month to attract new investors. It does not mean that all lending platforms are Ponzi schemes, but some of them have been Ponzi schemes in the past. Once the scammers cannot get more investors and have made enough gains from their scam, the lending platforms collapse, and the scammers make a clean getaway.
The second Ponzi scheme strategy used against cryptocurrency investors is mainly on trading. Each cryptocurrency trader uses different strategies to identify the best time to buy and sell. Some people are more established in identifying this opportunity compared to others. The new traders may want to seek help on how to maximise their trading profits. Scammers are taking advantage of this and offering their strategies and saying they have a trading bot they could offer the traders. Once this happens and the traders pay for the services, the scammers disappear with the money paid. Another Ponzi scheme is the use of cloud mining platforms. Cloud mining is where an organisation is set up to get investors interested in cryptocurrency mining. When they invest in mining operations, the organisation buys the hardware required, and the profits are shared with the investors. Scammers use this to get investors’ money and make a clean getaway with the investors’ money. Some of the biggest red flags that people may look for to identify Ponzi schemes include; the first red flag should be quick and fast returns compared to other similar service providers in the market. Scammers target people’s greed and need to quickly make huge sums of money for their operations to be successful. The second red flag for a Ponzi scheme in cryptocurrency or any other field is the promise to make money or earn bonuses when you refer a new investor. It is a sure way to identify a Ponzi scheme. Some Ponzi schemes run for years before they fail, so it does not matter how long they say they have been in business; the scheme will surely fail.
Another way scammers get people’s money is through giveaways. A common nature among most people is the need for more money and the good things in life. When applying this approach, the scammers pose as organisations or rich celebrities. They mostly use social media accounts such as Twitter and Facebook to reach their targets. They state that they are giving away cryptocurrency to people and the only way to get the money is to send some to the account they offer. A good example is how they used Ellon Musk’s Twitter account and said he would send double the amount anyone would send to them. It was identified and pulled down but not before some victims had sent over $100,000 to the scammers.
Phishing scams are another way scammers target people in one way or another. There are various types of phishing scams that have been applied in the past. First, they use corrupted malware to steal important information from users. Once they have the information, they steal any cryptocurrency r funds their victims may have in their cryptocurrency wallets. In most cases, they target cryptocurrency tokens’ bank information, emails, passwords, and access keys. A major crypto exchange organisation recently suffered a hack where hackers stole their clients’ personal information. The stolen information was sold in the black market, and some of the users whose information was stolen started receiving adverts and targeted malware from scammers who wanted to access their cryptocurrency from them. If the targets download malware or give any personal details to the hackers and scammers, these hackers can steal their money in seconds.