Scams in the crypto market are more frequent despite the fact that crypto is built on blockchain and no individual takes advantage of it and scams people, but exchanges are the loophole in the system. Many exchanges lack advanced security, and con artists try to hack into their systems and wipe out all the assets. However, these are highlighted in the industry because businesses are robbed there, whereas users are less aware of cryptocurrency investment scams because con artists lure victims in with bait before tricking them into falling for the scam and robbing them individually.
In a crypto investment scam, fraudsters generally dupe people by hacking into their accounts or making them invest in some false currency. They even try to lure investors with fake schemes and investment ideas that can give double returns in the future. Such fake promises entice more investors on board, and scammers flee with all the digital assets.
To get a better understanding of such investment scams, you should first learn about digital assets and how they work. In this article, we will discuss virtual currency, various types of cryptocurrency scams, and how to report them.
What is cryptocurrency?
Cryptocurrency is nothing but a currency that is only available digitally, an intangible currency. You can make transactions and buy and sell products with this currency. You can access cryptocurrency with your cell phone or computer that has access to the internet.
You can buy this currency with fiat currency through exchange platforms. However, before purchasing any token, you should conduct extensive research because the crypto market contains over 22,000 currencies, the majority of which are not trustworthy. Bitcoin is one of the few currencies that can be trusted to be purchased without being scammed, as it is a well known cryptocurrency with the largest market cap.
Because of its decentralized nature, anyone can create a cryptocurrency and create hype to attract investors and loot them, and no government body can control them. If someone files a case against such a scam, then only they can track such fraudsters.
Such fraudsters can lure you to invest in their schemes. Let’s take a look at investment options in the crypto market.
Investment in the crypto market
Investments in the crypto market are similar to the options available in the traditional market. You have to buy tokens with the help of an exchange platform, but if you are interested in investing in altcoins, then you have to buy bitcoin first. Most of the altcoins can’t be bought with USD, so you have to buy bitcoin or ethereum.
To proceed with an investment in crypto, you can buy NFTs with the help of cryptocurrency. NFTs, or non-fungible tokens, are nothing but unique art or design by a creator, which can be anything like digital art, music, games, wearables, and more.
For more investment options, you can opt for ICOs, IDOs, or IGOs, as there are many cryptocurrency investment companies, but most of them are frauds. In the crypto world, there are very few investment companies that are trustworthy, but if you want to know about investment fraud, you can go through some cryptocurrency fraud cases, through which you can get an idea of how such fake companies dupe people. I’ll list the most frequent frauds in the crypto market.
Frauds in the crypto market
Because of the increase in fraud cases, there are a large number of people who believe cryptocurrency will never be real money, but being a decade-old system, it is a serious competitor to traditional financial systems. Let’s look into the most frequent investment scam in the crypto market.
Rug Pull Scam
The rug pull scam involves pumping up new projects, or NFTs. Generally, con artists hype the new project, or NFT, via social platforms. As more and more investors are interested in the project, the value of the project scales, and after a certain period, con artists lock out the investors through codes and flee with all the funds. When investors are locked out, they cannot sell their assets, and they are left with worthless tokens, or NTFs. One such scam was Squid Coin, which was made after a series named Squid Games got famous.
Giveaways Scams have been practiced by con artists for ages in every sector where money is involved. Their main motive is to lure investors and trap them in their scams. In an investment scam, they lure investors by giving them freebies. These freebies are mostly bitcoins or NFT, which can be beneficial in the future.
Many investors fall victim to such schemes, and when they are ready to invest in their project, they lose all of their assets, as these giveaway scams are nothing more than a ruse offered by a fraudster.
Phishing scams are practiced by investors for a longer period of time. In a phishing scam, a fraudster will contact you via email or maybe SMS, stating “that your investment has just gained a good return.” “If you want to redeem it, click this website,” and it will redirect you to a phony website where they will ask for all your personal details. By having access to your details, they can easily hack into your account and wipe out all your assets.
Fake exchange platform
One of the trendiest scams involves fake exchange platforms. Fraudsters create hype among crypto users about the upcoming platform and the goodies it offers. After the platform is launched, they initially have a good user base because of their fake promises of a good return on investment.
But the catch here is that they ask for quite high upfront fees, and people have observed some serious withdrawal issues too. In some cases, they can’t withdraw their funds because the platform asks for more fees.
Reporting a crypto scam
If you are a victim of a crypto scam, you can report it to the governing bodies.
Law enforcement will help you track down the fraudster and get your funds back.
Where to report crypto scams
As the cryptocurrency is decentralized and no governing body can control the flow of currency, but if you are duped and your funds are stolen, governing bodies like law enforcement can help you. Below is the list of places where you can report fraud.
- The Internet Crime Complaint Center
- The FTC
- The Commodity Futures Trading Commission
- The U.S. Securities and Exchange Commission
How to report stolen cryptocurrency
- Collect all the information or details about the fraud and make a document.
- Report to the local police or law enforcement.
- Change all the passwords and set two-factor authentication.
- Wait for some time, because in theft, you have to be patient enough if you want your funds back.
Frequently asked questions
If the cryptocurrency goes to zero value, investors will lose the value of their investment and they cannot sell it, and will hold a worthless investment.
The simplest way to determine whether a cryptocurrency is legitimate is to look at its white paper. Their white papers are mostly poorly written, and they engage in excessive marketing and promote deceptive claims such as high returns in less time.
There are more than 22,904 cryptocurrencies, whereas there are only 8,832 active cryptocurrencies.
If you are a beginner, you can join a renown community and an exchange platform where you can get daily updates and articles to read about cryptocurrencies. You can also do research from your end with the help of Google and through a couple or more good crypto agencies.
Concluding the article here, I hope the article will help you avoid such crypto investment scams in the future. With thorough research and knowledge of the market, you will be able to understand market trends and frauds going on, so you can be safe from these frauds and help your family and friends too.