Between January 2021 and June 2022, financial frauds with losses surpassing $1 billion were recorded. The decentralized ledger technology has allowed the scammers to stay anonymous, leaving investors dismayed. The lack of legal protections and centralized monitoring made the crypto market vulnerable.
Cryptocurrency Scams To Watch Out For In 2024
Scammers continuously innovate to deceive people and extract money, especially in the realm of cryptocurrency. Here are several prevalent cryptocurrency scams that investors should remain vigilant against:
Rug Pull Scams
In a rug pull scam, scammers hype up a new crypto project or NFT with the intention to trick investors.d. Investors are left with cryptocurrency that cannot be utilized or sold because of coding issues, leaving their investments useless.
A notable instance is the Squid coin fraud, which was inspired by the Netflix comedy Squid Game. Investors were enticed by the possibility of earning cryptocurrencies through online games. The Squid token’s value rose from one cent to nearly $90 per token. However, trade was abruptly suspended, leaving investors unable to sell their tokens while the scammers vanished with the funds. As a result, the token’s value fell to zero, forcing investors to lose about $3 million.
Investment Scams
This scam involves imposters posing as seasoned “investment managers” who contact potential investors, boasting about their supposed success in cryptocurrency trading and promising lucrative opportunities. They entice investors with the promise of substantial profits, but the catch is sending cryptocurrency to their account to initiate the process. Instead of delivering on their promises, these scammers typically abscond with the funds. In some cases, they may request the download of an app or personal information, gaining access to the investor’s crypto account.
Another form of investment scam involves the exploitation of fake celebrity endorsements. Scammers utilize authentic images from legitimate events and circulate them through fake accounts, articles, or advertisements to create the illusion of real celebrities endorsing the investment opportunity. To further deceive potential victims, they employ well-known names of firms like NBC and construct professional-looking websites.
Pump-and-dump Schemes
A pump-and-dump scheme unfolds when a collective group of scammers amplify the hype surrounding a specific coin across social media platforms. They orchestrate synchronized purchases to artificially inflate or “pump” the coin’s price. As other investors observe the rising prices, they’re enticed to join the trend, further driving up the value. Subsequently, the scammers swiftly sell off their holdings, triggering a sharp drop in prices. In this manner, the scammers profit substantially while leaving investors with substantial losses.
Phishing Scams
Phishing scams have persisted since the early days of web development and remain widespread today. In these schemes, scammers act as legitimate companies, sending emails containing deceptive links to unsuspecting individuals. These emails often claim to offer investment strategies or other enticing information to lend an air of legitimacy. Once recipients take the bait and click on the link, they are directed to counterfeit websites where the scammers harvest the investors’ crypto wallet data. With access to the private key, the scammers can easily drain the funds stored within the wallet.
Romance Scams
These scams typically revolve around long-distance or online relationships. Scammers assume false identities, posing as someone else to cultivate a romantic connection with an investor. Through a web of lies, they spend months forging a deep bond, weaving intricate tales about themselves. Eventually, they request cryptocurrency or persuade the investor to invest in a particular cryptocurrency, all under the guise of a future together. Once their objectives are fulfilled, they vanish without a trace, leaving the victim heartbroken and deceived.
Fake Exchanges And ICOs
Fake exchanges are cryptocurrency platforms that closely mimic popular exchanges, often using highly similar domain names to deceive investors. Initially, these fake exchanges may operate similarly to legitimate platforms, allowing users to make small withdrawals and trades. As users gain trust in the platform, they may invest larger sums of money. However, when attempting to withdraw funds or execute transactions, investors may suddenly find the platform non-functional or unresponsive. The ultimate objective of these scams is to lure investors in and flee with their funds.
Fake ICOs lure investors with promises of groundbreaking innovations and revolutionary applications in the cryptocurrency field. Once investors are convinced of the project’s legitimacy and invest their funds, they are often dismayed to discover that it is fraudulent. In these schemes, the scammers vanish with the invested funds, leaving investors empty-handed.
AI Scams
The emergence of Artificial Intelligence (AI) has opened new avenues for scammers to exploit cryptocurrency market investors. Utilizing AI-powered chatbots, scammers engage with investors, disseminating false advice and endorsing counterfeit tokens. These chatbots are programmed to promote investment opportunities, which are often manipulated into pump-and-dump schemes, allowing the scammers to profit from the ensuing sell-off. Moreover, scammers utilize AI to manipulate proof of work, artificially enhancing the project’s apparent legitimacy by falsifying follower counts and exaggerating its accomplishments. This makes it challenging to discern the authenticity of the token.
Giveaway Scams
Giveaway scams promise free cryptocurrency or claim to multiply the crypto sent to them, alluring investors into providing funds or personal information. These deceptive schemes predominantly thrive on social media platforms, where scammers impersonate reputable figures or entities to gain trust. Due to the irreversible nature of cryptocurrency transactions, once funds are sent to the giveaway address, they are lost forever. Victims are left facing financial losses as a result of falling for these fraudulent tactics.
Man-in-the-Middle (MITM) Attack
During an MITM attack, scammers steal investors’ private and sensitive information as they log in to their cryptocurrency accounts in public places. They intercept all data transmitted over the public network, including wallet keys, passwords, and account details. Through MITM attacks, scammers can capture Wi-Fi signals from nearby networks whenever users log in. Employing a virtual private network (VPN) is the sole solution to counteract such threats. VPNs encrypt all transmitted data, thereby preventing hackers’ attempts to access personal information or steal cryptocurrency.
How to Identify Crypto Scams?
- If a cryptocurrency exchange requests your private keys as part of an investment process, it is likely to be a scam.
- When testing a new wallet, begin with small transfer amounts. If you notice anything suspicious, uninstall the app.
- If you come across an offer that seems too good to be true, it is probably a scam, as legitimate opportunities typically require some form of effort or investment.
- Conduct thorough due diligence before engaging with cryptocurrency opportunities advertised on social media platforms. Scammers frequently exploit these platforms to promote fraudulent schemes, so it’s essential to verify the legitimacy of any investment before proceeding.
- If you receive emails, SMS, or phone calls promising guaranteed returns in exchange for funds, it’s advisable not to respond. Such claims are often fraudulent, as there are no genuine guarantees of returns on investments.
Conclusion
From rug pulls and giveaways to typical Ponzi and phishing schemes, scammers use various ways to fraud investors. Using fraudulent strategies, scammers steal investor’s assets. For this reason, crypto users must be aware of common crypto scams. By staying cautious and implementing preventative measures, individuals can safeguard their investments amidst the dynamic landscape of cryptocurrency.
