Cryptocurrency scams or virtual currency scams are one of the scariest things that investors face when entering this market. In fact, only in 2019, criminals have “fished” more than 4.26 billion dollars from fraud in the crypto market. So, what are the most common types of frauds used here? How to recognize and get rid of these trick traps? You will find all of the answers in the article below!

Table of contents:

Who can fall victim to these types of virtual currency scams?
Many people think positively that only virtual currency exchanges, with huge assets, can become the “potential customers” of cryptocurrency scams. This is a completely wrong statement! The truth is, a large proportion of new investors who are “wet feet” entering the market, or do not have much investment knowledge, are impatient and want to quickly make a profit. the scammers aim at. They often take advantage of these weaknesses of investors, along with the fear of missing out the opportunity (FOMO) that most people have to commit fraudulent missions.

1.Ponzi scheme – Old but effective

Along with the explosion of the electronics market, the Ponzi scheme also quickly entered and became a bright star because of its efficiency. The general formula of the Ponzi scheme: Participants pay a certain amount and will be paid interest up to a few tens of percent per month, as a return from the initial capital (but it is actually money of the following investors).

In other words, the Ponzi scheme works in the form of borrowing money from one person to pay it back, but convincing participants that it is a return on the initial investment they make. paradigm.

BitConnect is the most famous example of a Ponzi scheme. Launched in early 2017, with promise of profits of up to 40% per month. In Vietnam, the number of people participating in this model is the largest (according to statistics of MLM Lending sites), always ranking top 1 or 2. In January 2018, BitConnect suddenly closed, causing the price of copper This token dropped to 20 USD (average price is 365 USD), causing investors to lose 90% of their assets.

This scam is very common and can be easily recognized, but why are so many people winning the trap? It is not too praiseworthy to say that the team behind this model is really “overcoming soldiers” because of perseverance, determination not to give up when a coin scam project can last up to one, even a few years, just to “gather” enough confidence of investors. During that time, participants will “be shown” to the positive results of the model. earns huge profits every month and they, of course, become extremely effective marketing and trust-building tools to attract new entrants. In the end, when the model no longer can appeal Add any new prey, it will collapse on its own, those behind it will disappear with huge amounts of money, leaving investors who are now victims, bewildered to know where to go to find their numbers. money is lost.

How to avoid the Ponzi scheme:

  • Beware of new crypto projects that encourage you to introduce new investors for greater returns.
  • Never trust projects for which you are promised an unusually high return (a few tens of percent) in just a short time.

2.Fraudulent ICOs – It sounds ridiculous but very convincing
For those who do not know, ICO is a form of raising capital from investors by issuing tokens during the early sale, with extremely preferential prices. ICO scam (or ICO scam) can be considered one of the most successful form of fraud, by creating a new cryptocurrency, creating documents to promote, even hiring. office and media hype, in order to attract investors to buy.

In 2017 alone, nearly 80% of ICOs were identified as scams, causing losses of over $ 100 million. These projects all have common characteristics: Copying ideas from other real ICO projects, from technology to token-supporting documents, building websites with fake wallets to fake into true crypto companies. The prey of this scam is new investors with not much capital, eager to make profits from the crypto market. At that time, ICO projects will be the perfect choice that allows them to buy virtual currency at very affordable prices.

You must have heard about the ICO scam of Pincoin and iFan, based in Vietnam, allegedly defrauded more than 30,000 investors with more than $ 660 million. iFan is meant to be a social media platform for celebrities, and Pincoin promises 40% monthly returns for investors. Both were later shown as multi-level marketing scams (MLM).

How to prevent scams from ICOs:

  • Thoroughly research ICO projects before deciding to buy: Check out the team behind the project, the white paper, the purpose of the launch and the technology behind it, and the specifics. about selling tokens.

Common signs of a scam ICO project or Token Sales:

  • Whitepapers are copied
  • Half of the team is anonymous or unable to find information on the Internet
  • Conducting ICO in a hurry
  • There are many inconsistencies between written and spoken text
  • Always avoid verifying questions from investors
  • There is no specific roadmap for the token to be released

3.Coin pump scam (Pump & Dump Scam) – When life is not like a dream
Pump & Dump is a term indicating Bitcoin (or altcoin) price is pumped up and then suddenly dropped (dump). The guys behind this scam often make schemes to manipulate their coin prices through pump & dump groups on apps like Telegram, Slack, IRC … This group of buyers will target into an altcoin with a low market capitalization, making them appear “potential” by pushing the coin price high (For example, buying coins at a high price, releasing news authoring the price impact) to attract mentally-affected-new-buyer-new-FOMO and sell them at a premium price. The people behind will immediately withdraw after making a substantial profit. As a matter of fact, the price of that altcoin – once pumped out, will drop dramatically, leaving only investors with godless losses.

Illustration of the pump and discharge stages of a coin

In January 2018, a fake Twitter account of cybersecurity expert and crypto enthusiast John McAfee tweeted support for the GVT cryptocurrency, even naming it the most potential coin. at that time. Just four minutes after the tweet was posted, the price of GVT increased from 30 USD to 45 USD and trading volume doubled. Fifteen minutes later, the price hovers around the $ 30 mark again, after the first buyers stopped buying and disappeared. Upon closer inspection, it was found that the Twitter account was fake and completely unrelated to McAfee. Instead, it is simply a key step in a price manipulation strategy invented and implemented by a group on Telegram called “Big Pump Signal”.

Pump & dump is considered illegal in traditional financial markets. Therefore, in the world of crypto – where the law is not protected, this form of scam has become a favorite choice of bad guys.

How to prevent Coin Pump Scam:

  • Carefully research the information surrounding any cryptocurrency before deciding to buy them.
  • Beware of low-market cap cryptocurrencies with mid-volume but sudden sharp increases in price.
  • Beware of news on social media that can push the price of a coin up

4.Stealing account (Phishing Scams) – The trap for subjective people
It seems that crypto scammers are increasingly favoring the adoption of high technology and automation in the creation of a new form of cryptocurrency scams. Phishing Scams is one such form. By sending an email to a client, impersonating an admin from the exchange. These emails usually contain a link that leads you to a website of the exchange that looks exactly like the exchange you normally use, but is actually a virtual phishing site (scam site) and automatically copies all information that you fill in.

Therefore, if you carelessly enter your account information on this site, the scammers will use it to access your account on the real exchange and steal all of your money in it.

How to prevent account theft fraud:

  • Make sure the links to the trading page you click on are the official website of the exchange
  • Absolutely do not click on suspicious links sent to your email
  • Never reveal your private key and other private information

5.Malware (Malware Scams) – It is also a crime to blindly technology
Taking advantage of the highly technical and complex nature of cryptocurrencies – for which the majority of participants do not have sufficient knowledge and understanding, malware is currently one of the effective weapons of the scammers. electronic money island. Malware applied in the cryptocurrency market is designed to be able to access your hot wallet and withdraw money from it. Specifically, they will track the Windows clipboard where your transactions are stored so that the receiving address is replaced with another one belonging to the scammer.

How to prevent malware scams:

  • Update anti-virus program regularly to protect your computer and phone from malicious software.
  • Never download and install applications or software unless you are 100% sure they come from a legitimate and reputable vendor.
  • Absolutely do not open suspicious attachments.

Conclude
The above are the most common types of scams in the cryptocurrency market. Be aware that the cryptocurrency market itself has not received the protection of any organization or government. There will not be a general formula for avoiding the dangers of entering an investment.

However, look at things from a more positive angle: the development of these scams will somehow stimulate the cryptocurrency market to become more stable and secure, in which the participants – Investors will become more cautious in the transaction process.

What investors should do is stay vigilant, increase the security of their crypto transactions, and always update relevant information to minimize the risk of unnecessary fraud.

If, after reading this article, you suddenly realize that you are accidentally or intentionally participating in one of the above forms, immediately stop and find a way out of it (a low risk way. Best). It’s never too late, it’s important that you be conscious and learning from it.

Souce Original Post: Remitano

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