5 common cryptocurrency scams and how to avoid them
Cryptocurrency has exploded in popularity in recent years, and as a result, so has the number of scams making their way through the industry. For every legitimate opportunity, there is at least another one falsified or intended to cause harm to your mining efforts.
In 2018 alone, crypto scams led to around $1.7 billion in lost funds. Some scams take more traditional forms, while others have grown more complex as technology as developed, allowing imposters to even more effectively disguise themselves in an attempt to gain access to private data.
Here are five of the most common scams in crypto today to help you identify and avoid any future threats toward your profitability.
Initial coin offerings – or ICOs – are fundraising platforms for newly launched cryptocurrencies. While many are legitimate, there are far more that have no real business in the marketplace.
These overhyped ICOs often lack structured and informed business plans and are led by people with little to no industry experience. You should perform extensive research into any ICO you have interest in before investing to ensure its claims are legitimate and its backing is sufficient.
The iCenter scam
This scam starts with a small group of scammers in a group chat who share a referral code throughout the web to get others to join the chat. When newcomers do join, they see a bunch of encouraging messages from the scammers inspiring them to invest.
The newbies are then assigned a wallet into which they deposit crypto before agreeing to wait 90-120 days to see a return. During the waiting period, the new investors share their own referral codes on the web to bring more people into the scheme.
But the funds deposited into the wallet aren’t actually being invested anywhere. Instead, the recruiter of the depositing investor gets a percentage of the investment and the cycle continues by paying out earlier investors from each round of new.
Bots are often used on Telegram and other messaging systems to respond to investor inquiries with inaccurate information, telling them they have much more in their accounts than is actually present. This only adds to the scam, prompting investors to share their good news with friends, family, and followers who also end up jumping on board.
Fake celebrity endorsements
Industry scammers have also been known to fabricate images of celebrities holding up signs or otherwise promoting the scamming entity’s brand online, indicating a false level of legitimacy that misleads investors. Justin Timberlake and Dwayne “The Rock” Johnson are just a couple of Hollywood’s biggest names who have been taken advantage of by scams like these.
Some scammers create websites designed to look and feel like just a legitimate counterpart – but with a minor tweak or two you might not notice. Some may change one character in the URL to decrease the chance of noticing you’re on the wrong site.
When you arrive at a site – especially one on which you intend to perform a financial action – you should first make sure there’s a padlock icon on the left end of your browser’s URL bar, and that the URL begins with “https”. This indicates the site is secure.
Another red flag is if the website redirects you to an unexpected or seemingly random third-party location to complete your transaction. If something feels off with a site, it probably is.
More advice on crypto scams
When considering getting involved with a crypto company, it’s a good idea to make sure the company is blockchain-powered, meaning it keeps detailed records of transaction data. Companies should also specify their digital currency and ICO rules up-front.
If there’s any information about the company you feel should be readily available – but isn’t – you should second-guess your involvement from the get-go.
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