Crypto Scams to Avoid: Common Scams
The crypto counterpart of a stock’s first public offering (IPO) is an initial coin offering (ICO). Companies can use an ICO to obtain funds for a crypto project, such as a coin, software, or relevant service. The investor receives a new issue of coins in exchange for pledging cash.
While IPOs are traditionally reserved for well-established private enterprises, companies who seek ICOs aren’t in the same boat. They might be brand-new businesses with no track record, making it impossible to tell the difference between a legitimate service and a scam. ICO scammers, take money from early investors only to abandon the project soon after.
Examining the company’s whitepaper is a simple method to spot an ICO fraud — or just an unprepared management team. This document outlines the project’s specifics, including the strategy, goals, and market analysis. It’s a red flag if the corporation doesn’t provide a whitepaper.
Scams involving cryptocurrency Attempt to obtain the keys to your cryptocurrency wallet. These are often known as “technical support scams,” since the scammer will frequently act as a tech support representative in order to obtain your personal information.
Representatives from fraudulent companies—or those posing as real companies—will approach you and offer to assist you to manage your cryptocurrency in exchange for your login information. They may also claim that they require remote access to your computer or another device, or that they require you to transmit cryptocurrency to a suspicious wallet address.
Since celebrities frequently discuss cryptocurrency on social media, fraudsters can arrange fake giveaways, that look like they are made by some prominent figures.
The scam posts will often include screenshots designed to make the giveaway seem real, and a link to a website where people can go to enter. Once there, the customer will be required to “verify” his crypto wallet address by sending a payment. Never trust giveaways that require you to pay anything.
Just like scammers in the physical world, crypto frauds snare unsuspecting buyers using the fine print in contracts.
It is quite inexpensive and simple for someone with computer programming experience to establish their own cryptocurrency. As a result, hackers have begun to offer new cryptocurrencies with a smart contract provision stating that any resale will pay the inventor a large amount of the token’s value in fees.
In this type of fraud, the hackers include a condition in the smart contract that states that their new coin cannot be resold. This gives the hacker complete control of the new token’s price. In order to get the scam rolling, the scammers purchase the token at steadily increasing prices. If investors join the game, they will not be able to sell, meaning the price cannot be pushed down.
A simple way to defend against such scams is to avoid newly launched cryptocurrencies.
Market manipulation is more likely in cryptocurrency marketplaces since they are still young and unregulated.
Scammers frequently use dummy accounts and bots, placing fake buy or sell orders, which are canceled before they’re filled, giving other investors the impression that demand is either increasing or decreasing.
To avoid this kind of scam, it’s best to trade on larger, reputable exchanges that have established security policies and internal controls.
Some fraudsters may call you and claim to have humiliating or embarrassing information about you, threatening to disclose it unless you provide them with cryptocurrency payment.
They may show you something they received from a data breach, such as an old password, to make the hoax more plausible. This is frequently all they have, and the fraudster is only fooling you into complying with his requests. If this occurs, it is considered criminal extortion.
How can you protect yourself from crypto scams?
*Any offer that needs an upfront fee, regardless of the amount, should be rejected, especially if the price must be paid in cryptocurrencies.
*Do not believe anybody who contacts you personally, whether it is a government official, a prominent personality, or a stranger, asks for cryptocurrency payments or offers you an “investment opportunity.”
*Don’t believe everything you’re told. Examine any claims made about investment, especially if they appear too good to be true or promise huge returns in a short period of time.
*Double and triple-check website URLs. Scammers attempting a phishing scam usually will copy the URL of legitimate sites and swap a letter or a number on it.
Crypto investors, like those in traditional asset markets, may reduce their risk of falling victim to market manipulation by being aware of these scams and taking proactive precautions. Using reputable exchanges and conducting comprehensive research before making any investment decisions are examples of this.
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