Cryptocurrency Scams Explained

Learn more about how it works and how to prevent situations to be a victim of this type of scam.

What are Cryptocurrencies and Cryptocurrency Scams?

A cryptocurrency is a digital currency intended to facilitate in the sale, purchase or trade of merchandise between two individuals. Unlike traditional currencies, the ownership of cryptocurrencies are recorded on a digital database that uses cryptography to protect transaction records, control the design of additional cryptocurrencies and to authenticate the transfer of ownership.

While traditional mediums of exchange were designed to operate using a central banking system, cryptocurrencies function independently and use a decentralized control system. As a result, there is no mechanism that exists whereby regulators can assist individuals who need to raise a dispute regarding a particular transaction. In addition, cryptocurrencies are designed to be an anonymous medium of exchange. This gives a recipient the freedom to transact without fear of any recourse.

more about crypto scam

The ability to transact anonymously and the absence of a centralized system creates the perfect environment for cryptocurrency scams to thrive. As the popularity to transact with cryptocurrencies increases, so too do the scams and opportunities for criminals to disappear with your money. Popular cryptocurrency scams include investment and business opportunities that promise to double an investment in a very short space of time. Offers to double your cryptocurrency value in a short space of time, guarantees of large payouts and promises of free cryptocurrency token are all signs of a cryptocurrency scam.

types of crypto scam

Identifying and Recognizing Crypto Scams are the Best Ways to Protect Your Digital Investments

Pump and Dump Schemes

Traditionally operated via cold calling, this crypto scam has become more prevalent in the age of the internet. In this crypto scam, criminals entice investors to quickly snap up a stock, claiming to have inside information of a particular event that will lead to a sudden increase in the share price. Once the investor is on board, the criminals quickly sell their shares which results in a sudden drop in the share price, leaving the new investors with nothing. These types of crypto scams are generally promoted by scammers based on “insider tips” regarding an impending announcement that will drive stocks rapidly in a very short space of time. The details of each scam differ slightly but they all work on the basic premise of shifts in supply and demand.

Investment Clubs

An investment club may sound like a good opportunity to meet like minded investors and learn a tip or two, however the only one that profit from this cryptocurrency scam are the scammers who operate them. Investment club websites, like fake forex sites, look very professional and legit. A closer look at the finer details of the website and a few Google searches later, and it’s easy to differentiate the fact from the fraud

FAKE EXCHANGES

Fake cryptocurrency markets are relatively easy to find and are particularly threatening to new investors. It’s generally very difficult for a beginner to differentiate between scam cryptocurrency exchanges from legitimate ones.
The fake cryptocurrencies exchanges deceive users by offering very competitive rates to make it appear as if the consumer is getting a great deal. It’s important to therefore ensure you use a recognized exchange when dealing with cryptocurrencies.

Social Media Crypto Scams

In this cryptocurrency scam, cybercriminals target and hack the accounts of influential social media personalities that have a large number of followers. Social media platforms include Twitter, Facebook, Instagram and TikTok to mention a few. Once the hackers have logged into the account, fake messages are sent out to their followers which may include requests for donations, methods to rapidly double a crypto investment portfolio or links to unsecure sites that download malicious software on your device.