According to the US Federal Trade Commission (FTC) statistics, from October 2020 to March 31, 2021, Americans lost more than $80 million due to fraudulent cryptocurrency schemes.
Compared to the same period in 2019-2020, the amount of financial damage has increased tenfold. Such an increase can be explained by unprecedented growth in the popularity of cryptocurrencies in recent months. In addition, a record rise in the price of bitcoin, which rose to $63,000 in April 2021, also attracted criminals. On average, according to the FTC, one single person lost $1.9K due to attacks by so-called scammers.
The FTC lists several types of cryptocurrency scams that were especially popular with scammers during the period specified in a commission document. In this article, we will define what a cryptocurrency scam is and what you need to pay attention to avoid becoming a victim of scammers.
Scheme #1: Fraudulent Websites
Those who complained to the FTC talked about sites they got on someone’s advice. They offered to make money on investments in cryptocurrency.
According to the victims, such sites often create an illusion that your investments are generating income, but when you are trying to withdraw your profits, for example, you are asked to transfer more tokens to your account. Thus, as a result, you end up with nothing.
This type of scam includes fraudulent emails, phishing sites, and fake mobile apps. With the help of such schemes, criminals impersonate someone else (for example, a crypto exchange), gain access to client data, or force them to transfer money to their account.
Scheme #2: Ads with Fake Celebrities
Another option for a fraudulent scheme is to use the image of a famous person who advertises a free distribution of cryptocurrency. Scammers often impersonate Elon Musk, Bill Gates, or Apple co-founder Steve Wozniak.
Of the $80 million mentioned in the FTC statistics, $2 million is money stolen through the illegal use of Elon Musk’s image.
By the way, Steve Wozniak recently lost a lawsuit against YouTube, which he filed because of a video on the service. In a video made using a deepfake technology, Wozniak ‘announced’ the distribution of cryptocurrency, which turned out to be a scam. However, the judge sided with YouTube.
Scheme #3: Dating Sites and Apps
Another way to steal your coins is through dating sites and apps. Scammers use them to get acquainted with a user and then advertise some ‘promising’ cryptocurrency to them. A fake soulmate asks for a certain amount of money (usually in digital assets) to be transferred to him/her, which they promise to invest in a promising project. Naturally, these funds do not go to any deposits.
Scheme #4: Financial Pyramids
Sometimes scammers act big and launch large crypto projects, which eventually turn out to be a pyramid scheme. New users are lured there and promised fabulous benefits — not now, but after some time.
An example is a OneCoin project, which appeared in the mid-2010s and was launched by Ruja Ignatova, a native of Bulgaria. OneCoin was announced as an educational service for trading with its own cryptocurrency. To get OneCoin’s cryptocurrency, it was necessary to buy an educational course, which cost from €100 to €118K. The more expensive the acquired lessons were, the more tokens the client supposedly had to get. It was possible to exchange tokens for euros only through OneCoin’s internal exchange.
As a result, it turned out that OneCoin did not have a blockchain — that is, the tokens were just a sham. In 2017, the exchange stopped working without warning, and Ignatova is still hiding from law enforcement agencies. The financial damage from OneCoin’s activities is estimated at $4 billion.
Scheme #5: Fraudulent ICOs
Another ‘high-budget’ type of cryptocurrency scam is an ICO scam.
ICO is a way to attract money from investors by selling them cryptocurrency tokens. Several types of scams associated with ICOs exist, but their essence is the same. Fraudsters attract investors’ money and then disappear — of course, without fulfilling their part of the obligations.
In 2018, investors lost about $100 million on fraudulent ICOs.
Scheme #6: Shitcoins
Unlike creators of financial pyramids and ICO scammers, creators of shitcoins are not formally engaged in fraud. Shitcoin is called a cryptocurrency that does not represent and will never represent any value.
Roughly speaking, a DOGE meme-currency without Elon Musk’s support could be called a shitcoin. To attract more people, creators give their shitcoins flashy names like ASS, Pussy, Poo, and so on.
There is even a SCAM coin, the capitalization of which skyrocketed to $70 million for a short time. The main task of shitcoins is often to cash in on inexperienced investors who know little about cryptocurrency and have never done any market research.
As a result, such people invest in digital currency, which was originally ‘dead’ but cheap compared to BTC and ETH. Experienced investors ‘help’ newbies in this. Having agreed, they artificially affect the value of a certain shitcoin, attracting the attention of newbies to it. Then they collect all dividends before the value of a shitcoin drops to almost zero. Such a scheme is called Pump and Dump.
Scheme #7: NFT Scams
According to analysts, an NFT market scam is a new, recently appeared danger. So, in December 2020, OpenSea allowed to issue tokens for free and then canceled verification of collections. This has led to a wave of fraudulent activities. As a result, at the end of 2021, the company had to block copied collections of Phunky Ape Yacht Club and PHAYC, allowing users to create no more than five collections. According to the marketplace itself, up to 80% of tokens could be attributed to scams or plagiarism.
In January 2022, New York-based NFT collector Todd Kramer claimed that his collection of sixteen BAYC NFTs worth $2.28 million had been hacked. As a result, NFT trading platform OpenSea froze assets for him, including one Clonex, seven Mutant Ape Yacht Clubs, and eight NFT BAYCs.
Conclusion
According to the FTC’s statistics, users aged 20 to 49 fall into fraudulent schemes. Therefore, we advise you to study each cryptocurrency carefully before investing. After all, it is obvious that the more popular bitcoin is, the more speculators who want to cash in on this topic will appear.
When it comes to investing money, security should always be the top factor to consider. Every step of the process must be secure from the minute you choose an investment asset to the moment you start exchanging.
Switchere is one of the most reliable online exchanges for buying cryptocurrencies. The company is a licensed financial services provider with guaranteed legal compliance and a secure infrastructure system for fast crypto exchange services at fair prices!
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