In the earlier stages of the cryptocurrency industry, there was not much that the sector had to offer. However, things have come so far in a matter of 13 years.
The industry has become very vast and it has continued expanding for over a decade. So far, the industry has expanded so much that it has formed multiple segments and has built a strong user base.
The Scams are born
Unfortunately, as the cryptocurrency industry has continued expanding, so have the types and the number of scams.
The industry is now swarming with different kinds of scammers who are preying on the innocence of the novice and new investors.
However, it is quite easy not to get lured by the scammers and keep yourself protected from their attacks. Let us have a look at some of the major cryptocurrency scams and see how these can be avoided.
Fake Websites
Just recently, a major cryptocurrency exchange FTX found out that many of its users had fallen prey to a similar scam.
The scammers reportedly made a website that mislead the users into thinking that they were logging into FTX. As they did, their credentials were stolen by the hackers.
The hackers would then go onto use these credentials (API keys) to access the trading accounts of the affected users to perform unauthorized trades.
The users would go onto lose their funds to these scammers and FTX had to proceed with issuing a $6 million reimbursement fund for the victims.
Pump and Dump Schemes
It is also one of the hottest and most liked scams by the fraudsters in the cryptocurrency industry. In these schemes, the fraudsters create digital assets only for the purpose of using them to their benefit.
After their development and introduction, the fraudsters claim that these tokens have high utility and they would offer huge profits to their bearers.
They use all the popular channels to promote and do marketing of their tokens to create as much hype as possible.
Once enough hype is created, the investors are flushing out their investments into the particular asset. Most of the times, it is the novice investors who start investing into these assets.
Surprisingly, such fraudsters keep the majority of the assets in their possession. Once the particular price target is reached for the asset, the fraudsters simply dump all the assets in their possession.
The fraudsters dump the asset when its price has hit the all-time high. They take all the profits while the rest of the (innocent) investors are left with losses.
Fake Applications
Then come the fraudsters with fake applications for making cryptocurrencies. The scammers develop and launch fake applications for two purposes.
The first purpose is for phishing and the second one is to make money from the advertisements. The developers claim that by using the application, the users can earn digital currencies.
They offer the users multiple fake tasks to perform so they can earn digital currencies. However, it is an attempt only to keep the innocent users engaged so they keep viewing ads and help the fraudsters make money.
Giveaways and Rugpulls
This is where the fraudsters get the innocent investors to spend their cryptocurrencies making fake promises. They promise the users that if they send a certain amount of cryptocurrencies to their wallet, the cryptocurrencies would be returned with double the value.
In case of rugpulls, the fraudsters launch platforms claiming that the users would get huge returns on their investments. As the investors send their funds to the platform, they do give out the promised returns to some of the users.
This way, they gain the trust of the users but as more investors enter the market with huge investments, the fraudsters desert the entire project and runaway with the money.
How to Avoid the Scams
The majority of the cases, the users can save themselves if they stay informed, vigilant, and do their research before trusting, and investing in a project.
If it is a new cryptocurrency or has been around for a few months, it is better not to invest in the asset. If there is an urge to invest, then gather as much information as possible before making investments.
It is important to go to the website sources that are authentic and always check the address to establish whether it is the right one or a bad one.
You can do the same for the fake applications by checking their reviews and doing some research about them before making any investments.
In almost every case, it is important to stay informed and do not turn a blind eye to any detail that may hint that a project or a platform is a scam.
If you do get scammed through either of the channels, then you can also get in touch with money recovery firms such as Payback Ltd.
Such platform can help the investors get their money back if there is a possibility of recovering the funds.