Introduction
Scams are a bad but real part of the financial system. Just like traditional finance product cryptocurrency markets are also subjected to scam. This article talks about the 5 most common types of crypto scams and how to steer clear of them.
What is a Crypto Scam?
Crypto scams are fraudulent schemes that are designed to target unsuspecting investors to steal cryptocurrencies from them. Scammers can use bluffing, hacking techniques, or even psychological tricks to trap their targets.
Cryptocurrencies are digital entities; the investors have to safeguard their private keys and seed phrases from the reach of scammers. At the same time, they should do research regarding the issuer of a particular cryptocurrency to make sure that it is safe from the danger of scams.
Types of Crypto Scams
Here are the top 5 most common types of cryptocurrency scams and how they are propagated:
- Fake Giveaways
Cryptocurrencies have been able to gain mass traction by reaching out potential investors on social media platforms. However, scammers can also try to trick potential investors using social media platforms. One of the most common types of social media scam is offering giveaways.
Scammers in this instance can impersonate blockchain core developers or other famous personalities on the social media platform. They can try to promote their scam tokens by asking to send some crypto coins to a given wallet with a promise to return it many folds.
Prevention and Precaution
Investors should always make sure that the account that is offering the fake giveaway is verified or a copied one.
Real crypto developers or influencers will never ask people to double the crypto reserves of investors as it could land them in legal troubles.
- Pyramid and Ponzi Schemes
Pyramid Schemes are a type of marketing scam where the threat actors recruit new investors to earn commission. They offer their new recruits to make money by bringing more members to the platform. This classic scam model can be adopted and used by cryptocurrency scammers as well.
Ponzi scheme is a type of situation where the scammers lure in victims with promise of sure fire profits and massive returns. This type of scheme is designed to trap the investors to buy-in by using psychological tricks and invoking FOMO (Fear-of-Missing-Out).
Precaution and Prevention
The best way to deal with Pyramid scheme is to ask as many questions as possible with a view to keep realistic goals.
Both Pyramid and Ponzi scheme scammers use psychological tricks to entrap their victims, therefore the best course to take here is to avoid trusting them and cross-check their claims with other sources.
- Fraudulent Apps and Sites
Scammers are always coming up with new ways to fool as much victims as possible. One of the most dangerous types of crypto scams is where the scammers impersonate real crypto projects by creating fake sites or applications that imitate the real ones.
New investors can end up downloading these fake applications or making accounts on the fraudulent sites.
Precaution and Prevention
It is best to ensure that the application you are downloading from the app store has been verified and offered by original issuers.
In the same manner, before making an account on any given site read consumer reviews and check the about us and contact us section to ensure that it is legit.
- Phishing Attacks
Phishing attacks are a type of data attack that is done by impersonating an office employee or a company. Scammers can use many different ways to steal the personal and sensitive information from a company or individual.
They may use psychological tricks or even malware to achieve their goals. In case of cryptocurrency phishing attacks, scammers are usually after login credentials and private keys of their targets.
Precaution and Prevention
It is best to never share your personal credentials with any random stranger via phone, email, or messaging.
Always contact the real service providers and lookup the person who is asking for your personal information.
Report the scammers to proper authorities and share the details of these incidents with friends and family members to alert them.
- Pump Signals
There are many social media platforms such as Telegram and others where scammers set up accounts posing as financial influencers. In reality they are looking for potential victims who believe their analysis and follow along their pump signals.
Scammers buy in early and after inflating the prices enough by defrauding their followers, they take profit and leave everyone with losses.
Precaution and Prevention
It is best to pay consultation fee to professional brokers rather than trusting free advice of unknown financial influencers.
Conclusion
Crypto scams can be scary and they can trap the most reasonable people. Therefore, the best way to avoid these situations is to stay updated about the latest scamming techniques and discuss them in your circle to raise awareness and building a collective immunity against them.
