The crypto space. A great place to make a fortune, but also a way to lose everything again. That’s why you must always be vigilant.
But unfortunately, many of the newcomers to the industry neglect their own due diligence and rely far too much on the influence of social media and don’t have a deeper look into projects. This of course makes you as an investor very vulnerable and might even scare you off to the crypto sphere.
That’s why we are going to present you with the five most widespread scams to get you ready for your journey into the wild world of crypto. As the industry evolves and with it the fraudsters, this list will never be complete. But it will give you a good starting point to know what to avoid if you want to be successful in this fascinating industry.
1. When old meets new: the IRS tax scam
As some of you might already have heard from older folks, there are people out there posing as the IRS. Back in the day, they used to send out fake letters via mail. But nowadays these scammers usually call or e-mail their victims and claim that you owed the IRS taxes and that the owed amount has to be transferred in BTC to a specified wallet address immediately. And sadly, many people fall victim to these scams. Now it is important to know that no legitimate branch of any respecting government will ever call you or write you an e-mail to collect your back taxes. But in case this might happen to you, first of all always be a skeptic! And if you want to be sure to get in contact with your local authorities to check bevor you start sending out your hard-earned Bitcoin.
2. When exchanges disappear: the fake exchange scam
A very widespread scam in the last bull run, and sadly ever since were fake exchanges. These new enterprises popped up almost overnight and boasted with amazingly high trading volumes of the many listed coins and tokens. And after a while, these exchanges close down the operation and disappear with all deposited funds. Sadly, this sometimes even happened at already quite reputable exchanges if they got into financial troubles or encountered severe mismanagement.
That’s why you always, and we really mean ALWAYS, need to be very careful in the selection of exchange you choose for trusting with your hard-earned cryptos.
So, if you are new to the topic and you want to start out with well-established industry leaders!
Always remember, not your keys – not your coins. If you don’t trade, we recommend you to always withdraw your funds from the exchange.
3. If it looks like a duck and quacks like a duck it might be a Ponzi: the pyramid scheme
In one form or another, almost everybody has heard about the classic pyramid scheme. One of the most well-known must be the Ponzi scheme, named after Charles Ponzi, one of the world’s most successful scammers of all time. He succeeded to rob his clients of more than $150 million in today’s money, without mobile phones and social media, which should make many modern scammers blush.
And sadly, it inspired quite a few scammers to prey on naive individuals with crypto pyramid schemes. Two of the best-known scams in this category are the BitConnect scam and the OneCoin scam. Both operated differently but nonetheless managed to scam their investors out of huge amounts of money. They promised huge returns on the investment. In the case of Bitconnect, 1% daily returns were almost standard. And this way they lured in many unsuspecting investors. But to be eligible for these features an investor would have to lock up its capital for a set amount of days. Giving you no access to your funds until the end of the contract.
So if you ever see some new project promise you so many returns, with no plausible explanation what so ever, be very careful and research well before you commit and risk your hard-earned funds.
4. And everything is gone: the malware problem
Of course, this is a well-known problem for all conscious PC and mobile users. And sadly, it is almost a staple in the computerized world. Malware was used before to get your credit card information and now the scammers have moved on to the world of crypto. So if you use the Internet, you should always beware of malicious disputes, no matter which payment method you prefer.
And it can be so easy to fall prey to malware. It can happen if you click on a link in an email, you can find it on unknown websites and even hidden in a social media post that wants you to download something. And before you know someone got access to your most sensitive information, possible your crypto wallet too and your funds will be gone in no time.
But luckily there are services out there that protect your PC or mobile and with a little common sense, you can avoid many of these malicious encounters.
5. It is too late for BTC: the fake cryptocurrency scam
Who would have thought that there are people out there creating fake cryptocurrencies just to rip you off? Well, many of you of course know this already but many unsuspecting new investors get sucked in by promises of gigantic gains and a new lifestyle. These new tokens or coins are presented as a way better alternative to Bitcoin or Ethereum. But ironically many times the investors had to pay in Bitcoin or Ethereum.
Sometimes it can be quite hard to spot a fake new project, but generally, you should pay attention to these red flags: there is no information about the team.
- there is no white paper or just copied whitepaper
- the tokenomics make no sense
- the roadmap is missing or a way to short
- important questions are not addressed
This of course is only a small list of possible red flags. It should give the novice an idea of what to look for and should of course be customized to everyone’s personal preferences.