Crypto 101: How to be aware of and avoid Crypto Scams!
Thanks for taking the time to read today's blog post where we have our blogger from Nigeria, Emmanuel Familoye, with a Masters in Computer Science who is going to talk about avoiding Crypto scams.
The word scam/scammer itches to the ear, and you will not want to be a named that's associated with it. Those who perpetrate this act indirectly bear the name of 'Scammer', and several coined words are used to scam people. The name may change, but its action doesn't.
Scammers continue to devise new ways to steal something, most especially money from people, and are always on the lookout for loopholes to siphon them. Technology has made this process easier. People lose their hard-earned money to these scammers because of their professionalism in deceiving people to believe their money is safe with them and they are not losing it anyway. Technology has made it easy to transfer money through cash, wire, gift cards, and cryptocurrency. Scammers now prefer cryptocurrency as a means for payment because the transaction does not involve a third party, making it almost non-traceable to get the money back. Several factors contributed to crypto scams due to people's surge in acceptance and usage of cryptocurrencies over the past years, and investors find it promising.
Scammers over the years have succeeded by gaining access to an individual's private information, which grants them access to siphon such person, and this trick is also applicable to crypto. Scammers trick the unsuspecting person into sending cryptocurrency into a compromised digital wallet.
Cryptocurrency is a digital currency, mainly available to carry out internet transactions, giving room for social engineering scams. Scammers carry out several activities that would interest and captivate people to quickly participate in a program and scam them through giveaways, email compromise, romance scams, phishing, and many more. These scams methods are easy to carry out with cryptocurrency.
Scammers psychologically manipulate innocent people into believing who they claim to be to steal vital information to gain access to their accounts. They present themselves as tech-support, government agency, certified personnel, claimed to be a colleague, or get the correct information of someone close to you like a friend, relative to gain your trust. They can go any length to deceive because that's their means of livelihood, and they must 'make money' though illegal.
What are some ways people try to SCAM you in Crypto?
You can imagine a verified social media account like Twitter, Instagram, Facebook as a platform to get credible information, also from celebrities and cryptocurrency influencers. This medium has been used to scam people because of their supposed credibility. People behind these accounts use them for scams, and they appear authentic by creating mouth-watering offers with a sense of urgency. This requires quick and fast action takers. In 2021, an imposter of the CEO of Tesla and Founder of Space X, Elon musk, scammed over 7,000 investors. What a number! Whatever the offer could have been, that name could have made me be among the first responder to the offer. According to Federal Trade Commission report, the investors in this imposter scheme lost $80 million in a cryptocurrency scam. Ensure you watch out for money multipliers in your journey to investing in cryptocurrency.
Oh, does this exist in the crypto world? Yes, it does. It is more prevalent and vulnerable than the 'normal' phishing attack. The world is migrating to a decentralized network. You might have received an email containing text to bait you in clicking a link in the mail. Clicking this link will request your private key, and these scammers capture it at the backend. The stolen private key is used to access your wallet to steal your cryptocurrency.
The fear of revealing one's private and sensitive information on the internet has made room for scammers to trick many people. On a hot afternoon, while relaxing, you received an email and opened it. Lo, it contained a threat of possessing your nude picture, illicit website visits, etc. They hold you for ransom by requesting your private wallet key or paying them some certain amount of cryptocurrency if you don't want your information to be released. If you found yourself in this category, don't forget to inform the FBI/local police.
Cryptocurrency Investment Scams
You have $100 worth of cryptocurrency, and a program/platform promises you a 1000% return, and you are like, oh, I'm going to be rich. You start 'head-paying' your debt, buying your dream car, house, traveling places; finger snaps, hope you've woken from your sleep? These scams are more in the ICOs (Initial Coin Offerings). You must be careful of the coin or investment program you invest your hard-earned money into, not to be ripped off.
The ICO Scam
ICO (Initial Coin Offerings) is a new coin created on the blockchain network. It can be launched by anyone, yes 'anyone.' Let's say I have an idea or an existing business and would like to make the payment to be digital and encrypted. Ok, my business is sales of torchlight, my coin name can be called 'torchcoin.' Now, this is just an idea that needs funding, and I don't want to get a loan from a bank, having shareholders. How then do I fund this? ICO could fund such a project.
First, a white paper document is created containing details on how the system would work with a nice-looking website and do a bit of publicity to make people see the prospect of the coin "torchcoin." I will then ask people/investors to buy the torchcoin by paying with Bitcoin or Ether. The buyers’/investors would be 'calculative' and hope the coin is used and in high circulation, which will cause the value of the coin to rise. ICO developers can scam investors by making them pay into a compromised wallet or make the ICO see a "pump and dump." The coin is widely known, and the price has jerked up. Developers will sell their holdings/coins and run away with investors' money. This type of scam also exists in the NFT (Non-Fungible Token). If you heard about a coin or were referred to by a friend/colleague, make sure you carry out a thorough search to know the coin's stability.
Many people find love on the internet, i.e., a dating app/website. These relationships often involve long-distance or exist only on the internet. Both parties communicate frequently, and at a point, one could demand a cash gift by either convincing or pressurizing the other party to send money in the form of cryptocurrency. According to FTC, from October 2020 to March 2021, people lost about 20% of their money in romance scams through cryptocurrency. So, watch out!
Don't want to get scammed? Here are some tips you can follow to prevent scams:
When the payment gateway to an investment program is cryptocurrency only, it’s most likely a scam.
Companies that promise huge earnings in a short time avoid them.
Investment imposters assure you of Return on Investment.
Scam jobs that promise a job but demand a participatory or advance fee. Why don't you remove the 'fee' when you start paying me?
They guarantee profit under any circumstances. They can show you proofs/testimonials from celebrities and highly reputable personnel, all to make you believe them.
They promise bonuses/free money. They are likely fake/scams.
They make big claims but with little or no explanation of the mode of operation. The project will likely fail/crash at inception.
Social media posts on cryptocurrency are increasing, making adequate findings to avoid scamming is necessary.
They ask you private or sensitive questions, don't discuss further, and block them immediately.
They stylishly demand your private key in exchange for a considerable sum in return, run, I say run.
Cross-check every email you receive not to fall victim to email scams.
Check for typographical errors, misspelled names/words, and fake/cloned accounts.
I wish you well in your investment journey,
Essex's Trading Quote of the Day (#QotD)
"Teach your students to doubt, to think, to communicate, to question, to make mistakes, to learn from their mistakes, and most importantly have fun in their learning."
Professor Feyman on Twitter