Introduction:
Cryptocurrencies have emerged as a major force in the world economy in the digital finance age. A darker side, the world of fake cryptocurrencies, has, however, surfaced alongside the growth of respectable ventures. Scammers are constantly seeking new ways to steal your money, and the recent explosive growth of cryptocurrencies has made fraud more common.
According to Chainalysis, a blockchain intelligence company, thieves stole $14 billion in cryptocurrencies in 2021, creating a new record for cryptocurrency crime. Unwary investors have suffered financial losses as a result of these fraudulent digital assets, which are frequently designed to resemble their legitimate counterparts.
This post will explore the world of fake cryptocurrencies, including what they are, how they work, and, most importantly, how to avoid becoming a victim of scams.
What is a fake cryptocurrency?
The term “fake cryptocurrency,” frequently referred to as “scam coins” or “fraudulent tokens,” refers to a variety of misleading digital assets. These fraudulent enterprises often make lavish return promises, use deceptive marketing strategies, and have no real technological or utility-based underpinning. The goal is to deceive innocent investors into giving up their money.
Understanding Fake Cryptocurrency’s Structure
Lack of Transparency and Mysterious Whitepapers:
Reputable cryptocurrency projects have well-researched whitepapers that outline their goals, technology, and development teams. On the other hand, fake cryptocurrencies frequently produce vague or overly complicated whitepapers that offer little clarification regarding the project’s objectives and technology.
Unrealistic guarantees and promises:
Scam coins are well known for making ludicrous promises of exponential returns in a short period of time, which is a clear sign of a potential scam. The risks and volatility associated with Bitcoin investments are emphasized in authentic ventures.
Teams that are invisible or anonymous:
Legitimate cryptocurrency projects are often run by seasoned professionals with a solid reputation who are honest about who they are. However, fake coins typically have anonymous teams or completely made-up personas.
Lack of Community Development and Engagement:
Genuine cryptocurrencies benefit from vibrant discussions, engaged communities, and continuing development activities. In contrast, scam coins frequently have dormant GitHub projects and inactive social media accounts.
Typical Signs of Fake Cryptocurrency Scams
1. Ponzi schemes:
Ponzi schemes use the capital of later investors to finance the huge returns that they promise to attract early investors. When there aren’t enough new investors to meet rewards, this unsustainable model will inevitably fail.
2. Initial Coin Offering (ICO) Scams:
Some fraudulent projects use ICOs as a way to generate money, frequently making bold technological claims but providing little real value. The tokens that investors own are worthless.
3. False Airdrops and Giveaways:
Scammers may entice victims with claims that in exchange for a little up-front purchase, they would receive a larger quantity of cryptocurrency. After the initial transaction is completed, the con artist vanishes.
4. False Wallet Services and Exchanges:
False wallet services and exchanges have the potential to steal customers’ private keys or money. It is essential to only interact with trustworthy, mature platforms.
5. Bitcoin investment schemes
Scammers approach participants in bitcoin investment schemes posing as experienced “investment managers.” As part of the scheme, so-called investment managers make exaggerated claims about their experience investing in cryptocurrency and tell their victims that their money will be rewarded.
To begin, the con artists demand payment in advance. Instead of making money, the fraudsters just steal the upfront deposits. Con artists may also seek for personal identity information in order to access someone’s bitcoin, claiming that they need it to transfer or deposit money.
The use of phony celebrity endorsements is a different kind of investment scam. In order to make it seem as though the celebrity is endorsing a significant financial benefit from the investment, scammers take authentic images and superimpose them on false accounts, advertising, or articles. These claims are made by sources that appear credible because they employ well-known brand names, such as ABC or CBS, and have polished websites and logos. But the endorsement is a fraud.
6. Rug pull scams
A “rug pull” is a type of scam that occurs in the cryptocurrency world, specifically within the realm of decentralized finance (DeFi) and non-fungible tokens (NFTs). It involves a fraudulent project or individual intentionally misleading investors and then abruptly pulling out, taking a significant portion of the invested funds with them.
The Squid coin scam, which took its name from the well-liked Netflix comedy Squid Game, is a common variation of this scam. To earn cryptocurrency, investors had to play: People would purchase tokens for online games and ultimately earn more to trade for other cryptocurrencies. The Squid token’s value increased from one cent to almost $90 per token.
Trading eventually ceased, and the funds vanished. As consumers attempted but failed to sell their tokens, the token value eventually plummeted to zero. Over $3 million was obtained from these investors by the con artists.
Rug-pull scams are also prevalent for NFTs, unique digital assets.
7. Romantic Scams
Cryptocurrency scams are not new to dating apps. These frauds involve relationships that are established gradually over time, usually through long-distance and only online communication. One party gradually persuades the other to give or purchase money in cryptocurrency.
The dating scammer departs after they have your money. They are often referred to as “pig butchering scams.”
8. Phishing scams
Cybercriminals pose as reputable cryptocurrency services or websites in fake cryptocurrency phishing scams to trick unsuspecting victims into giving up sensitive information, such as private keys or login passwords. These con artists take advantage of users’ trust in well-known platforms by tricking them into accidentally disclosing their precious cryptocurrency holdings.
Never enter secure information from an email link to protect yourself against phishing schemes. No matter how trustworthy the website or link looks, always go directly to the page.
9. Bitcoin giveaway fraud on social media
Social media sites are flooded with fake posts that advertise Bitcoin giveaways. To entice consumers, some of these scams also use phony celebrity accounts to promote the offer.
However, when a user clicks on the promotion, they are transferred to a phony website that requests verification in order to send them Bitcoin. Making a payment as part of the verification process demonstrates the legitimacy of the account.
The victim runs the risk of losing this payment or, even worse, clicking on a malicious link that results in the theft of their personal data and Bitcoin.
10. Fake cryptocurrency exchanges
Scammers might entice investors with claims of a fantastic cryptocurrency exchange or even extra bitcoin. However, there isn’t really an exchange, and the investor doesn’t realize it’s a scam until they’ve already lost their money.
To avoid an unfamiliar exchange, stick to well-known cryptocurrency exchange marketplaces like Coinbase, Crypto.com, and Cash App. Before entering any personal information, do some research and look for information on the exchange’s reputation and legitimacy on industry websites.
11. Flash loan attack
Flash loans are loans for short periods of time, such as seconds to make a trade. These loans are popular in the cryptocurrency market because traders use funds to buy tokens on one platform at a lower price and then sell that asset immediately on a different platform to make money. These money-making trades are all done in one transaction, and the flash loan is repaid.
An attacker takes advantage of borrowing money and uses it to manipulate prices on a DeFi platform because flash loans are not secured and there are no credit checks performed. The attacker creates numerous buy and sell orders to feign significant demand in an attempt to manipulate pricing. After prices rise, the attacker cancels orders, which causes the price to drop right away. The attacker can then turn a profit by making a purchase on another platform at a lower cost.
A flash loan attack that Platypus Finance fell prey to in February 2023 cost the company $8.5 million.
12. Pump-and-dump tactics
Through an email blast or social media sites like Twitter, Facebook, or Telegram, con artists will hype up a certain coin or token. Tradesmen hurry to purchase the coins because they don’t want to miss out, which raises the cost. After successfully driving up the price, the con artists liquidate their shares, which leads to a crash as the asset’s value rapidly drops. This can occur in a matter of minutes.
13. Fake endorsements by celebrities
To entice potential targets, cryptocurrency scammers occasionally adopt celebrity, corporate, or influencer personas or make claims about endorsements from these individuals. This occasionally entails marketing fake cryptocurrency to unsophisticated investors. Sophisticated websites and pamphlets that purport to have celebrity endorsements from well-known figures like Elon Musk are sometimes used in these scams.
How to avoid fake cryptocurrency phishing scams:
Take the following actions to safeguard yourself from fake cryptocurrency phishing scams:
- URLs: Check the URLs Always verify that the website’s URL corresponds to the correct platform by checking it twice. Watch out for typos or subtle differences that con artists can try to trick you with.
- Avoid Unsolicited Communications: Never open links or download files from emails, texts, or advertisements that you did not ask to receive. Typically, legitimate sites won’t get in touch with users in this way.
- Two-factor authentication (2FA): Enable two-factor authentication (2FA) to add an extra layer of security to your accounts. 2FA should be used whenever practicable. In addition to your password, you’ll also need another authentication method for this.
- Create Bookmarks for Official Websites: Rather than depending on links from outside sources, manually enter the website’s URL or create bookmarks to visit reputable cryptocurrency platforms.
- Educate yourself: Keep up with typical phishing and fraud tactics. Being aware of warning signs will help you stay away from scams.
- Report strange activity: If you come across a phony website or receive a strange communication, report it to the appropriate authorities and the real platform.
