What is a cryptocurrency scam?
Here are a few of the scams that are commonplace among cryptocurrency companies and startups.
The ICO scam. When scam artists sell cryptocurrencies and project of some kind to naive investors. It’s a highly publicized and poorly executed way to scam investors. The company issues new cryptocurrencies that can be sold to investors in the form of a new currency. The scam artists are then rewarded with a portion of the coins (for a short time, of course) in return for their new coins.
You’ll also see complaints about ICOs (initial coin offerings) in media and online, most often from investors who lose most of their money, are left with nothing and eventually have to liquidate.
How to avoid cryptocurrency scams
Once you make a decision to invest in a cryptocurrency, make sure to do your research and know what you’re getting into. Here are some strategies for avoiding bitcoin and cryptocurrency scams:
Watch out for investments that take advantage of your inexperience. Avoid businesses that promise guaranteed returns or “guaranteed profits.” While you can make money by making cryptocurrency transactions, you’ll be losing out on the potential to earn these returns if you start a side project with cryptocurrency. Similarly, don’t invest your money into a project that promises to generate income.
Never click on a link or accept a link on a website or email you’re not familiar with. This will always be the first step to cryptocurrency fraud.
Common types of cryptocurrency scams
Spoofing and spoofing scams — This fraud is a little different than the rest because there is a human element. Often, people lure you into doing a wire transfer, because they are the intermediaries between you and the actual company or group who want your money. The scammers can pose as the company and trick you into transferring money.
This scam is also referred to as a “send-to-bundle” scheme. Usually, the scammers start by using a spoofed email address. They are one step ahead of the law and use spoofing technology to mask the real company’s name. Your email, phone number, and other communication details are stolen or stolen via social engineering. You’ll typically find out that you’ve been scammed when the company calls you back and tells you to transfer money.
What you should look for in a cryptocurrency startup
Check their backgrounds
If a company is touting its blockchain technology, you can check their company pages to see where their investors and backers are coming from.
Look into the tech they’re using
You can research the technology involved in a particular company. For example, don’t believe the company claiming it has the best security in the field if they don’t disclose the source of their security.
Check the creator’s background
You can usually find a researcher’s biography on the company’s website or social media pages. If the company isn’t being run by the original creator of their cryptocurrency, it’s possible they’ve stolen their work. Ask them for proof.
Scam or not, crypto and bitcoin are revolutionizing the investment world. So even though you’re working with Bitcoins, invest with the idea that the digital currency can be a great investment for you.