What is a crypto scam?
Crypto scams use faulty or incomplete information to scam people who are interested in virtual currencies and blockchain technology.
Crypto scammers will create social media accounts, email accounts, or fake websites that appear legitimate, such as ones with the names of real companies, a polished website design, and sponsored links. They’ll even name their websites and social media accounts after big brands, which shows their audience that the scammer’s people think they’re worthy of your trust.
If you’re interested in joining cryptocurrency exchanges or buying cryptocurrency, the scammers will quickly befriend you on social media, and they’ll claim that they’re keen to “help you out.
Overview of crypto scams
According to the Better Business Bureau’s internet scams report for 2018, there were 23 scams committed against Canadians in 2017. Cryptocurrency scams are the most prevalent, accounting for 16 of these 23 scams. The numbers have also been on the rise in 2018. There was a 67% increase in Canadian scams committed using cryptocurrency in just one month. Cryptocurrency scammers prey on this age group, with millennials being at the biggest risk.
A common tactic is to create a company that claims to offer a cryptocurrency-related service. Once you contact these companies, they will ask you to provide your personal information including your credit card information and banking details. If you try to use their products or services, you’ll find that they’re not even connected to the blockchain.
How do they work?
Bitcoins are one type of crypto currency, but many other kinds exist. Bitcoin, the most well-known type, lets users exchange money directly. Traditional methods of making payments require intermediaries, such as a bank or credit card company. With Bitcoin, no intermediary is required, as it works directly between individuals.
Other coins have similar features. In many cases, investors will use a percentage of cryptocurrency to buy something with real money, whether that’s another crypto coin or an established currency. When you do this, you become a holder of the crypto coin, which tracks and generates units of currency. The end goal is to get your money back, plus profit, by selling the crypto coin.
Types of crypto scams
As cryptocurrency scams are hard to detect, the IBTimes did the research to find the most common crypto scams around.
1. Purported ICO
A brief overview: An ICO (initial coin offering) is a popular fundraising method for startups, which offer their own cryptocurrency for a token price, usually during an upcoming token distribution.
This is a cool concept, and some startups claim to have solved a major problem in traditional finance by replacing the need for traditional initial public offerings with a new way of fundraising. However, even when token-based crypto companies can find something novel to promote to the public, their plans can turn out to be worthless.
Even with a considerable amount of fraud out there, cryptocurrencies are gaining in popularity. Bitcoin was the first to become an internationally recognized form of payment, and ever since, the cryptocurrency has grown in popularity as the search for alternative currencies continues. If you want to get involved, make sure that you do your homework before you make any investments, and know the risks involved.