What is crypto fraud?
Bitcoin is by far the most common form of cryptocurrency in use today, but scammers are targeting a wide range of other related currencies.
This form of cryptocurrency scam is easiest to spot because of its name. They claim to offer just one type of cryptocurrency, say Bitcoin, but in reality they’re selling something different. In most cases, a Bitcoin scam promises a one-time, non-refundable “bonus” to customers, which is completely bogus.
“If the company’s account is verified, the fraudster has one more trick up their sleeve,” says Steve Meer, who runs The Bitcoin Center NYC. “They’ll ask you to place your order, but only with one of their virtual wallets.
Types of Crypto Fraud
From fake ICOs and pre-scams to fake pump and dump sites and cryptocurrency startups with dodgy business plans, a whole range of scams exist. Here are a few types of cryptocurrency fraud to keep an eye out for.
Fake ICOs
Some of the initial coin offerings (ICOs) that have launched on the blockchain have delivered the goods on paper. But because ICOs are new territory for regulators and because their market has yet to mature, frauds abound. “ICOs can be lucrative if you’re a criminal,” says Rik Willard, cyber-security strategist for Silent Circle. “The rule of thumb is if the company doesn’t make money you shouldn’t do an ICO.”
Fake Pump and Dump Sites
Even some legitimate projects can suffer from pump and dump.
How to avoid crypto fraud
Bitcoin scams are complex, so you’ll need to do some research on your own. Here are some common fraudulent methods crypto scams use, along with how you can protect yourself:
Change my Bitcoin Before You Want it
Crypto scammers often create fake user accounts and pump fake wallets. They don’t want to have to actually store any of your Bitcoin or other cryptocurrencies for you, so they’ll ask you to send money to a newly created account before they will honor the original request.
“If a scammers pops up on your radar, it’s best to assume they want your money all or nothing,” says McArdle. “That way, when you get caught in their trap, they won’t have the time to try to convince you otherwise.
Conclusion
As with all investments, beware of fakes! Online fraudulent schemes can feel easy and exciting, but at their heart are people selling you something for an incredibly low price. If you don’t know what to look for, you could be overpaying for a lot of good that’s not worth what you paid.