Although cryptocurrency is popular among many as it offers high margins and liquidity, many do fall victim to elaborate crypto scams. It’s a shame that many lose their life savings to fake investment schemes and false promises.
The latest figures reveal that, until April 2023, more than $103 million was lost to cryptocurrency scams. It has been observed that the rate of crypto scams is surging every year. It is surprising to know that such scams are increasing at an astounding rate.
However, one must not deny the fact that there have been several occasions when cryptos were received and returned to their rightful owners; however, such recoveries that are initiated by the financial fund recovery specialist are very few and hardly make headlines.
The challenge for these financial fund recovery specialists is that the victims are required to approach them and render their services.
Nonetheless, the government also participates in the recovery of stolen money in the form of cryptos. In 2022, the Manhattan D.A.'s Office managed to seize $1.3 million from a scam site.
It is right to say that venturing into a crypto market can be compared to the Wild West, where the sheriffs are on a constant lookout for robbers to stop the ‘bank’ from being robbed.
The primary reasons why many fall easy prey to such elaborate scams are their lack of awareness and the thought that they are too smart to fall for them. Unfortunately, many do not do thorough research before investing in cryptos, which results in their financial downfall.
In this article, we will shed light on some of the prominent scams that are prevalent in the crypto industry. Understanding such red flags can help you navigate and avoid falling for such scams.
Offering unrealistic returns
Several crypto exchanges, brokers, and brokerage firms offer returns on interest at a competitive price by allowing their users to stake their cryptos and earn interest on them. Such a move is welcomed by many crypto users, as they can earn a passive income without the fear of their cryptos lying idle.
It is advisable to research the kind of returns on interest that they have to offer. Several crypto exchanges, brokers, and brokerage firms offer rates of interest at astounding rates. You need to wait and research it before signing on to it.
If you are updated with the latest news, you must have observed that in recent years, many crypto exchanges have gone bust, regardless of how they projected themselves. And when they did go bust, those crypto users who had staked their cryptos with them lost everything.
FTX is the latest episode in the crypto scam where poor fund management led to its downfall. When it was created by Sam Bankman-Fried, he offered 8% annual returns. These were the highest rates of returns promised by a firm that just started compared to the rest of the crypto industry. It should have raised obvious red flags.
When FTX went into bankruptcy, many crypto investors lost their cryptos in the process.
Solution:
With current scenarios where crypto exchanges are going bust, it would be wise to invest in a crypto hard wallet with multiple-factor authentication. Although it would be a tedious job to transfer your crypto while investing or trading, they do offer the assurance that you will not lose your crypto to such scams. It is far easier and cheaper to open up an account on a crypto exchange than to rebuild your crypto holdings.
Offering free cryptos through Airdrops
It is quite common in the crypto industry to offer free cryptos as a part of promotional activities. However, several scammers will ensure that they can wipe out your crypto holdings. These scammers will ask for your sensitive data regarding your crypto account with the false assurance that they will pass on free cryptos to your account.
Solution:
Before sharing your details, verify if such an Airdrop has been announced by the developer or the crypto industry. You should exercise caution while sharing your wallet address when demanded.
Joining a signal group on social media and messaging platforms
Several online communities are available where they share signals based on their research. However, you must exercise caution since many of these indulge in rug-pulling and pump-and-dump strategies.
Solution:
Many crypto traders understand the dynamics of the crypto market and the price fluctuation trend. Although not all trades can be successful, they do provide good results. Regardless, many offer their services at a premium. You should do thorough research before you subscribe to their channel.
Investment Scam
Many scammers will impersonate a successful crypto investment guru and send random messages and texts on various social media and messaging platforms. They lie in the hope that some gullible victim will accept their offer and fall for an elaborate scam.
Scammers will always target those who wish to improve their financial health. When an interested and needy crypto user contacts these scammers, they will ask for sensitive information like date of birth, entire name, details of bank accounts and crypto accounts, social security number, and so forth.
When these Crypto scammers try to explain the so-called ‘business model,’ they will make use of heavy jargon that is unknown to common people. They use such language to appear well-read and know their trade very well.
These investment schemes are generally pyramid schemes or Ponzi schemes. Depending on the way these schemes are executed, they are classified. These scams only differ in their hierarchy of the flow of money. In other words, Peter was robbed to pay Paul.
Solution:
Regardless of how attractive the investment scheme appears to be, you should have everything on a piece of paper. Once you have it, go through all the terms and conditions, and if you find it challenging to understand, then always go to your local certified public accountant, or CPA, and get it clarified. Scammers are known to levy hidden charges, and the CPA should advise if the investment scheme is good to invest in or another scam.
Final thoughts
Crypto scams are a dime a dozen online, and scammers are known to pull scams through a well-engineered process. Several crypto users fall for such scams daily. Although many do recover their financial holdings either through a professional financial fund recovery specialist or by approaching local law enforcement agencies,
Still, it is advisable to do some research before you open up your wallet and become a victim of such scams.
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