Crypto Scams: Crypto enthusiasts are being targeted by fraudsters. Despite the fact that cryptocurrency is decentralised, which guarantees privacy and high levels of security, the asset class isn’t free from con artists and criminals. Scammers use a variety of tactics and plans to persuade victims into making fake cryptocurrency investments.
To avoid fraudsters and their wicked schemes, here’s a guide to some common crypto-scams.
1. Fake Crypto Exchanges and Crypto Wallets
While browsing social media, you might come across accounts selling cheap Bitcoin, Ethereum, Dogecoin, etc. They are nothing but fake accounts created to lure you into a trap.
The corresponding sites for these accounts will offer cryptocurrencies at below market rates and promise huge savings. But these platforms are usually fake. They often ”guarantee” huge returns on investment, and users are typically asked to pay a high initial fee. And when you try to withdraw your funds, you’ll likely find they’ve disappeared.
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2. Pump-and-dump Schemes
It is a popular method of duping investors in the stock market as well as in crypto. In this scheme, a group inflates the price of an asset by different means so that they can sell their own holdings for a profit.
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These people build fake hype about a typically unknown cryptocurrency by spreading false or misleading information through social media, forums, and online communities. This stage is known as “pump”. When people start to buy in, price rises as a result.
Early investors sell their crypto assets once they reach peak value. This is called ”dump”. As a result, there is a sharp decline in the price. Other investors rush to liquidate their holdings and suffer losses. Be careful and consume information only from trusted sources, not from social media posts coming from unknown and unreliable sources.
3. Rug Pull Scam
In this scam, the fraudsters pose as developers of crypto products, attracting investors to provide seed money for a fake new coin or any other kind of Web 3 project. After raising a considerable amount of money, rug pull fraudsters disappear with the investors’ money.
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4. Initial Coin Offering (ICO) Scams
Just like an initial public offering (IPO) for the stock market, new crypto projects offer an initial coin offering (ICO). Companies can use an ICO to raise funds to support a crypto development, such as a coin, software, or relevant service. The investor receives newly minted coins in exchange for committing cash.
But scammers use this system to scam people as there’s little to no regulation around this. They set up fake startups with no working history, making it difficult to differentiate between a genuine business and a fraud. ICO scams, like rug pulls, take money from early investors only to quit the enterprise shortly after. Examining the company’s whitepaper might help you spot an ICO fraud.
5. Giveaway Scams
“There are no free lunches” quote also applies in the crypto industry. In this scam, a false celebrity account on social media announces giveaways of crypto tokens or assets. Usually, they persuade people to send fiat currency or crypto to someone with the promise that they will get a high return on their “investments”. Once you send them fiat or cryptocurrency, they’ll disappear forever.
So, Do Your Own Research! And stay away from ”get rich quick” schemes.