UncategorizedCommon Cryptocurrency Frauds

December 17, 2018by Lenora Lostaunau
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Common Cryptocurrency Frauds

Experts believe cryptocurrency frauds are the norm rather than exception. Bitcoin estimates close to $3.25 billion will be lost because of worldwide fraud. Being prepared and doing due diligence are the best ways to avoid being scammed.

Here are some common frauds in the cryptocurrency world:

Untrustworthy exchanges: Along with the rise in popularity of cryptocurrency, is the phenomenal increase in the number of exchanges. As they get to make a profit with the transaction fees, they are boisterous in getting the buyer’s attention. Not many exchanges are completely trustworthy. Some exchanges that have been popular have disappeared overnight leaving the buyer at large.

A case in point is the Mt. Gox exchange fraud. As an early exchange in cryptocurrency, it accounted at one point for more than 70 percent of crypto transactions-Bitcoin to be specific – worldwide. One fine morning in February of 2014, the exchange suddenly suspended trading. It was reported later that 850,000 Bitcoins valued at $450 million had been stolen.

Pump and dump:

Just as in mainstream stock markets, the pump and dump schemes are way too common in cryptocurrency world. While Bitcoin with a value of $110 billion may be difficult to manipulate, other altcoins are vulnerable to schemes of pump and dump. There are multiple groups on platforms like slack, IRC and Telegram some with more than 40,000-100,000 members. These groups are focused on price manipulation of altcoins with low market caps. With this, those who act fast get the price advantage while those who are late in acting have to deal with plummeting prices within minutes.

Pyramid schemes:

As the saying goes “if its too good to be true, it probably is.” Also called Ponzi scheme, this is a scheme that lures new buyers with unusual payouts that are too good to be true. Older buyers or investors receive payouts from this money that new investors put in and not from any profits. Ultimately the scheme collapses and promoters make off with the money.

Fake wallets:

The play store has plenty of fake android wallets which make it risky for investors to pick just any wallet randomly. Many wallets promise that the buyer has the control of his funds but without conducting thorough investigation, these may result in you losing your investment. As one of the easiest modes of scamming buyers, fake wallets can take your private keys and seed and rip off BTC as well.

Fake ICOs:

Fabricating a fake ICO, creating hype and persuading people to purchase cryptocurrency is one of the most common scams. Anonymous team, unwarranted hurry in completing transactions, copied whitepaper, mismatch of oral and written statements, missing roadmaps are some signs of a fraudulent ICO. Examples of such frauds include Confido, Benebit and Centra Token.

How to avoid being scammed

The best way to stay safe is to do due diligence and a thorough research into every aspect of the cryptocurrency, exchange and wallets. Reading reviews and contacting those who have had a real experience with exchanges can also help. Avoid giving private keys of your wallets on any platform and report to the concerned authorities of any signs of fraudulent behavior. Going in for hardware wallets instead of virtual wallets and securing your computer against hackers with the use of potent anti-malware are absolutely essential to safeguard your investment.

 

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