Part Two: Fraud Methods and How to Recognize Them
Cryptocurrency fraud methods are numerous and sophisticated, as fraudsters exploit modern technologies and investors’ lack of experience to make illicit gains. Below is a review of the most prominent of these methods and how to identify them.
1. Ponzi and pyramid schemes
Ponzi schemes rely on promising investors huge, quick returns, but these profits come from new investors’ money rather than real profits. The scheme stops when the scammers are unable to attract more victims, resulting in huge losses. These schemes can be identified by unrealistic promises of high returns with no real product or service behind the investment.
2. Phishing
Scammers use fake emails or websites that look exactly like the official ones in order to trick victims into revealing their wallet keys or passwords. You can identify this type of scam by always checking the website address and refraining from clicking on suspicious links.
3. Fake wallets and apps
Scammers create apps that look like legitimate wallets to store cryptocurrencies, but are designed to steal funds once deposited. These apps can be identified by checking reviews and downloading only from official app stores.
4. Fake cryptocurrency trading platforms
These platforms claim to offer cryptocurrency trading services, but they disappear as soon as you deposit funds. To avoid this type of scam, you should check the platform’s history and online reputation before dealing with it.
5. Manipulating ICO projects
Scammers use fake ICO projects to raise money from investors, claiming to be developing new currencies or technologies. These fraudulent projects can be identified by checking the team and supporting documents such as the white paper.
6. Giveaway Scams
Scammers often use social media to advertise fake gifts that claim to double your money once you send them. The best way to avoid this scam is to avoid any offer that seems too good to be true.
Conclusion of Part Two
Knowing the fraud methods is the first step to protection. The investor should always be careful and make sure to deal with reliable platforms and tools.
In Part 3, we will discuss prevention and solutions to combat cryptocurrency fraud.