Beware of Crypto Scams
Just like when anything goes mainstream the scammers come alive, in the world of cryptocurrency you will have so many of them that your guard will have to be up constantly. Crypto involves technology and with that comes people who are well versed in sophisticated technology that can come to light in order to scam crypto holders out of their coins.
You can have a developer just create a crypto and hype it up to solely take the money and run, for instance the crypto called “SQUID” which was making reference to the “Squid Game” movie on Netflix. Developers created it, marketed it like crazy and then allegedly disappeared with well over $3 million from the sales of the coins.
Investors must be careful and know what you are getting behind. One of the key words you will see in this article is UTILITY. If a cryptocurrency doesn’t have a utility then run for the hills because chances are it will probably be a pump and dump situation. Some retail investors may do well while others will be left holding the bag; it’s a dangerous proposition if you don’t know what you are doing.
According to the Federal Trade Commission over 7,500 people lost well over $85 million in crypto related scams in 2020, the year prior that number was 570 people and under $8 million. So as crypto continues on the mainstream course you will have bad actors that will promote it like a penny stock. Basically showing promise of huge gains from a small investment but of course greed comes into play and just like the Wall Street bucket shops investors are pushed to buy more until it reverses their fortune.
What you will see in the crypto investment schemes that act like a ponzi scheme are people touting it like that altcoin is the future of crypto, meanwhile there is zero utility with it. You will see people that never pushed crypto before all of a sudden pushing it on their social media accounts, showing how much they made and attracting their friends and followers to jump in head first and make a killing.
That you will see on Twitter, Instagram and SnapChat, it’s very possible that all social media platforms will begin to shut down crypto promoters on their platforms and they should. It’s like in the past when penny stock promoters would pump and dump so many different stocks but hyping up the stocks while selling new investors their stock. It’s a classic scheme where unsuspecting investors get jammed up because they were promised quick wealth.
We have seen celebrities do this over the past 24 months and gotten in trouble, so it is certain that the hammer will come down on those with are still doing it. Now let’s clear the air, Tom Brady is promoting an exchange in FTX but Elon Musk was touting an actual crypto in Dogecoin. Celebrity endorsements of am altcoin directly solely as a paid advertisement is misleading, Musk wasn’t getting paid from his touts but there is no question that someone made a lot of money for his endorsements on Twitter.
So investors just BEWARE the touts and make sure to do your own due diligence, if an altcoin has a utility such as using if for payments of products, is asset backed or is building on its backbone for growth then you are on the right track, otherwise RUN!!
For example Ethereum is a great example of a crypto with an extreme utility, so many crypto’s and NFT’s were minted on their backbone, that is value. Dogecoin for example was created as a joke and it still is a joke because investors will realize that there is no value there and they will get burnt at some point.
Here are some other things to be on the lookout for when dealing with crypto so that you can protect yourselves. Beware of people demanding crypto only payments for retail items, any credible retail establishment will accept cash, credit cards and if they accept crypto then that is in addition to. The ONLY instance would be if an internal crypto is being used for an ecosystem.
Shadow scammers, those are the people with fake identities that will try to scam crypto holders to actually take their coins. They will eventually get caught because the reality is that blockchain is not anonymous even though people think it is and decentralized networks make it harder to catch thieves but they do eventually get caught as all transactions are traceable. With that said it won’t help an investor who got scammed because they may not see those coins ever coming home, there is not SIPC insurance on your crypto unless you hold it at a Coinbase or other viable exchange.
Another scam that investors need to be aware of are the digital games and collectibles, you may have some newly minted altcoin being pushed that has to do with a game, so users will buy the coins for the game but they are just enriching the creator of the altcoin. Now if it were a stable coin and used for the game itself then that makes sense but if it is a coin that trades and can jump up like crazy somewhat like a penny stock pump and dump situation then that is dangerous for any novice investor.
Of course money laundering is always a concern but we will cover that in the next issue of Crypto Community.
Now do we even have to go into the “Romance Scams”? , even the smartest people have been taken in typical romance scams that have come from dating websites like Plenty of Fish, Match.com and eHarmony, they reel the target in who is truly looking for love and take them to the cleaners. At the very least they eventually begin to ask them for money or help with something in their lives. So wiring money is traceable meanwhile these scam artist are now using crypto to scam people. The numbers went from 1% in 2019 to 20% in 2020 as far as crypto being used for the scam, don’t worry they are still looking for cash in the end. Just be very careful when dealing with dating websites, we know that love is hard to find just use all precautions to protect yourselves and utilize video as well as other services that the likes of Bumble offer to their members.
Let’s go through some things to avoid closing out this article:
- Hype schemes that you see on websites or via email
- Hype that comes from social media influencers, HUGE red flag
- Romance schemes that are asking you for crypto or money
- Blackmail schemes, call the authorities at that point
- Mass emails pushing a crypto
- Newsletters or Reddit post pushing a crypto pump and dump
Be safe people, it’s a new world out there so arm yourself with information.
UCW MAGAZINE NOV 2021