Cryptocurrentcy is a potential and extremely developed market at the moment, but it comes with problems about scams – scams – ponzi…. Below are the most typical models to help investors have more understanding about these models.
Common types of Scams (scams)
In a recent study, 80% of ICOs conducted in 2017 were identified as scams. One of the most popular projects is Confido.
This is an article collected by Coin98 that talks about scams in a very complete and detailed manner. We would like to share this article so that you guys can understand and avoid current forms of fraud.
In November 2017, the group raised $375,000 and disappeared shortly after. Immediately after the news spread, the token price plummeted from $0.60 to $0.10 in less than 2 hours and then continued to plummet a few hours later.
An even bigger ICO scam is Centra, which raised $32 million and was backed by celebrities Floyd Mayweather and DJ Khaled. In April 2018, the two founders were arrested and in a similar way to Confido, the coin lost almost all of its value following the news.
Another typical ICO scam is simply listing the Dev team or advisor (Advisor), possibly related to securities or from famous advisors.
Photos of team members can be easily searched on Google. If you find a match in someone’s name on the team in another project, it’s likely a scam project.
Other Scam ICOs:
Giving tokens/coins on social networks
Be aware of groups and users on social networks (Facebook, Telegram and Twitter), which sometimes impersonate notable figures in the crypto world or billionaires such as: Vitalik Buterin or Elon Musk, to Offers a gift of valuable tokens.
Whenever you read a message like “send 1 ETH to this address and get X amount back” it is definitely a scam.
Cryptocurrencies are still money and no one gives free money.
Copy famous exchange websites
Exact replicas of legitimate projects, often exchanges (Exchanges) or ICO sites, used to steal money and personal information.
Always double check the URL and bookmark the sites you visit often.
Copying sites will use similar letters in the URL to make it look real at a glance. Example: Use “m” instead of “n”, “0” instead of “o”, etc
Pay attention to advertisements that lead to fraudulent websites. Recent examples include Google Ads ads for fake exchanges.
Always bookmark legitimate URLs and don’t visit other URLs even if they look similar.
Chrome extensions like Metamask help avoid phishing sites.
Even Etherdelta, a nearly non-existent decentralized exchange, and MyEtherWallet are victims of DNS hacks (MyEtherWallet Users Lose Funds to DNS Hack).
A DNS hack occurs when traffic is redirected from a legitimate website to a phishing site by modifying the legitimate website’s DNS records. This means when a user visits the correct URL, but is accidentally redirected to a phishing site.
These are particularly tricky because even accessing a site from a bookmark can still be tricked.
A great way to avoid DNS hacks is to verify the SSL certificate of the website you are visiting.
The main targets for DNS attacks like MyEtherWallet or MyCrypto all have specific SSL certificate names. If the SSL certificate does not match or there is an error, exit the site immediately.
Another way to prevent DNS hacks for MyEtherWallet and MyCrypto is to run them offline locally on the computer.
Also known as phishing, fake emails can redirect users to fake websites where they try to steal money and personal information.
Fake support teams
Another form of scam, these groups pretend to be the support team of a project or a large exchange and ask for personal information, deposits or private keys.
Fake exchanges & apps
When it comes to exchanges, especially famous exchanges like: Binance, Kraken, Bitfinex, Kucoin, Huobi, Bibox, Coinbase and Gemini.
At the time of writing, CoinMarketCap lists 204 exchanges and most likely among them is BitKRX, a fake exchange that was discovered and seized in 2017. Learn more here.
Another case from Ukraine: Six Fake Crypto Exchange Sites Busted by Ukraine’s Cyberpolice | News
Also, be aware of the legitimacy of apps downloaded to your phone or browser.
Cloud mining is increasingly popular. Due to the higher cost of mining equipment and electricity for individuals, it has created an easy opportunity for the bad guys to carry out fraudulent activities.
A well-known case is MiningMax, a cloud-based mining service that requires people to invest $3,200 for daily ROI for two years and receive $200 in commission for each investor referred (ref. ). The site defrauded investors of up to $250 million.
Ponzi (Pyramid & Multi-Level Pattern)
This is the most common pattern in Crypto projects and also gives this market a bad reputation.
Ponzi scheme is a form of borrowing money from one person to repay another. Borrowers offer high-yield guarantees to lenders and advertise with them examples of past high-yield returns to attract lenders. Lenders attracted by high yields refer new lenders.
In this way, borrowers increasingly borrow larger amounts of money from many new lenders.
The most notorious Ponzi scheme in crypto history is Bitconnect. Surprisingly, it stayed up and running for a year, until they made their biggest exit scam to date.
At the time of the crash, Bitconnect’s market cap was around $2 billion and the token’s price was around $320. In less than 24 hours, it plummeted to $6 and the market cap dropped to $40 million.
Bitconnect has a large following and very well organized and successful marketing.
List of Ponzi projects: Here is a list of crypto ponzi schemes and people who are/were promoting them on YouTube : CryptoCurrency
Malware and Crypto Mining
Cryptocurrency malware comes in two forms:
- The most common occurs when malware is installed. Generally with the user’s naive consent, on a computer or mobile device, for the purpose of stealing private keys or funds.
- Crypto mining malware is the latter. In this case, the malware secretly uses the resources of the infected computer to mine cryptocurrencies, at the decentralized mining network.
- A notable sign of cryptocurrency mining is increased CPU or GPU usage. This can cause the device to become noisier as the fan speed increases to keep the device cool.
- Use extreme caution when installing software on a computer that is used to trade or trade cryptocurrencies. If you’re using Google Chrome, be mindful of the extensions you’re installing, and in general always double-check your app’s authenticity and its source.
Fake Pools and OTC Scams
Fake groups are often organized through Telegram or Discord groups. These groups provide allocations (allocations) for upcoming ICOs and require brothers to deposit funds, usually Ethereum, to contribute to the pool to receive later ICO tokens.
While some legit groups are generally difficult to join – they can ask for a hefty monthly fee, KYC, and a specific skill set – most of them are just scams.
Furthermore, due to the anonymous nature of cryptocurrencies, once a brother deposits money into a fake group, there is no way to receive a “refund”.
Fake OTC scams work the same way. They offer to sell or buy property directly from you, ask you to deposit money first and then disappear.
OTC trades are extremely risky so proceed with caution and use a trusted third party as collateral. Be careful as the middleman can be an accomplice of the person offering OTC trading.
Pump and Dumps
Pump and Dump teams manipulate the price and volume of a coin – often little known and often low-cap tokens. Initially, they pumped the price in a short period of time by combining buying in bulk and spreading the news, then they dumped.
Recently, several well-known crypto influencers reported their assets being stolen by an attacker taking control of their phone numbers. The way it works is amazingly simple.
The attacker impersonates the owner of a phone number when calling the mobile phone provider and asks to transfer the number to a new SIM. As a result, the attacker has access to email, 2FA and all related tools to steal assets.
Ways to recognize scam projects
Promises to bring huge profits
Always keep in mind that if that sounds too good to be true, it probably isn’t. Simply put, always be skeptical of any project that offers a high return on investment.
Invite more users
Doubts and doubts: When asked to invite others to participate, it is a clear sign that it is a Ponzi project.
Remember that affiliate programs are always voluntary.
Ask Private Keys
Never share passwords, private keys or security phrases. Any individual, project or ICO that asks for a password, private key or security phrase is a scam.
A scam will always be a scam. If a project or a startup or an individual has been accused of being a scam in the past, beware that they may be a scam again.
Don’t trust articles or a project website. The most important thing is to verify that the team has a LinkedIn profile and do a full background check with Google and Twitter/Facebook. If the information about the group is not made public then it is most likely a scam.
Assess the legitimacy of Crypto projects
- Are there full names and faces associated with the project?
- Do they have active LinkedIn or other social media profiles?
- Is the whitepaper the original or a copy of another whitepaper?
- Are there confirmed partnerships with other companies?
- Does the project have a roadmap, a working product, or just an idea?
- Are they a registered and established company?
- If the project has been abandoned, then it is not worth the time and money.
- What do people say on social media about this project?
- Does the group interact with the community and what is their attitude?
- Not everything requires blockchain.
- Does the project need blockchain or can the problem be solved using a classical database?
- Does the technology behind this project really solve the problem?
- Are there any other projects trying to solve the same problem?
- Does the project have a clear goal?
- Has the team completed past deadlines and achieved the goals outlined in the roadmap?
- Did the team experience any issues during development and how did they handle it?
- Has the token ever gone through a pump and sold before?
- Have there been any recent changes to the Team structure?
*Reference source: Coin98
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