Cryptocurrency has caught the world's attention like wildfire. Many dream of making millions due to their high rate of return on investment compared to the rest of the financial asset classes. There are other factors, too, that are responsible for their global acceptance.
Due to the financial crisis that has gripped the world, many rely on cryptocurrency to hedge inflation. Most have lost their jobs, and applying for a job has become increasingly challenging. Those who do find it increasingly challenging and are living paycheck-to-paycheck
With such an economic crisis, it makes sense to have an alternate source of income.
Although cryptocurrency is over a decade old, it has been the most successful asset class considering its high volatility and liquidity. Such market conditions are ideal for crypto investors or users to make a lot of money.
The crypto market is so popular that many retail investors and traders are attracted to it. Many big financial giants, like Blackrock, have recently expressed a keen interest in it after their clients started demanding to include cryptocurrency as an additional financial asset in their portfolios.
However, such popularity has attracted scammers and hackers alike. The crypto market has become a breeding ground for scams and fraudulent activities. As per the FTC reports, more than $1 billion was lost to crypto scams; thus, out of $4, $1 is lost to crypto fraud.
Scammers indulge in illegal activities by offering fake investment schemes, and unfortunately, many fall victim and lose their financial holdings, while some even lose their retirement money.
In this article, we will elaborate on various illegal crypto investment schemes that are popular with scammers.
We shall first look at how scammers lure in their victims.
Popular methods to lure in potential victims
Unrealistic promises and fake returns
Scammers have a way of exaggerating the rate of return on investments. When one compares the rates of returns that are floating in the market, these scammers will offer fake and exaggerated returns. To ensnare their victims from committing financial blunders, they will also associate fake guarantees.
You must remember that, like any business, profits and losses go hand in hand. You are unsure whether that business will be a success or a failure. Investment schemes, especially cryptos due to their high volatility, are also subjected to the same conditions.
Lack of Project transparency
Scammers know that most people who do invest in the crypto market lack the necessary awareness. Once a victim falls for their gag and appears disinterested, these scammers will bombard them with investment and crypto jargon. They create the impression of being well-read and knowing their trade well. They create such a false sense of security in the minds of their potential victims that they finally cave in.
When you come across any such crypto investment scheme and your gut warns you about it, it is advisable to have everything in writing and contact your local certified public accountant to get it verified.
A genuine crypto investor will give you time and won’t hesitate to provide all the terms and conditions in writing.
Scammers, on the other hand, will use coercive tactics to lure their victims in.
Pressure Tactics.
Scammers are known to go to great lengths to convince their potential victims to cave into their demands. They are known to use all the sales-pressure tactics, like offering a limited period and highly inflated returns on investments. They will use all the tricks and strategies from the book to convince their victims to part with their money by investing it in their fake schemes.
As we have already mentioned, a genuine crypto investment firm has its reputation at stake and would rather wait until their customer makes up their mind to invest in it. A scammer has no scruples and is after your money. They won’t hesitate to cheat their victims, as once these scammers know their game is up, they simply wind down their business and open up a new one.
Types of crypto scams
Ponzi and pyramid schemes
Although the basic method of ripping off victims in a Ponzi scheme and a pyramid scheme remains the same, they only differ in their execution. Both of these schemes run on the principle of robbing Paul to pay Peter.
In a Ponzi scheme, scammers will make the fake promise of multiplying their cryptos depending on the amount of cryptos they invest after a certain period. As an investor, you might invest a small amount in your cryptos. Scammers, as promised, will multiply your cryptos, ensuring that you can trust them. As soon as you invest a huge amount in cryptos, they disappear without a trace.
In a pyramid scheme, the modus operandi remains the same; however, scammers will encourage you to bring in new investors to earn some ‘extra’ cryptos. The entire scheme is based on paying off old clients with the cryptos collected from new clients. The scheme continues until the pool of new investors runs dry.
Phishing Scams
Impersonating a gue cryptos investment firm, scammers will lure in their victims and convince them to hand over their sensitive information, like their entire name, date of birth, cryptos account details, bank details, and so forth. Once they collect this data, they will wipe out your crypto as well as other financial holdings in your bank.
They indulge in various investment and non-investment cryptos schemes that may appear to be genuine by just looking at them.
Cryptocurrency Mining
Another way to earn a passive income is through cryptocurrency mining. All you need is a crypto mining rig, and you can earn cryptos after verifying and authenticating each cryptocurrency transaction.
Scammers will also offer their victims the opportunity to earn cryptos by selling their rigs to them. Since these mining rigs are expensive, they will enter you into a contract that you will regret later. These mining rigs require a cooler climate and consume a huge amount of energy.
The contract is such that you will make peanuts while these scammers will enjoy the lion’s share of your earnings.
Romance scam
Scammers will lure their victims on social media platforms and dating apps. They will initially start with all the romantic talks, and once they gain a total hold of their victims, they will then start milking them by asking for cryptos as gifts or by guiding them into investing in fake cryptos investment schemes.
How do scammers operate?
There are other tactics that these scammers employ to rip off their victims online.
Phishing Attacks
As we already mentioned under the name of crypto investment opportunities, scammers engage in illegal financial activities. They will try to collect sensitive data regarding your crypto account and bank details. Once they have these details, they will rip you off.
Pump and Dump Scheme
Several social media influencers will entice their victims by suggesting that they invest in a particular cryptocurrency.
These scammers will identify certain cryptos and have enough money to buy them in bulk. Then they suggest these to their audience. Since they have a huge fan base, they start to follow these scammers by investing in the cryptos that they have suggested. Due to this, the price of that particular cryptocurrency begins to surge.
Once the price of that particular cryptocurrency reaches that level, these scammers will sell off all their cryptos holdings, leaving their fans with worthless cryptos.
Fake IOCs and token sales
When a developer wants to develop a cryptocurrency, it requires a huge amount of money. Although there are several venture capitalists available, to protect themselves from interference from these same venture capitalists, they go for crowdfunding, and it is a common practice.
Scammers will also announce that they will create a cryptocurrency that will be as big as Bitcoin. They create a fake white paper that will describe the utility and purpose of the token.
Once a sufficient amount of money is collected, these fake developers will leave the market, taking people's money with them.
Now that we know how a cryptos scam is perpetrated, we shall explain what steps you should take should you be a victim of one such scam.
A first step towards cryptocurrency recovery
It might sound inhumane after understanding that you have lost your hard-earned money in a cryptos fraud, but you need to calm yourself; otherwise, you risk acting foolishly out of anger and regretting it afterward.
Once you find out that you have been scammed, you need to reach out to your family and friends, the ones you trust. They may provide certain insights that you may not have thought of due to your present mental state.
Documentation
Having a detailed account of the crime helps the crime investigator connect the dots to help solve the case and retrieve your lost cryptos holdings.
Capture relevant details.
Take screenshots of any transaction that may have taken place between you and the scammer. Provide your bank details and also the bank details or wire transfer of the scammer's account number. Any form of communication between you and the scammer, be it a text message, social media message, or email, should be preserved.
Preserving digital evidence
Details like the URL of the website from which the scammers operated, the name of the website, and the IP address should all be preserved, as they will play a vital role in solving the case.
Maintaining chronological details
You must document right from the beginning how you contacted the scammers or how the scammers contacted you until the time you realized that you were scammed.
Contacting the authorities
After completing your detailed documentation of the scam, it is crucial to contact relevant authorities to crack down on the scammer and recover your lost cryptos in the process.
You need to go to local law enforcement authorities and file a case against the scammer. You also need to contact your credit card rating bureau and freeze the account to discourage further unauthorized transactions.
Options for you
Once you realize that you are a victim of an elaborate scam, you are left with two options. You could either go and seek help from the boys in blue or another professional.
Law enforcement agencies
We have nothing against them; however, the sheer number of crimes that take place is quite high, leaving behind a few to pursue such online scams. Again, you also need to periodically call relevant departments to know the status of the case.
Seeking professional help
Besides law enforcement agencies, there are several online crypto recovery agencies. They have the necessary human resources, the relevant technology to track down your cryptos holdings, and last but not least, the legal arm that will ensure that domestic scammers can be imprisoned when you file a legal suit against them.
They have all the teams under one roof and can provide all the latest developments regarding the case and the process of recovering your lost cryptos.
Final Thoughts
Although there are two ways to seek professional help, the choice finally rests with you: how you wish to pursue the case and recover your stolen cryptos.
Regardless of the professional help you seek, you must document in detail the crime that has occurred.
