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6 common cryptocurrency scams in 2023

A digital wallet can be used to store digital currency, which can be converted into cash by transferring it to a bank account. Digital currency is distinct from cryptocurrencies like bitcoin. Because it does not run through financial institutions and uses blockchain for verification, it is harder to recover from theft.

Even though cryptocurrency is a recent trend, thieves are still stealing using traditional techniques. The most common scams involving cryptocurrencies are listed below.

 

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  • Bitcoin investment schemes

Scammers contact investors claiming to be experienced “investment managers” in bitcoin investment schemes. As part of the scheme, the so-called investment managers tell their victims that they will make money from investments and claim to have made millions of dollars investing in cryptocurrencies.

The con artists demand an upfront payment to get started. The thieves then simply steal the initial fees, not making any money. To gain access to a person’s cryptocurrency, the con artists may also request personal identification information, claiming that it is necessary for transferring or depositing funds.

The use of fictitious endorsements from famous people is another kind of investment fraud. To create the impression that a celebrity is promoting a significant financial gain from the investment, con artists use real photos and paste them onto fake accounts, advertisements, or articles. Using reputable company names like ABC or CBS and a professional-looking website and logo, the sources of these claims appear to be true. The endorsement, however, is fake.

 

  • Rug pull scams

Investment fraudsters “pump up” a new project, nonfungible token (NFT), or coin to obtain funding in rug pull scams. The con artists steal the money and then vanish along with it. Investors are left with an investment that has no value because the code for these investments prevents people from selling the bitcoin after purchase.

The Squid coin scam, named after the Netflix series Squid Game, was a popular version of this con. Financial backers needed to play to acquire digital currency: Tokens for online games would be purchased by users, who could then exchange them for additional cryptocurrencies. The cost of the Squid token went from being worth 1 penny to about $90 per token.

The trading eventually stopped, and the money vanished. As people tried to sell their tokens but were unsuccessful, the token’s value dropped to zero. The con artists made about $3 million from these financial backers. Rug pull scams are also common for NFTs, which are digital assets that are one of a kind.

 

  • Romance scams

Crypto scams are not new to dating apps. These con schemes involve long-distance and strictly online relationships in which one party takes time to earn the trust of the other. One party begins to persuade the other to buy or give money in cryptocurrency over time.

The con artist with the dating service then vanishes. These con schemes are also known as “pig butchering con schemes.”

 

  • Social media cryptocurrency giveaway scams

On social media, numerous bogus posts claiming to offer bitcoin giveaways exist. Fake celebrity accounts are also used in some of these con schemes to entice people to enter the giveaway.

However, when a person clicks on the giveaway, they are taken to a bogus website where they are required to verify to receive the bitcoin. To demonstrate the account’s legitimacy, the verification procedure requires payment.

The victim may either lose this payment or, even worse, click on a malicious link, which could result in the theft of their personal information and cryptocurrency.

 

  • Ponzi schemes

Older investors in Ponzi schemes get paid money from new investors. Scammers operating in the cryptocurrency industry will use bitcoin to entice new investors. Since there are no legitimate investments, it’s a scheme that keeps going around and around; It’s all about getting money from new investors.

A Ponzi scheme’s main draw is the promise of huge profits at low risk. However, these investments always come with risks, and there are no guaranteed returns.

 

Be careful about the Ponzi scheme!

 

  • Fake cryptocurrency exchanges

Investors may be conned by con artists who promise excellent cryptocurrency exchanges and even more bitcoin. However, there is no exchange, and the investor is unaware that it is a hoax until they lose their deposit.

To stay away from an unfamiliar exchange, stick to markets for known crypto exchanges like Coinbase, Crypto.com, and Cash App. Before entering any personal information, do some research and check out websites related to the industry to learn more about the exchange’s reputation and legitimacy.

 

The bottom line

Because the Federal Deposit Insurance Corporation does not provide insurance for cryptocurrency, it is essential to safeguard it. Never give anyone access codes or keys to your wallet.

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