Whenever or wherever money is flowing, there will always be people who want it but do not want to work for it. These people are all willing to steal to make a fortune. The emergence of Bitcoin, Bitcoin exchanges , and altcoins have offered ample opportunities for thieves who want to get rich quick. Many potential investors have little to no knowledge of how cryptocurrencies work, and they are vulnerable malicious actors. However, there are many sure signs of a scam that are highly visible to those who know how to look for them.
The promise of high returns on an investment is a big sign someone is up to no good. Cybercriminals back up these claims by showing graphs displaying the appreciating value. Nothing appreciates forever, not even precious metals. In the financial market, no one can guarantee huge returns overnight. The market is too unpredictable to ensure never-ending dividends and appreciation. Anyone making such guarantees does not know what they are doing or is a fraud.
Another trick is to get investors to recruit more people with the promise of high commissions if they are successful. This trick is called a Ponzi scheme, named after Charles Ponzi. The original investors will make money by doing this, believing the high returns are because the business (or cryptocurrency) is doing well. What really happens is that the money invested by new investors is transferred to old investors. The new investors think they will get a return at a later date. When the scheme is no longer workable, the ring leaders skip town with billions of dollars, leaving their investors high and dry.
Scammers often impersonate a celebrity to lower people’s guard, and then claim they are doing a Bitcoin giveaway, but only to those who contribute a certain amount of crypto. They commonly use platforms like Twitter, where they hack the account of the owner or duplicate it. Many of these accounts have blue checkmarks to make them look authentic. They also use YouTube and conduct live streams. The goal is to make people think they are missing out on a big event, prompting them to make a rash decision. Any online event with a celebrity giving away crypto is likely a scam.
Users Have No Control Over Keys
Cryptocurrency exchanges have wallets in which users can store their cryptocurrency. These wallets have keys that allow users to access their wallets whenever they wish. Only the user should have access to the keys, and no one else. One example of users not having access to their keys is the QuadrigaCX scandal. The owner, Mr. Gerald William Cotten, unexpectedly died, and he was the only one who had the keys. Upon his death, 115,000 investors were unable to access their $190 million. These circumstances led people to believe QuadrigaCX was a money-making scheme. Never join an exchange in which someone else controls wallet keys.
No External Exchanges
Another sign of a scheme is to have only internal exchanges. Genuine cryptocurrencies, like Bitcoin and Ethereum, can be converted into local currencies at local exchanges. Cryptocurrencies that can only be exchanged internally are a sign that something foul is afoot. Genuine coins and trading platforms are decentralized.
Zero Information about the Currency and Its Development
Anyone who creates anything wants his or her name all over it. Everyone associated with the creation of the project wants to be mentioned, too. It is the same with cryptocurrencies. A genuine coin or trading platform has an about page, a white paper that explains how the program works, and photos and information about the developers. Fraudsters want no information on their site about who they are or how they look. They also may not have a white paper, and if they do, it is vague and poorly written.
Conduct thorough research on a cryptocurrency before investing. Look for the company’s address, white paper, and what customers have said about investing with them. If this information cannot be found, the coin is likely a scam.
Impersonators Who Threaten or Beg
Tricks that involve threats or sob stories are as old as time itself. The reason they are so old is that they work. Scammers who have the personal information of coin holders, but no access to their wallets, call pretending to be agents with the Internal Revenue Service. They say that the coin owner owes the IRS money and that he or she must pay in Bitcoin, or go to prison. The person on the other end of the line knows Americans are afraid of the IRS and will give in to make the problem go away.
The IRS does not work that way. Instead, they send a letter informing whoever owes taxes that their case was assigned to a private collection company. Next, the company sends a letter explaining how to resolve their tax issue. These letters contain the taxpayer’s authentication number. Legitimate collections agents do not call and threaten people with prison time. Third-party debt collectors must respect the rights of debtors as specified in the Fair Debt Collection Practices Act. The law specifies that they cannot call at odd hours or threaten and harass debtors. Debtors can sue any collection acting outside the law in state or federal court.
Confidence tricksters not only threaten but convince with sob stories. The story could be about a sick relative, a soldier unable to buy plane tickets home, and other kinds of cock and bull fairy tales. The objective is to gain sympathy and get free money.
Signs of a Genuine Cryptocurrency or Exchange
Genuine trading platforms and currencies generally have the following characteristics. They have a white paper and an about or FAQ page that provides detailed information about the company, its members, and how the system works. They also have valid contact information, well-structured websites, and authentication processes for security purposes. Even if a company has these characteristics, be sure to do plenty of research to confirm it is genuine.
Acquiring a wealth of experience in writing articles on trends and prospects for the development of the game industry in the world I've found myself as a Freelance Journalist. I am writing now about blockchain and cryptocurrencies trends, sometimes covering the importance of bitcoin for various other industries.