Key Takeaways:
- Scams are deceptive schemes posing as legitimate opportunities aiming to trick individuals into giving away money, personal information, and/or assets.
- Scammers may impersonate platforms or create fake websites to entice users to invest with unrealistic returns promised.
- Phishing websites mimic legitimate crypto platforms to steal login credentials.
- Fake ICOs promise high returns on cryptocurrencies with no intention or plan to deliver any value.
- Conduct thorough research on projects, teams, and technologies before committing financially.
- Verify authenticity by using reputable exchanges, wallets, and websites with secure URLs.
What Is a Scam?
A scam is a fraudulent or deceptive scheme designed to trick individuals into giving away their money, personal information, and/or other valuable assets. Scammers use various tactics and strategies to manipulate their victims into believing they are dealing with a legitimate opportunity, service, or product, when in reality, their intentions are dishonest.
Scams take many forms, such as fake investment opportunities, phishing emails, pyramid schemes, identity theft, lottery scams, romance scams, and more. They often exploit psychological triggers like urgency, fear, greed, or a desire for gain in order to manipulate victims into taking actions that benefit the scammer.
To protect oneself from scams, it’s important to be cautious and sceptical when encountering unsolicited offers, requests for personal information, or deals that seem too good to be true. In this article, learn the basics of how to recognise so-called ‘get-rich-quick’ and ‘pump-and-dump’ schemes, and how to avoid this type of crypto investment scam.
For more information, read our article 7 Common Crypto Scams and How to Avoid Them.
What Are Get-Rich-Quick Scams?
‘Get-rich-quick’ and ‘pump-and-dump‘ scams have been around for a long time and aren’t exclusive to the crypto space. Yet, with cryptocurrency, scammers take advantage of the anonymity of wallets and the irreversibility of transactions.
These scams take several forms. One of the most common involves the scammer reaching out to users in crypto communities via social media or instant messaging, alleging to represent a certain platform (e.g., a crypto exchange, crypto mining enterprise, or new coin project).
Sometimes scammers also use realistic-looking websites in their endeavour to trap as many unsuspecting users as possible, and often manipulate search engine optimisation (SEO) results and/or advertising for their platforms.
Usually, scammers request that users buy in, with unrealistic and allegedly ‘guaranteed’ returns. Some users — out of FOMO (‘fear of missing out’) — may invest. Scams of this type happen at any scale, from scammers taking small amounts from a wide pool of unsuspecting victims to large-scale investment scams.
Examples of Crypto Scams
Below are examples of different variations of get-rich-quick scams in the crypto space:
- Rug Pulls: Scammers create cryptocurrencies and projects promising high returns to supporters without any intention to deliver value. Once they collect enough money, they disappear, leaving traders with worthless tokens.
- Phishing Websites: Scammers may create websites that closely resemble legitimate cryptocurrency exchanges or wallet websites. They trick users into entering their login credentials or private keys, allowing the scammers to steal their funds.
- Ponzi Schemes: Similar to traditional Ponzi schemes, scammers may promise consistent high returns to members by using funds from new members to pay off earlier ones. Eventually, the scheme collapses, and most victims lose their money.
- Fake Exchanges: Scammers may set up fake cryptocurrency exchanges, offering enticing trading options. But once users deposit their funds, they find it difficult or impossible to withdraw the funds.
- Crypto Trading Bots: Scammers might offer automated trading bots that claim to generate profits for users. However, these bots often don’t deliver the promised results and can lead to a total loss of the allocated funds.
- Celebrity Endorsement Scams: Scammers may impersonate celebrities or influential figures on social media, claiming they’ve made significant profits from a certain crypto asset. They urge followers to buy, but the whole scheme is a ploy to steal funds.
- Cloud Mining Scams: Scammers may offer cloud mining contracts that promise to mine cryptocurrencies on behalf of traders. However, these contracts might turn out to be non-existent or unprofitable.
- Fake Airdrops: Scammers may promote fake airdrops (free distribution of cryptocurrency tokens) that require participants to provide personal information or pay an upfront fee. They use this information to steal identities or funds.
- Multi-Level Marketing (MLM) Schemes: Scammers can create MLM schemes where traders need to recruit other crypto traders to join. These schemes often promise unrealistic rewards and rely on continuous recruitment to sustain returns.
How to Avoid Falling for a Get-Rich-Quick Scam
In the rapidly evolving landscape of cryptocurrency, safeguarding oneself against scams is paramount. The allure of quick riches must be met with a healthy dose of scepticism and commitment to due diligence. By adopting a cautious approach and following a few key principles, individuals can significantly reduce the risk of falling prey to crypto scams.
In conclusion, to help guard against crypto scams:
- DYOR: Scrutinise any opportunity with a critical eye. Investigate the project’s white paper, team members, technology, and community.
- Verify Authenticity: Only engage with reputable exchanges, wallets, and projects. Make sure the website is legitimate and the URL is not manipulated in a way to look like the legitimate one. For this, amongst other elements, pay attention to the last part of the URL.
- Stay Sceptical: Be wary of promises of guaranteed profits or pressure to hastily invest. High returns often come with high risks.
- Avoid Unrealistic Promises: If an opportunity sounds too good to be true, it probably is. Maintain realistic expectations about potential returns.
- Use Secure Platforms: Ensure the platforms have robust security measures in place. Multi-factor authentication and encryption are essential.
- Trust Intuition: If something feels off or doesn’t add up, don’t proceed. Intuition can often act as a good alert to potential scams.
- Report Suspicious Activity: Report any potential scams to relevant authorities or platforms to help protect others from falling victim.
Read our 101 on security and best practices with Crypto.com.
Conclusion
By bearing in mind these tips and maintaining a cautious approach, individuals can empower themselves to navigate the crypto landscape more safely. Remember that responsible crypto trading requires patience, research, and a commitment to staying informed. In doing so, the risks of falling for a scam decrease.
Due Diligence and Do Your Own Research
All examples listed in this article are for informational purposes only. You should not construe any such information or other material as legal, tax, investment, financial, cybersecurity, or other advice. Nothing contained herein shall constitute a solicitation, recommendation, endorsement, or offer by Crypto.com to invest, buy, or sell any coins, tokens, or other crypto assets. Returns on the buying and selling of crypto assets may be subject to tax, including capital gains tax, in your jurisdiction. Any descriptions of Crypto.com products or features are merely for illustrative purposes and do not constitute an endorsement, invitation, or solicitation.
Past performance is not a guarantee or predictor of future performance. The value of crypto assets can increase or decrease, and you could lose all or a substantial amount of your purchase price. When assessing a crypto asset, it’s essential for you to do your research and due diligence to make the best possible judgement, as any purchases shall be your sole responsibility.
