How A Cryptocurrency Scam Works
The cryptocurrency industry is attracting more attention that is getting a lot of excitement now but there is always someone to take advantage of people by scamming. This is how the operations for a cryptocurrency scam works and signs to avoid these scams.
Cryptocurrency is enticing as a new way to replace traditional money into a digital form that can be transferred anonymously that is enticing more investors and scammers willing to easily take advantage of investors. The main appeal of cryptocurrency is that is decentralized so no authority such as a bank or government is overseeing the virtual currency with the idea that investors have complete control over their money.
Cryptocurrency can be used to transfer money worldwide without the need of going through a bank and blockchain is the technology that powers cryptocurrency. Blockchain is a secure online database that is hard to tamper with compared to a central database that is vulnerable to hackers.
The blockchain is widely distributed across computers that comprise that network and with multiple copies of the database circulating, it makes it more difficult for hackers to manipulate or takedown. Investors should be careful about which exchange they choose as they buy cryptocurrency using real money that doesn’t go through a bank but is processed through a third-party exchange.
Scammers have used fake exchange platforms that are built, collect money, and close overnight resulting in investors losing their money in the process. One example is the Bitconnect exchange platform that was once popular and ended up wiping out $2.5 billion in value. Bitconnect shuttered operations after several accusations that they were operating a Ponzi scheme, attributing their closing to bad press and attacks on the platform.
Another one is giveaway scams that seem like online sweepstakes for free cryptocurrency that is done by scammers posing as wealthy figures. In the past, scammers have posed as SpaceX billionaire founder Elon Musk using a similar handle to trick people into thinking there is a legitimate giveaway but asking people to send a certain amount of cryptocurrency to an address.
Scammers will pose as anyone online with a fake account to take advantage of people and you can be a victim of someone else posing as you. Using social media scammers can create a fake account, run the scam, and shut down the account all in the name of taking advantage of people.
With a fake social media account that isn’t linked to them, they can run coordinated disinformation campaigns with the goal of manipulating the price of a cryptocurrency. Scammers will pose as people or organizations with accredited accounts and share posts spreading misinformation about a cryptocurrency with the goal of people buying more.
The scams often involve others who are notified to share the fake post to promote it at specific times to buy and sell the coin known as a pump-and-dump scheme. Scams are hard to identify as they are designed to deceive innocent people.
If you think you’ve fallen across a scam, you can double-check the URL and account name you’re getting information from. Watch out for cryptocurrency scams as some seem legitimate but take advantage of people easily.