Crypto Dictionary

How to Avoid Investment or Business Opportunity Scams in Crypto

Outsmart the crypto swindlers! Uncover deceptive practices behind too-good-to-be-true business/investment opportunities and learn how to secure your cryptocurrencies.

For every legitimate project in the crypto ecosystem, there are hundreds of scams that present equally enticing opportunities, only to rob the unwary investor of their hard-earned coins. 

This article aims to shed light on these deceitful practices, empowering you to make well-informed decisions and safeguard your crypto assets. Discover why knowing the difference between an investment gold mine and a scammer's trap is the key to success in the crypto world.

TL;DR:

  • Crypto Investment scams typically include a complete stranger or a lesser-known acquaintance pitching to you a great opportunity with guaranteed returns.
  • Scammers evolve in real time and most of the offers play at our emotions, making them very believable. Willingly force yourself to scrutinize every offer you get in crypto.
  • Major red flags pointing at an investment scam include: strangers contacting you first, unrealistically high or guaranteed returns, low-cap assets, and unknown platforms
  • Scammers often use predefined scenarios, such as Airdrop/giveaway schemes, Romantic relationship schemes, and impersonator schemes.

What Are Crypto Investment Scams?

Crypto investment scams involve deceptive practices wherein scammers lure individuals into making investments in cryptocurrencies with the promise of high returns. These scams are particularly dangerous due to the less regulated nature of the cryptocurrency market and the anonymity that digital currencies can provide. 

The fraudsters capitalize on investors' lack of knowledge about cryptocurrencies and their desire for quick returns. They typically promise guaranteed profits, use aggressive sales tactics, and may even create fake platforms or initial coin offerings (ICOs) to appear legitimate.

Tempting Investment or Business Opportunities

Scammers often employ tempting narratives about the potential wealth to be gained through crypto investments. They might present an opportunity to invest in a new cryptocurrency, promising it to be the next Bitcoin or a business opportunity linked to the crypto market. 

For instance, they might offer a chance to buy a stake in a mining operation or blockchain startup. These opportunities are typically riddled with misinformation, unrealistic promises, and manipulated numbers aimed at luring potential victims into the scam.

How to Avoid Falling for the Scheme?

The best defense against crypto investment scams is knowledge and due diligence. Stay informed about the common types of scams, their typical characteristics, and red flags. Understand the workings of the cryptocurrency market and the realistic expectations of returns. 

Scrutinize any potential investment or business opportunity carefully—check the credibility of the platforms, the track record of the team involved, and the details of the proposed project. Consult reputable sources and consider seeking advice from users familiar with the crypto field.

Typical Red Flags of a Crypto Investment Scam

Spotting crypto investment scams is not difficult if you know where to look. The offers are always specifically tailored to appear believable and promising - you will want to believe them because the emotions from the amazing offer will try to trick your brain. This is actually the first red flag. Let's summarize them:

  1. Usually, if you are trying hard to persuade yourself that the offer is legitimate, it most likely isn't.
  2. If the offer promises unrealistically high returns it is most probably a scam. Be very aware of the phrase “Guaranteed returns” - this is a major red flag, which you should step away from immediately.
  3. Does the offer mention an obscure token that you never hear of? Great! Politely thank the scammer and cut the communication completely.
  4. Do you as a non-crypto user receive a crypto investment offer? Something seems off, right? Why would you even want to invest if you do not use, nor understand crypto?
  5. If the offer provides such a great investment opportunity, why is the team cold-contacting complete strangers on the internet? If the return would be such as they declare, they would definitely not be working with retail, but rather with global institutional investors.

Different Types of Investment Scams

There is an uncountable amount of various Investment scam schemes and it would be borderline impossible to cover them all. However, the majority of the most visible ones would fall roughly into one of these categories.

Scammers often use similar scenarios or sale strategies - accustoming yourself to these basic types of Investment/Business opportunity schemes will provide you a great advantage of recognizing them in the future.

Giveaway/Airdrop Scams

A scammer may create a fraudulent social media account, or infiltrate a legitimate crypto group, posing as a recognized figure or a credible crypto project. They'll then announce a "special" airdrop or giveaway event. To participate, they'll usually require that users first send a certain amount of cryptocurrency to a specified wallet address to "confirm their wallet compatibility" or to "cover network fees".

In other versions of this scam, they might ask you to provide private keys to your crypto wallet or personal information "to confirm your identity and eligibility for the airdrop". This is particularly dangerous as it can lead to direct theft from your wallet or potential identity theft.

Romance Scams

In romance scams, the scammer starts by building an emotional connection with the victim, often through online dating sites or social media platforms. Once they have gained the victim's trust, they'll introduce the concept of a "great investment opportunity" in the cryptocurrency space or just simply ask for small favors in the form of crypto payments.

The scammer may claim they have had enormous success with this investment and encourage the victim to get involved. They may even guide the victim through the process of buying and transferring cryptocurrency, usually to the scammer's wallet.

Investment Fund Managers

In these types of scams, the scammer poses as a professional investment fund manager or a financial advisor specializing in cryptocurrency investments. They promise high returns and low risk due to their "expertise" and "insider knowledge".

The scammer might offer victims an opportunity to invest in a crypto fund, or a chance to buy a new, promising cryptocurrency before it's listed on exchanges (a pre-ICO scam, for example). They may also request funds to invest on the victim's behalf. Typically, they will have elaborate, professional-looking websites and testimonials to appear legitimate.

Once the victim sends cryptocurrency to invest, the scammer might provide them with a falsified statement showing that their investment is growing. When the victim tries to withdraw their money or their 'profits', however, the scammer will make excuses, impose unexpected fees, or simply disappear.

FAQs

What is the biggest scam in crypto history?

One of the biggest scams in the history of cryptocurrency is probably the Ponzi scheme run by BitConnect. At its peak, BitConnect had a market capitalization of over $2.6 billion. It promised high-yield returns through a so-called "trading bot and volatility software" that, in reality, did not exist. BitConnect collapsed in 2018 when regulators took action and it was revealed to be a scam, causing huge losses for many investors.

Can scammed crypto be recovered?

Recovering scammed cryptocurrency is very challenging and often not possible. Crypto transactions are irreversible, meaning once the money has been sent, it cannot be retrieved by simply 'undoing' the transaction. If you fall victim to a scam, report it to local law enforcement and to your crypto wallet provider as they may be able to offer some assistance. Additionally, there are some companies that claim to offer services in recovering stolen cryptocurrency, but their success varies and they should be thoroughly vetted before use.

 

How do you know if a crypto investment offer is legitimate?

There are several steps you can take to determine if a crypto investment offer is legitimate:

Research: Search for information about the company or individual making the offer. Look for reviews, comments, or news articles.

Understand the Business Model: Be wary of any business model that doesn't make sense or isn't fully explained.

Transparency: Legitimate projects usually have transparent team members, clear roadmaps, and detailed whitepapers. They are often more than willing to answer any questions you might have.

Check with Regulators: In some regions, companies offering investments must be registered with regulatory bodies. Check to see if they are registered and in good standing.

Unrealistic Promises: Be wary of any investment that promises high returns with little risk, especially if those returns are guaranteed.

What do crypto scammers want?

Crypto scammers are after your money and sometimes your personal information. They often lure victims with the promise of high returns on investments. They might request funds to be transferred to their cryptocurrency wallet, or ask for your wallet's private keys under the guise of a necessary procedure, thereby gaining access to your assets. Some scammers also engage in identity theft by seeking personal information, which they can use for further fraudulent activities.

Disclaimer: The content of this piece reflects the writer's opinion. This article is not intended to provide financial advice and is meant solely for entertainment and educational purposes. Investing in cryptocurrency involves significant risk. Capital is at risk, and returns are not guaranteed. Always conduct your own research.

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