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After 13 years of steady, yet perpetual growth within American society, the cryptocurrency market continues to achieve new peaks in both veneration and mockery. With words like “crypto” or “NFT” now being commonly associated with scams, there are still many who clamor against the market’s further expansion. Reports of money lost from crypto scams rose 1000% since 2020 to about $80 million. This fluctuation in regard to the crypto market reflects onto its trends during the past 2 years, with experts in the field advising that its portfolio contribution should be lowered no more than 5%. Crypto scammers continue to cast a looming shadow over the market’s future, fuelling the skepticism and ignorance that always brewed beneath the surface. So how do we fight these crypto scams? And how do you know if you haven’t been scammed already?
Scams On The Blockchain
The blockchain has integrated designs that, when taken advantage of, can lead to irreversible damage to your finances very easily. Because of the nature of its transparency, there are no legal protections bound to your ledger. Every lost fund is a part of an irreversible transaction that can’t be disputed, leaving you practically defenseless against adept scammers. This is especially prevalent in the crypto market today, as there are many who still lack familiarity with the blockchain. These scams can deter all businesses of all sizes, from startup crypto investors to major corporations, keeping them all from further trusting in the market’s potential. Crypto scams are the main reason why much of the current antagonism exists in the first place.
It’s important to study the unique risks that crypto is saddled with in order to preserve your own future on the blockchain. Luckily, you don’t need to understand the technological details. Instead, you need to be wary about the way you’ve come in contact with your investment. If you follow a guarantee on returns, sometimes endorsed by a celebrity, there is a high possibility that the entire opportunity is faked. Any kind of promise from a self-appointed crypto enthusiast or wealth guru to make you money should be taken with a grain of salt. Critiquing their understanding of the blockchain can give you a good insight into what their intentions might be. Some of the scammers can be very convincing because of their reputation or social status. Companies can use their reputation to rope you into a contract that locks your crypto holdings, trapping you to make off with your money.
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Types Of Crypto Scams
Crypto scams can come in the form of any standard scam, the only difference is that your wallet is online, and can be accessed with a private key or a password. The main objective of these scammers is to gain access to your credentials and transfer your money into their wallets. The misunderstanding of the new technology is their biggest squeeze on the market right now, robbing people blind with fake giveaways, personas, and opportunities, even hacking into their software and hardware directly to threaten extortion.
A popular crypto scam amongst influencers is the “pump and dump” scam, where they inflate the return on investment of an Initial Coin Offering to attract more investors, and then sell the shares at the peak of the price rise. Some even attribute this tactic with NFTs, who often also cite that the value of ownership expended on them is simply not worth the investment in the first place. Influencers can use their status to hype up a particular ICO or NFT to set your expectation of returns in stone, sometimes by creating fake websites, or launching digital collectibles and games, only to siphon your money directly into their own digital wallets and leave you in the dust of their great escape. Wherever one might find out about an investment opportunity in crypto, there is always the risk that they are a bad actor. Businesses have reported a whopping $10 billion in losses due to “rug pulls” by reputable Decentralized Finance companies that promised to integrate the very benefits that the crypto market has to offer into their business model.
Crypto scammers don’t always have to rely on fame or reputation to make money from the crypto market, they can also take advantage of the technology. This can include any outlet you have on the internet like your email, social media, and even dating apps. A common phishing scam done to your emails might be even more dangerous when dealing with cryptocurrency. Your private key is your singular access token to your wallet, so when you get baited into giving it up, you are relinquishing all control to your crypto funds. This tactic leverages an integral part of the blockchain’s design and can lead to even deadlier scams like identity theft and fraud.
- Squid Game Token
- Bored Ape NFT Theft
- FaZe Clan/Save The Kids
Perhaps the most infamous crypto scam of recent years is the Squid Game Token scam. SQUID was marketed to be in association with the hit show Squid Game turned out to be just a rug pull once the price peaked at $2,860 a week and a half after it launched on October 20, 2021, for just over a penny. They immediately closed down their website when they sold their shares and made out with $3 million on a $1000 investment.
'Squid Game' Crypto-Scam Exposed, COIN Crashes 100% After Explosive Gains https://t.co/RfXT8B9JIW
— zerohedge (@zerohedge) November 1, 2021
A Bored Ape NFT is one of the most recognizable NFTs on the market, belonging to a collection of exclusive JPEG images called the Bored Ape Yacht Club. These NFTs are worth between $2-300,000. When the self-designated motivational speaker and business builder Calvin Becerra had his three NFTs stolen through his discord account, he estimated his losses to be over $1 million.
Major news! All three of these @BoredApeYC were hacked tonight over discord. Guys posing as buyers in discord were helping me trouble shoot a problem we thought was happening. They walked me through language settings in my MetaMask and had me chose an option and took everything. pic.twitter.com/mB3QA4PbTB
— Calvin Becerra (@calvinbecerra) October 30, 2021
FaZe Clan was just part of a big scandal involving a “pump and dump” scam with an ICO called $KIDS coin. It was introduced by a variety of FaZe Clan members, primarily FaZe Kay and Jarvis, to be a charity coin and that the wealth would be redistributed to charities through the Binance Charity Wallet. FaZe Kay sold 6.2 million tokens just a few days after the launch, tanking the price from $0.0029 to $0.0012.
Nobody's more upset about all of this than we are. We took action the moment this was brought to our attention. Shit's embarrassing & I honestly wish these guys came to me about this in the beginning so I could've shut the entire thing down before it was too late. We had no idea.
— FaZe Banks (@Banks) July 7, 2021
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How To Protect Your Company
Although you can’t always completely deter scammers from your business, there are ways to make it much more difficult to access your digital wallet. Given that the currency resides entirely on the internet, there are several unique best practices to consider when safeguarding your investments and wallet online.
First is identifying your “hot wallets,” or fully digital wallets and “cold wallets,” which are hardware devices like USB drives. As mentioned earlier, once you lose your private key, you lose access to your wallet forever. For your hot wallets, you should keep your private key offline, and setting up two-factor authentication is a great additional layer of security that will stop the scammer if they indeed steal your password. Also, you should move a portion of your crypto funds into a cold wallet, that can have a private insurance policy to protect against theft.
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