Digital assets aren’t just attracting investors. Scammers are interested in cryptocurrency. The thirst for profit pushes criminals to create various schemes. Any method is based on the greed of users, ignorance of basic security requirements, and lack of elementary caution.
The most famous cases of cryptocurrency fraud
BitConnect cryptocurrency exchange was founded in 2016. For some time, it was considered one of the most popular cryptocurrency platforms. Under the attacker’s scheme, users were offered 1% income per day. This is an unrealistic amount, which was 3700% per annum. Such profits simply cannot exist. But millions of people believed, shortly after the start of the project, the capitalization of the BCC cryptocurrency was about $3 billion. In 2017, the price of the coin increased from 10 cents to $463.
The money of investors who invested in the BCC token was spent on payments to users who had invested their funds earlier. Thus, this is a typical Ponzi scheme, that is, a pyramid scheme. In January 2018, US government regulators closed the project, found the founders.
The financial pyramid, founded in 2014 by Ruzha Ignatova, “crypto-royal”, as she called herself. The project was positioned as an analog and replacement of bitcoin. In 2015, the first suspicions of fraud appeared. But the project worked even before 2019. In 2017, the FBI arrested Rouge’s brother, Konstantin, while Ignatova herself disappeared and her whereabouts are unknown.
To sell its tokens, the project used the principle of network marketing. OneCoin did not have its own blockchain, only the management company was engaged in mining. That is, the main features of the cryptocurrency were missing. It was a real fraud.
The project trained novice users sold them training courses. A wallet with a certain amount of tokens was opened. The project did not sell coins. Users exchanged coins themselves on the internal OneCoin exchange. Coins were not available on any of the well-known cryptocurrency platforms.
A multi-level referral system worked, bonuses were paid for new members. In total, about 3 million members of the system from 170 countries of the world are known. The scale is amazing.
According to various sources, the organizers of the scheme were able to steal from 4 to 15 billion euros.
One of the most famous and largest cryptocurrency pyramids in history. The classic Ponzi scheme was used. The project had its own tokens, which were listed on large cryptocurrency platforms. The total damage from the work of the pyramid is estimated at $ 3 billion.
A cryptocurrency project from Vietnam. The scam is based on an Initial Coin Offering (ICO). The project raised $ 660 million and closed. However, after that, another token was issued – iFan. After the end of the ICO, both projects were closed, the company disappeared along with the investors’ money.
There are many such projects, they are mixed with real ICOs, they issue tokens, conduct an advertising campaign, collect investments, and close. Examples – LoopX (trading algorithm, collected $4.5 million), PRIZM (cryptocurrency project, operated in Russia, India, collected $2.6 million), and other projects.
ICOs flourish in 2017. At this time, 382 projects totaling $12 billion came out with an initial proposal. Half of the projects turned out to be a scam. Fraudsters received more than 10% of the total investment.
Main cryptocurrency fraud schemes
There are several main types of fraud that cybercriminals exploit. They can be conditionally divided into 2 options:
- Fraudsters create an environment where users give up their savings themselves.
- Attackers use technical means, application security problems, and steal funds, passwords, and other confidential information.
- Among the most popular types of fraud, it should be noted:
- Cryptocurrency pyramids – the traditional Ponzi scheme, works in the digital world.
- Initial placement of tokens (ICO) – scammers often hide in this niche. They create a project for which they attract investors’ money, sell tokens. After fundraising, the project is closed, the money disappears. Sometimes scammers can impersonate honest people, hiding behind hacking sites, stealing funds. This type of fraud has 2 options – completely fake tokens and a fake for real cryptocurrency. In any case, the criminals fraudulently obtain user money.
- Fake exchange services, cryptocurrency exchanges – such platforms pretend to be real platforms, have a well-developed interface, and other attributes of a real project. Users are lured by advertising, they offer high profits, quick income. The goal of the scammers is to get the client’s money. After that, the platform is closed or the user is blocked.
- Cloud mining – cybercriminals lure clients by posing as a pool of miners for general mining of coins. Accept payment for the rental of equipment that does not exist. They can even make payments for several months to get into trust. A fake account is available to the client, on which he sees his earnings. After a while, the scammers close the project, leaving people without money.
- Phishing projects, virus applications – the purpose of such fraud is to obtain personal information (passwords to accounts on exchanges, wallets). Sometimes viruses can block the operation of the operating system, ransomware demands a ransom for opening access.
- Direct exchange scam – the attacker simply does not transfer money to the user.
- Fake brokers, investors, coaches – criminals can create fake websites, use advertisements, create fake reviews, letters of recommendation for themselves in order to attract investments.
- Fake cryptocurrency distributions – cybercriminals use fake accounts of famous people on social networks, promising on their behalf to double the number of funds if the user has time to transfer cryptocurrency to their address. Often scammers impersonate Elon Musk, Mark Zuckerberg, and other famous people.
In order not to fall for the tricks of scammers, you need to soberly evaluate all offers. Study reviews on the Internet about a project or broker, investor. It is important to understand that easy money does not exist. The digital world requires study, knowledge about the principles of cryptocurrencies, DeFi projects, and investment.
- The characteristic features of fake exchanges, stock exchanges, broker services are extremely attractive conditions, low-interest rates, or high incomes, much higher than those of real sites.
- The promise of profit without any action, you just need to give money and wait for earnings (this does not happen).
- The description on sites, in advertising mailings, does not contain specifics, only rave reviews from fake customers, promises of instant profit.
There are certain security rules that will help you avoid getting scammed. Protection Tips:
- Observe security measures when using the Internet.
- Create complex passwords, store them in a safe place.
- Do not give anyone confidential information (private keys, mnemonic phrases, passwords to accounts, wallets).
- Use cold wallets to store cryptocurrency.
Common sense will help you avoid falling for cybercriminals’ tricks.