Scams and fraud are evolving realities that we all face when operating in the virtual space. Whether you’re placing bets on the best online casino or making a simple online purchase, you’re always at risk of being tricked into having your personal and financial information exposed to parties that only want to take advantage of your details without your knowledge.
When it comes to crypto investments, the risk is no different. And because many traders are constantly looking for opportunities to grow their investment portfolio, they open themselves up to frauds and scams that could cost them a lot of money.
However, if you know of the common signs and red flags to look out for, you’ll be able to identify such instances quickly and take necessary action to protect yourself accordingly.
Wanting Crypto-Only Payments
If a retail establishment or ‘credible’ person insists on being unable to accept any form of payment other than Bitcoin or Ethereum, then the transaction is likely to be a scam.
According to experts, Bitcoin and other leading altcoins are regarded as a burgeoning asset class. This means that legit institutions and people won’t insist on accepting crypto alone without making room for other fiat currency options through the usual means of making online payments like card payments, wire transfers, checks, and cash.
Fake Or Anonymous Identities
The fact that KYC protocols don’t exist on blockchain makes the entire process in itself quite questionable. But this cannot be avoided forever because, in due time, law enforcement agencies existing on every municipal level will begin to implement new tools that they can use to investigate scams that are on smaller-scale blockchains.
In the meantime, there’s still a possibility that digital blockchain assets, NFTs, and crypto tokens could be used by criminals to engage in money laundering activities on small and large scales.
Also, it’s best to begin the trading journey by sticking to popular cryptocurrencies like Bitcoin and Ethereum since these cryptos have a longer track record that shows an increasing value in them when compared to other altcoins that have recently entered the market.
Games And Digital Collectibles
Nowadays, sophisticated coders can create imaginary worlds and new games on the blockchain. So, when a scammer wants to take advantage of this, they will entice excited blockchain beginners into buying a type of newly minted token or coin to get the game.
When there’s enough demand, the price will go up for the game and this will give the scammer a chance to sell all of their holdings and disappear. This move is called a “rug pull.”
Unlike what you’d find with a bank account where you have FDIC insurance or fraud protection when you’re victim to the “rug pull”, your money will get stolen and the only way to get it back is if the recipient reverses the payment themselves. And as most experienced traders would know, because all of this happens on a decentralized exchange, this kind of gesture is highly unlikely to happen.
Crypto Investment Schemes
Now and then, new cryptocurrencies are being minted and launched on the blockchain as an initial coin offering (ICO). Though this may be an exciting time for founders and investors to try something new in the hopes of finding another lucrative opportunity, it also means scammers have a new way to create opportunities for themselves.
When a founder in the form of a company or individual presents an offer that sounds too good to be true, they may add a lot of pressure to the deal so you can deposit several new coins into a digital wallet that’s already been messed with somehow. Or you could be pressured into buying up the coin and then having to sell it when the price begins to explode.
Romance Scams And Phishing Scams
Romance scams are when scammers put pressure on buyers to buy certain new crypto simply because the relationship was established on a dating app.
And then phishing scams are when scammers attempt to bait recipients through enticing emails so the recipient can click a certain link and share personal details.