What is a Crypto Scam?
The world of crypto is growing rapidly.
And so is the HYPE.
Due to the soaring (and plummeting) prices of cryptocurrencies, and lots of people making (and losing) lots of money, crypto has attracted huge interest from mainstream media generating buzz, which gets amplified by social media.
As public interest in crypto has risen, so have crypto scams and fraud.
Scammers are always looking for new ways to steal your money, and the massive growth of the crypto market in recent years has created lots of opportunities for shady activities.
With stories of folks in their 20s and 30s becoming overnight millionaires dabbling in crypto, noobs have been eager to get in on the action.
But their lack of technical understanding of how crypto works and desire to “get rich quick” (greed) can blind them to the dangers of crypto.
Scammers are cashing in on the buzz around crypto and luring gullible people into scams in record numbers.
In 2021, cryptocurrency crime hit an all-time high, According to Chainalysis, a blockchain analytics company, scammers took $14 billion worth of crypto!
That’s a 79% increase from the previous year when scammers “only” stole $7.8 billion. Scamming was the greatest form of cryptocurrency-based crime (followed by theft).
In the U.S., according to the Federal Trade Commission (FTC), reports of crypto-related scams skyrocketed to nearly 7,000 people reporting losses of more than $80 million, with a median loss of $1,900.
Compared to a year earlier, this was a 12x increase in the number of reports and an almost 1,000% increase in money lost! 😲
If you’re interested in crypto, you need to be aware of the risks.
Given the exponential rise in reported crypto scams, it’s extremely important that you know:
- What crypto scams are
- The common types of crypto scams
- How to identify these crypto scams so you can avoid them
- How to protect yourself from becoming a victim
That’s what this guide will help you with.
What is a Crypto Scam?
A scam is a deceptive scheme or trick used to cheat someone out of something,
A scammer will pose as a credible individual or business and attempt to ask you for money, your personal information, or both.
A crypto scam is similar, except that instead of asking for U.S. dollars or other fiat currency, the scammer will request cryptocurrency.
Fraudsters and con artists use a variety of scams to target you into buying and sending cryptocurrency to them. But the “hooks” usually rely on tried-and-tested methods from non-crypto scams:
- “Don’t miss out!”
- “Get in on the ground floor!”
- “There’s zero risk!”
- “100% Returns! Guaranteed!”
Even the promotions are similar: spam text messages and emails, social media posts and DMs, online forums, group chat apps, friends and family connections.
Unfortunately, the outcome is the same with victims having their crypto stolen or ending up with worthless “shitcoins“.
While most crypto scams are just slight modifications of traditional scams, crypto scams are more dangerous since Bitcoin and other cryptocurrencies are not regulated by any government, and once they have been transferred, the transaction is irreversible.
With a bank or credit card scam, you can usually dispute the transaction with a central authority (your bank or credit card company) and recover your money.
But by design, cryptocurrencies are decentralized…there is NO central authority to contact. If you send cryptocurrency to a third party, you can’t reverse it or cancel the payment.
So if you are a victim of a crypto scam, there is no legal protection or dispute process.
Risk too much of your money where you lose it all and…
You are on your own.
In the next lesson, I will share with you the common types of scams and red flags to look out for.