The rise of cryptocurrency has unfortunately been accompanied by a surge in scams and fraud, taking many forms to exploit the hype and technical complexity behind cryptocurrency. Together with cryptocurrencies’ decentralised nature, an increasing number of victims have fallen prey to scams.
Common types of crypto scams:
Ponzi schemes
These scams promise victims guaranteed or risk-free returns, and are often disguised as legitimate funds or projects. Yet, the crux of the scheme is that these funds rely on new money to pay earlier investors until the scheme collapses. Within the cryptocurrency markets, there have been many cases of this, with a prominent example of it being the Singapore A&A Blockchain case, where A&A Blockchain Technology Innovation falsely claimed ownership of 300000 cryptocurrency mining machines and guaranteed daily returns of 0.5%, targeting unsuspecting investors with seemingly legitimate digital offerings.
Romance or Pig Butchering Scams
In this scam, scammers would build trust over weeks or months through dating apps or social media, eventually persuading victims to deposit their funds on fake trading platforms. While victims will initially see illusory profits, they will be locked out of their accounts eventually, causing them to lose massive amounts of money.
Trust trading scam
Within many scams, websites attempt to convince victims to transfer cryptocurrency to a blockchain address with the promise of returning more cryptocurrency. Yet, in the end, these victims would not get back their money.
Stealing account details
Many websites also convince victims to produce existing credentials required to access their cryptocurrency with the promise of funds or access to a service. Phishing websites follow the same format, where victims believe they are on a legitimate website but are instead revealing their credentials to a malicious entity. This becomes even more lethal in the age of AI, where deepfake videos of public figures endorsing crypto projects are repeatedly being deployed to gain trust in victims.
Rug pulls
Rug pulls is where developers create new cryptocurrencies, heavily promoting them to garner buy-ins. Afterwards, the developers would withdraw the liquidity, leaving investors with worthless assets. These are especially prevalent in unregulated decentralised finance spaces, where issuers and developers are anonymous, as well as that smart contracts remain unaudited.
How to avoid these type of scams
- For one, scrutinise promises of guaranteed high returns, as legitimate investments would never be able to guarantee high profits. In most cases, these guarantees are ways to play with the victims’ emotions for them to commit to the buy-in.
- Before making any transactions, do also verify the license of the issuer. In Singapore,
- In no case should individuals share their private keys and seed phrases, as those would provide people with immediate access to their crypto accounts. It is also recommended to use multi-factor authentication to further ensure the security of the account.
- Whether it’s on social media, dating apps, or calls, investment advice or pitches should always be taken with a pinch of salt. Especially if the advice comes unsolicited, it will be crucial to check the reliability of the source and advice.
- In a digital age where deepfakes are prominent, it is important to cross-check endorsements or messages with official channels that are reliable.
- Before investing in new tokens, it is also important to check for critical information, such as whether audits have been done responsibly and whether the coin has a good reputation (if it existed previously)
Conclusion
Navigating scams in today’s technologically-advanced world is difficult, and the consequences of the scams are major. Knowing the various types of scams, as well as ways to avoid them are important in preventing the crime from happening. Yet, crypto scammers are constantly scheming and innovating, and there is no way to have a specific guide of all the scams that could happen for everyone. It is important to have a lawyer provide advice on the steps you should take to protect yourself from scams based on your unique actions and needs. If you require professional guidance in this regard, do contact the Advomi team, where we have a team of qualified lawyers to assist you in your operations.
Disclaimer: This article provides general information and does not constitute legal advice. Please seek professional advice for your specific situation.
