Cryptocurrencies are digital assets that are secured by cryptography, rather than issued by a government or central bank. Provided by the blockchain system, these currencies can be used as a medium of exchange. Bitcoin and other cryptocurrencies (Ethereum, Ripple’s XRP, Binance, Tether) attracted a lot of attention in 2017, with Bitcoin’s value rising to almost $20,000. In 2018, however, there was a massive depreciation.

How does Cryptocurrency Scam Work?

Cryptocurrency exchanges allow cryptocurrencies to be traded for other assets. However, due to the high volatility and huge public interest, cryptocurrency fraud has become widespread. Government authorities are taking various steps to discuss and prevent crypto fraud. With crypto scams on the rise, it is crucial that whistleblowers assist the SEC, CFTC, and IRS in their enforcement efforts.

Cryptocurrency fraud is a type of fraud in the digital currency sector intended to deceive investors with false or incomplete promises or intended to trick them into providing access to their digital wallets. Rug pulling is a scam in cryptocurrency in which the creators suddenly withdraw all liquidity, leaving investors with worthless assets. In this scam, scammers first deceive victims by promising them high profits. Then they simply disappeared along with  people’s investments.

What is Cryptocurrency Scam?

Ponzi Schemes: A type of scam that raises money from new participants with the promise of high returns to investors. In this system, new investors’ money is used to pay off previous investors.

Market Manipulation: A scam to artificially raise or lower cryptocurrency prices. Also known as ‘pump and dump’, scammers profit by quickly raising the price of a cryptocurrency (pump) followed by a sudden sell-off (dump).

Phishing: Fake websites or emails are used to steal the private keys to users’ cryptocurrency wallets. Fraudsters trick users by creating platforms that appear legitimate.

Investment Scams: A method of deceiving investors by collecting investments for projects that are not real. Scammers lure investors with promises of big returns.

Rug Pull: When the developers of a project suddenly abandon the project and steal investors’ money. Usually seen in decentralized finance (DeFi) projects. Once the developers have attracted investors to the project and raised enough funds, they withdraw all the money and abandon the project.

Mining Scams: A method of raising money by offering fake cloud mining services. Scammers convince users that they offer cryptocurrency mining services. However, there is no actual mining activity and users do not get their deposits back.

Social Media Scams: This is a scam that uses the name of celebrities to organize fake sweepstakes and promotions. Scammers make promotional announcements from fake or hacked celebrity accounts.

Malware: Malware is installed on computers to steal users’ crypto wallet information. This software monitors users’ keyboard movements or takes screenshots.

Ponzi Based Crypto Exchanges: These are fake cryptocurrency exchanges that pay old investors with new investors’ money. These exchanges try to attract investors by promising high returns.

Fake ICOs: A method of raising money by organizing initial coin offerings (ICOs) for cryptocurrency projects that are not real. Scammers attract investors by making big promises about fake projects. After the ICO is completed, the scammers disappear with the money they raised and the project fails to materialize.