Cryptocurrency: The Most Popular Scams - And How To Avoid Them

As cryptocurrencies gain popularity and blockchain technology emerges, Bitcoin and other online transactions are becoming easier (and faster). But with the promises of improvements that are increasing, some opportunists are increasingly seeking to take advantage of cryptomania and investors with no experience in the field. What does not help is that blockchain technology could look like a scam: difficult to understand, new and unregulated, and has already yielded massive gains. Scammers, hackers and identity thieves are realizing this, and they have already crafted intricate ploys to deceive even experienced shoppers.

Whether it's trade and illegitimate currency or classic fraudulent scams for the modern era, it's important to stay alert, here are the most common Bitcoin scams threatening your dream of becoming a 'cryptonnaire'.

The most common Bitcoin scams
#1. Pump (Fast Rise) and Dump (Fast Drop)
Immortalized by Jordan Belfort in The Wolf of Wall Street, this kind of scam existed long before the Internet. Pumps and dumps are as their name suggests: investors promote a stock they own so they can sell it as soon as the price goes up because of the growing demand. This is generally seen among altcoins (alternative coins) with low buy-ins - a dime per coin - and a high return. In reality, buying these cryptos can be incredibly risky.

Unregulated markets, volatile fluctuations and rapid changes are all part of the pump and dump. The popular Bittrex exchange platform, has already issued guidelines to avoid this scam, which can take the form of "false news" or "pump flash". Using forums (such as Reddit), social media, blogs, and massive advertising pushes, etc. Sometimes fake screen shots of successful investment portfolios or traditional partnerships can be found on these forums. Once the price is inflated, the first investors sell their assets. In this situation, the members of a closed group are part of the scam because taken in a snowball effect because of the FOMO. Once the name of the currency is announced, it is a race to purchase and then are resold to recent arrivals.

#2. "Groups" of investment
These "fake groups" were born with cryptoboom, and they are there to take your money. These sites seem legitimate and even have comments from customers touting the benefits of giving them your dollars because they are "experts" who know the cryptomarket. Most of these groups are filled with bots, paid actors and fake accounts ready to vouch for scammers at the top of the pyramid. A Perth man lost $ 5,000 when he joined the Bitcoin Investor Club, which even had a phone number. He stopped after the group leader asked him to take out a loan so he could buy more foreign currency. A reddit she explains how her daughter made the mistake of joining "Crypto Investors Club", a Facebook group composed of a thousand members and managed by a woman who calls herself "Crypto Queen". "Do not ever feel safe in crypto, being paranoid is the best way to keep your money," writes the mother. This is not bad advice.

#3. False exchanges
In mid-December, several fraudulent cryptocurrency exchanges were exposed by online Bitcoin communities. BitKRX, a fake South Korean market was one of them. By naming themselves after KRX (Korean Exchange), the charlatans encouraged buyers to trust BitKRX with branding and language that mimicked the official exchange of fiat. Although the South Korean government is cracking down on impostor sites, you can never be too cautious. Stick to popular exchanges and read comments on comparison sites.

#4. False wallets
One of the classic Bitcoin scams. Storing your crypto-currencies requires a digital wallet. Of course, cyber criminals have their own magic wallets that make your carefully deposited funds disappear! The recent swindle of the Bitcoin Gold wallet allegedly stole $ 3 million from users. In early December, the popular MyEtherWallet warned users against a fake MyEtherWallet digital wallet application created by scammers and which had reached the 3rd rank of the "Finance" section of the App Store.

#5. Ponzis, Pyramids and Multilevel Marketing (MLM)
The proof that crypto-currencies have become "mainstream" is the appearance of scams that until then were reserved for FIAT. In the end, any cryptocurrency site that requires you to "take a step" in addition to entering your financial information, buying the coins, and storing them in a private wallet should trigger a red flag . An example is OneCoin, which "allowed" members to buy and sell educational trading materials in exchange for "tokens" that would be "mined" from a currency. Except that there is nowhere to trade the Onecoins, the victims have essentially exchanged dollars for land. Gladicoin, a scam updated last May, promised to "double your Bitcoins in 90 days" and worked as a pyramid scheme. MiningMax, a South Korean website with a Nevada phone number, works like an MLM by asking members to get commission by referring new members.

#6. Phishing
Never share private keys because they keep your bitcoins and other currencies encrypted, even if you receive an email or a call from a known source asking you to do so. Unfortunately, this one is extremely common and can only be avoided by giving potential victims advice: When it comes to personal information, shut up.

#7. Fraud at the ICO
When a cryptocurrency is launched it is open to investors, it is called an ICO. But, nothing can prevent crooks from creating fake ICOs or spoofing existing certificates. Last year, the SEC closed PlexCoin ICO after the founders announced it would create a profit of 1,354% in less than a month, which would result in fraud of $ 15 million. Meanwhile, the ICO spoofing has defrauded $ 225 million of investors in 2017, according to security company Chainanalysis. The false ICOs are incredibly difficult to spot; many senior officials working for them have also been led to believe in their legitimacy. Here, it is important to do some extensive research before investing in a new coin.

Coin scams have become so prevalent that FINRA (the Financial Industry Regulatory Authority) has issued warnings in December against this type of scam. "We all have to become Mr. Spock when it comes to investing. We must be cold, rational and logical, "said Gerri Walsh, Vice President of FINRA. FINRA disapproves of those who guarantee specific returns. He also advises potential investors to use tools such as FINRA Broker Check, the SEC's suspended list of transactions and the SEC's search function to find a company's documents.

Yet the functionality of these sites depends on how quickly consumers report problems or how quickly the government can spot fraudsters. 99Bitcoins has created a simple questionnaire for buyers concerned about where they put their money called the Bitcoin Scam test. If you can not reach the end without serious introspection, chances are you will have to withdraw from this ICO.

Before throwing yourself also the gold rush of a cryptocurrency, first take a bite to test; this coin may be just chocolate.