Crypto Academy / Season 3 / Week 6 - Homework Post for @yohan2on | Crypto Scams and how to avoid them

It's another precious time to visit the academy again to learn more about cryptocurrency from our seasoned professors. And this time, I am glad that I have attended the lecture presented by professor @yohan2on which is with no doubt a great one where the professor took us on a ride about Crypto Scams. I will be using this article to solve the task given by the professor.

The crypto ecosystem comes with numerous investment opportunities that enable individuals in the space to make a fortune for themselves by engaging with genuine projects that have great potentials, and the engagement done in the right way. Nevertheless, the crypto ecosystem has the existence of dubious individuals that creates their platform to rake away users' assets in the crypto ecosystem and this is where crypto scams come in.

Crypto scams are carried out by individuals that sets up a platform/project with no specific use case but fraudulently take away funds from the users in the crypto ecosystem and such occurrence can lead to a user loss of total capital if care is not taken. Crypto scams happen in several ways, but a few of them would be discussed below.

Crypto scams are often seen in the form of investment, as such, users are enticed with high return on investment, for example, 100% ROI in 24 hours. This sounds too good to be true, yet it exists and if care is not taken, it leads to users' loss of total capital. I was once a victim of this type of scam when I first joined the crypto ecosystem, I got paid the time and I felt, oh it's real, I compounded my investment and at the end, all I see is virtual money with several withdrawals failure.

Crypto scams also occur in the crypto ecosystem using a fake website to lure people to carry out crypto activities. In this case, some of the letters in a website can be tweaked such that it appears as the original and can be shared through links to carry out Phishing that exposes users credentials and that could lead to excessive loss.

Scammers also uses social media platforms to carry out their fraudulent act and in this case, it's sometimes to invest or giveaway. I was viewing WhatsApp status a few days ago when I saw the news about a guy who lost 6190 ADA. He narrated he saw the live YouTube video session of ADA giveaway, the price of ADA was doing well then and he believed it' real, he sent his entire funds through the link under the video expecting double of the amount as promised and nothing comes back. So, social media campaigns can be used to lure people into crypto scams.

Crypto scammers set up fake applications on App stores with a name identical to existing crypto exchanges and as such, users that are impatient to verify the creator of the App or do not know how to do such verification end up downloading. Users in the quest to completely set up a new account follow all steps as directed by the App and in that case, it can lead to loss of funds.

Elon Musk has been a great mover in the crypto space for quite some time and users use sentimental analysis to decide to purchase an asset through Musk's social media spits. A crypto scam notably occurred in January 2021 when crypto scammers stole away about $580,000 worth of Bitcoin in just one week.

The act above was carried out on social media platform Twitter, the hackers hacked a verified account, customized the profile picture and name with Musk's. The hackers replied to an existing tweet by Elon Musk with an attached Bitcoin wallet that promises to return double of whatever is sent from each wallet. The influence of Elon Musk was used while many people believed it's a charity program by him but ended up being scammed in the process, the total carted away by the scammers was around $580, 000 worth in Bitcoin. This is a typical example of a Social media crypto scam and there are many more like that.

An ICO crypto scam happened in the year 2017, this involved the Centra Tech co-founder Sohrab Sharma and partners with the names; Robert Farkas and Raymond Trapani. Aforementioned names that operated under the company known as Centra Tech organized an ICO (Initial Coin Offering) to rake away funds worth 25 million USD.

As indicated earlier, this is an ICO (Initial Coin Offering) crypto scam that involved Centra Tech. Centra Tech offered an initial coin offering through the proposed sale of Centra Token in the year 2017. The group deceitfully gathered up to 25 million USD from investors through the ICO and it all resulted in the scam. The co-founders of Centra Tech were later caught by the law and were sentenced to prison. This is one of the biggest crypto scams of all time, and a lot was lost by the investors that trusted the project.

Crypto scams has extremely affected the crypto ecosystem as such forced some investors out of the system and instilled fear in the hearts of new persons that want to come into the space thinking of how disastrous it would be for them if they lose their funds. Let's take a look at a few points of how crypto scams has affected space.

Crypto scams have forced many investors out of the crypto ecosystem in a case whereby an investor lost his/her life savings to the schemes, and this happens if proper risk management is not put in place. A case study is an example of an ADA giveaway cited earlier, the writer said he was forced back to square one.

The irreversibility of an asset ignorantly sent to a fake project is of great fear since most of the project operates on a decentralized system whereby there is no valid identity of the users involved is required as such anonymity movement of funds is done thereby leaving investors hanging with no possible retrieval of the assets.

After so many crypto scams have been seen, some nations of the world are now conformed to regulations about cryptocurrency and in some cases total ban of crypto activities in the country in the quest to protect her citizens, and this has hindered many citizens to benefit from the crypto space. An example of this is seen in Nigeria, where the Central Bank of Nigeria threatened forceful close down of accounts that are seen interacting with cryptos and this hindered traders from depositing to an exchange of choice directly from their bank accounts rather they use Peer-Peer platform for fiat deposit/withdrawal.

Investors that wants to come into the crypto space are now scared to do so after seeing series of crypto scams and as such, have the fear of uncertainty, and this has hindered them from benefiting from the good side of cryptocurrency.

Considering the regulation of cryptocurrency, it will bring some good improvements and even the other side. The other side of crypto regulation is taking away the independence of transaction away from the traders in the crypto ecosystem which is quite not comfortable. I notably see two value I believed it's going to be added to the crypto space if regulated. Let's discuss it below.

Regulation of crypto means the transactions that takes place in the space in now regulated by a body which could be the government that oversees the transaction and is aware of what is involved in the transaction. This would eliminate the occurrence of using cryptocurrency for illegal money movement/money laundering.

If regulations come to a place in the crypto ecosystem, it protects traders that are involved in trades such that it becomes hard for one of them to fraudulently take funds from the other and run away. This can only be possible through identity verification such as KYC (Know Your Customer) of crypto traders and as such users in the space would hardly carry out scamming activities knowing their identity is visible to the regulatory body.

These two points mentioned above are quite of great value addition to the crypto space but what about independence giving to us through decentralization, regulation takes some away. To conclude on this, crypto regulations would come with some value additions and have their other side.

As much as there are numerous ways to make a fortune through cryptocurrency, there exist scammers that stand to frivolously take funds away from people in the crypto ecosystem through several crypto scams. Users must take proper caution while operating in the space and carry out proper research/verification before making any investment. Thanks to professor @yohan2on for this great lecture.