Crypto Academy Season 3: Week 6. Homework Post for @yohan2on | CRYPTO SCAMS by @salma78
Introduction
What are Crypto Scams?
Before I define what crypto scams are, I would like us to take each word and look at their definition. Cryptocurrencies are digital assets that are used in making payments and also be traded to make profits whilst Scam is defined as a deceptive or tricky act of a person in order to earn money in an illegal manner.
Now, Crypto Scams can be defined as illegal, deceptive, and fraudulent activities of an individual who intends to steal the cryptocurrencies of traders or holders of the assets. They do so by deceiving investors to invest more into a particular asset and later runs away with the monies of the investors. Because of the decentralized nature of cryptocurrencies, this makes it very easier for fraudsters to scam traders or investors of crypto assets. Cryptocurrencies are prone to risks of fraud or scams due to the following reason; cryptocurrency payments cannot be retrieved or reversed once a wrong transaction is done. Secondly, cryptocurrency transactions are not legally protected and lastly, some information about your transaction may be publicized.
Let's look at a case study of a situation where people were involved in Crypto Scams
The first case is a situation where a man named James Evans met another man on called David Grindr dating app where he deceived James Evans with his chatty and friendly conversation. James Evans reported having said that they started with a normal conversation and later they moved to WhatsApp messenger where a few days later David commenced telling James about cryptocurrency trading and how to earn more from it. To Jame's suggestion, he thought David was really putting him into a genuine business but unfortunately it ended as a scam where he was deceived to have given out £20,000.
James Evans made a complaint about that for a refund of his money but unfortunately, the First Direct told him they were sorry for the incident, and unfortunately, they can't do anything about that because he was already been scammed. Dating site scams started rising highly especially during the period of the lockdown to about a 40% rise in cases.
Another news was recently published just 5 days ago (29th July) where a retired man called Joseph was scammed of all his entire retirement income in a BBC NEWS. Mr. Joseph is in his 70s and this tells us that not only young people are scammed of but also old people get scammed as well.
His scam was a result of messages he used to be receiving continuously on his sickbed from the scammers who were about requesting more money from him. They told him they will need 10% from him so as to be able to withdraw his money, this news even made him collapse at that instant. He was perplexed and didn't know what to do and he continuously agree by sending them those monies until he realized he has lost more than £250,000 of his life savings. Joseph said after he came out of the hospital and I quote;
"I thought I was good with my money. It was really when I came out of the hospital that the shock of what I'd done hit me," "The money was for our retirement and any future healthcare we needed. I have no means to recoup the money I've lost as I'm retired." source.
It was published on 17th June 2021 that the rise of cryptocurrency scams has surged 1000% since October from CBS NEWS. According to the data taken from the Federal Trade Commission data about 44% of people in the range of ages 20 and 39 were severely scammed since October.
Types or Forms of Crypto Scams
- Phishing sites and Links
- Scamming Emails
- Crypto Ponzi Schemes
- Fraudulent Initial Coin Offering (ICOs)
- Fake Mining bots
- Fake P2P platforms
- Fake Wallets and Apps
Research on a Crypto Scam
ONECOIN SCAM
Onecoin scam has been one of the greatest scams on the crypto ecosystem and this was done by a 36-year-old businesswoman known as Dr. Ruja Ignatova came out on stage at a conference in June 2016, where she was dressed in expensive clothing including her jewelry. When she stepped foot on the stage, the whole crowd was cheering up and she said the following words which I quote;
OneCoin was on course to become the world's biggest cryptocurrency "for everyone to make payments everywhere".source.
After she came out with this news, people all over the globe started investing in onecoin with the aim of earnign a huge profit in the near future. Leakages from the BBC show indicated that about €30m was spent on onecoin by the ritish people just in the first six months in the year 2016. About €4bn was spent on onecoin between August 2014, and March 2017 from different countries around the globe.
After convincing and persuading many people to invest in onecoin currency, she disappeared with all the money that investors spent into this coin after she saw that more than 1 one million investors around the globe has invested their savings into oncecoin currency. Dr. Ruja run away with over $13 Billion of the investors money and as at now she is still wanted by Police. People are suspecting that she might be hidden somewhere in Germany, Russi, or Bulgaria and or she might be dead long ago. Greenwood Sebastian (co-founder) was arrested and put in jail in 2017 after Dr. Ruja disappeared with the money. His brother Konstantin was also arrested in November 2019. The link here leads to the story of his co-founder and brother arrest.
Dr. Ruja's scam was seen as a ponzi scheme form of scam.
Ponzi Scheme Scam
Ponzi scheme refers to the kind of scam or fraud that pays the early investors with much profits from the funds they acquire from investors who just joined the business or company. The investors (victims) tends to have believe that the business is booming especially when the scheme is growing gradually. Investors begins to have trust and believe in the business when they see the business booming without knowing that the funds are comign from they the investors. People then tends to invest more into the business and when they acquire huge amount of money they drop the project and run away with the investors money.
The image below briefly describe how ponzi scheme works;
To what extent have Crypto Scams affected the Crypto space?
Crypto scams have affected negatively affected the crypto ecosystem and I would like to explain some of these effeects below;
Limitation of use by Big Companies
Because of the surge of crypto scams in the crypto ecosystem, big companies such as Apple, Goggle, Microsoft, etc wouldn't prefer using crypto currencies as a payment method for their products because they have the fear of being scammed.Regulations
cryptocurrencies are currently under the control of security bodies to aid avoid the rate of scam within the crypto ecosystem. These bodies include the follwoing; Federal Trade Commssion (FTC), Securities and Exchange Commission (SEC), Internal Revenue Service (IRS), Financial Crimes, etc.Ban and Restrictions of Crypto currencies
Bans and restrictions are kept on cryptocurrencies so as to avoid crypto scams of its citizens. An example of a country where its central government has banned its citizen from crypto currency mining is China so as to avoid the rate of crypto scam or fraud in their country.The demand of cryptocurrencies by investors tend to reduce which tends to manipulate the trend of the asset due to the success of crypto scams. When crypto scammers sussceed in scamming a particular currency; it tends to bring the other currencies into a bearish period and this may take a long period.
Will regulations in Crypto add value to the Crypto space?
Regulation in crypto can positively and negatively affect the crypto space and I would like to mention some of these impact below;
Positive impacts of Regulations in crypto
The price stability of crypto currencies would be improved therey improivng financial stability as well.
Again, regulation in crypto would add value in the crypto ecosystem by focussing on consumer protection.
Also, regulation can aid improve the confidence level of investors. This can be achieved when public security is provided on the monies that investors invest into crypto assets. This in tends would help encourage investors to invest more in crypto currencies.
Negative impacts of regulation in Crypto
The volatilty of crypto asset's price would be depreciated greatly as a result of the stability of the asset when regulation are implemented in crypto.
Regulation in crypto ecosystem would lead to the violation of the decentralized nature of crypto currencies and would as well invalidate the privacy of crypto investors.
Conclusion
To conclude, I would like to briefly summarize what we've done in this article.First of all, we looked at the concept behind crypto scams and the types/forms of crypto scams. We also looked at the case study of individuals that have been a victim to crypto scams and how it happened. We also perforemed a research on onecoin crypto scam about the cryptoqueen and how she succeeded in deceivin millions of people around the globe and disappeared with the monies. We looked at what ponzi scheme scam is and how it works. Furthermore, we looked at how the crypto ecosystem has been affected by crypto scams where we talked about the limitations of use by big companies, regulations and ban and restrictions of crypto assets.
Lastly, we looked at the how impactful regulation in crypto will add value to the crypto esosystem where we touched on financial stability, public security and also consumer protection.
I would like to say thank you to prof @yohan20n for such a wonderful lecture taught this week. I look forward to participating in your subsequent homework.
Thank You.
Hi @salma78
Thanks for participating in the Steemit Crypto Academy
Feedback
This is good content. Well done with your research on the plague of Crypto scams.
Thanks for your kind review professor.