Users could stake their coins for high daily interest, which was actually just money taken from newer investors. The most notable Ponzi scheme in crypto is Bitconnect, a high-yield investment program disguised as an open-source currency. Money is taken from the new investors, given to the old investors disguised as the gains, and the scammer pockets his share. Scammers offer huge gains through an “up and coming” new arbitrage model. With cryptos, a Ponzi scheme takes a similar form. In the 100-plus years since, the scam has remained, but it’s become more sophisticated.
It’s a scheme as old as - well, as old as Charles Ponzi, who originated the scam under the façade of selling discounted postage stamps. The scam is one in which old investors are paid with the money of new investors, under the guise of receiving gains from their investment. If you’re at all familiar with investing, you are familiar with Ponzi schemes. If there are typos, or if there is a lack of a clear vision or roadmap for the crypto, these are all signs of a cryptocurrency scam. If it doesn’t have a white paper, that’s an immediate red flag. The details of a white paper are where you will find the evidence of a scam. It contains all the details of how a crypto functions, how it is used, and the roadmap for the underlying company and team. This means you should pore over the white paper, which is the cornerstone document to a blockchain project. So how do you avoid these cryptocurrency scams? The key for spotting a fake ICO is in the details. The resulting protests outside their Ho Chi Minh City office were a fruitless effort the seven developers emptied the commercial space and never came back. The development team raised $660 million from investors, launched a different coin from the one advertised, and compensated the victims with loads of the worthless crypto before disappearing.
SAFE MOON CRYPTO FULL
The scammer rides off into the sunset with a full wallet.Ī famous example of a fake ICO is Pincoin. Or, they’re getting a worthless token with absolutely no utility. Victims are the type who are prone to speculative investing they’ll bite, pouring money into an initial offering in order to get those “big gains.” Before you know it, they’re seeing no movement in their portfolio. These crypto scams usually also have great marketing. It will have a white paper and all the fixings, advertising a “groundbreaking” new blockchain tech or yield-farming model that is certain to bring huge gains. Let’s take a look at some of the most common crypto scams.Ī fake ICO, or initial coin offering, takes a similar shape to a pre-IPO scam. With this in mind, it’s a good idea to make yourself familiar with different crypto schemes to minimize the risk of falling victim to one. And, unfortunately, it’s only a drop in the bucket as far as crypto scams go. The scam, a play on the popular “Nigerian prince” email scheme, is shockingly lucrative. By just creating a Twitter account using Musk’s profile image and name, these scammers have convinced users to send over $2 million in Bitcoin to them. In the six months from October 2020 to May 2021, those Elon Musk impersonators have been making a killing. AARP says it best, though: “For all cryptocurrency’s high-tech gloss, many of the related scams are just newfangled versions of classic frauds.” In the world of cryptocurrencies, it’s the same.Īnd, just like with traditional pump-and-dump schemes and other stock scams, there are signs you can look for to avoid falling for fraud.Īltcoin schemes are frustrating because they can take many forms. In the world of traditional investing, this means highlighting the risks that come with penny stocks and other volatile names. There are many bad actors who know that, and seek to take advantage of those who are just beginning to explore the complex world of cryptocurrencies.Īt InvestorPlace, we want to ensure our readers are as educated as possible in order to tell the real from the fake. This new frontier of digital, decentralized finance can be a labyrinth for new investors.
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