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Cryptocurrency Scams and How to Keep away from Them

Cryptocurrency Scams and How to Keep away from Them

In case you are taking into consideration investing in cryptocurrency, there are a couple of common scams to appear out for.
Cryptocurrency Scams


The explosive popularity of Bitcoin and other altcoins has noticed an enormous rise in cryptocurrency exchanges. They all want your enterprise, and the transaction fees that include handling your purchases.

Well-known exchanges have already been known to entirely disappear overnight, taking each of the cryptocurrency with them. Do your due diligence just before putting any amount of Bitcoin or altcoins onto an exchange.

In case you are new to cryptocurrency, you may not have heard of Mt. Gox. This was an early cryptocurrency exchange that at one particular point accounted for over 70 percent of all Bitcoin transactions worldwide. In February 2014, Mt. Gox suspended trading. It later emerged that 850,000 Bitcoins had been stolen (valued at $450 million at the time). More than a period time 200,000 were recovered and returned to the internet site and a few of its users.

Trusting men and women in an totally digital globe is extremely challenging, specially if you can not audit or verify what is taking spot behind the scenes.

Do not keep your cryptocurrency stored on an exchange. Transfer coins to an offline wallet at the finish of the day since it only takes a short amount of time to send them back to an exchange for trading. In the event you intend to turn into an active trader take into account upgrading to a cryptocurrency hardware wallet.

Pyramid and Ponzi Schemes

In 2017, a Mumbai-based company called OneCoin was delivering a sales pitch to a space of investors. Indian financial enforcement officers raided the meeting, and arrested a number of OneCoin representatives for operating a cryptocurrency Ponzi scheme. In the time of their arrest, OneCoin had currently moved over $350 million through a payment processor.

Investors had been duped by way of a combination of enthusiastic upselling, lack of expertise from the technology, and constructive media hype around booming cryptocurrency prices.

Cryptocurrency is making new scams, employing jargon and technology most people have in no way heard of, let alone realize. Even grasping the basics of blockchain technology and smart contracts could be tough.

Pump and Dump

Pump and dump can be a term used to describe the fraudulent practice of encouraging investors to buy shares within a company as a way to inflate the price artificially, and after that promoting one's personal shares although the price is high.

Many prominent financial specialists have dismissed cryptocurrency as a scam. Even though some evaluate Bitcoin to other safe haven investments, such as gold, other people believe it's merely a speculator’s heaven, ripe for pumping and dumping.

Bitcoin features a market capitalization of more than $70 billion so it could be really difficult to directly manipulate the price. But smaller altcoins having a minimal market cap are extremely vulnerable to a standard pump and dump.


Initial Coin Offerings (ICOs) are the IPOs in the cryptocurrency world. Cryptocurrency startups produce initial coin offerings to raise substantial amounts of money. However, many of them vastly overestimate the value of their startup. Others are simply elaborate pump and dump schemes.

As with any initial providing, investing is a threat, so due diligence should usually be applied.

Red flag indicators may possibly be;

There is a lack of precise or existing information about a company.

Inquiries arise regarding the accuracy of publicly available information, which includes press releases and media coverage.

There are questionable trading practices, like insider trading or market manipulation.


The DAO was a digital decentralized autonomous organization plus a form of investor-directed venture capital fund. The DAO had an objective to supply a brand new decentralised organization model for organising both commercial and non-profit enterprises.

The DAO raised over $34 million when they completed their ICO in 2016. It was deemed a success, till users exploited vulnerability within the DAO code to allow them to siphon off 1 third of its funds to a subsidiary account.

Sooner or later, virtually all of the funds were returned to the original contract. The DAO is now delisted from significant exchanges, and is observed as a significant issue within the close scrutiny of cryptocurrency ICOs.

ICOs have also created the cryptocurrency news after each China and South Korea took measures to ban them. The South Korean Financial Solutions Commission mentioned that institutions and individuals conducting business relating to an ICO would face “stern penalties.”

This move comes following the Chinese government banned all ICOs, calling them “illegal fundraising.”

China is also worried in regards to the power cryptocurrency provides its citizens. Decentralised anonymous currency within the form of ICOs (and other altcoins) could effortlessly “disrupt their social order.” China has previously banned Bitcoin and cryptocurrency associated activity, every single time causing a slump in global markets.

Don't forget Coin doesn’t exist

In August 2017, the City of London Police shut down a “cryptocurrency business” that was cold-calling individuals to sell fake digital currency. Victims had been cold-called and persuaded to buy non-existent cryptocurrencies. The individual who allegedly set up the scam employed a central London financial district address to lend the illicit scheme authenticity.

Nine victims came forward to UK Action Fraud, with combined losses exceeding £150,000.

Real investors is not going to cold-call you to offer you an opportunity. In the event you get a call asking for your investment in a cryptocurrency opportunity, always note the name of the caller, telephone number, the company name and address. You might must report a potential securities fraud for the authorities at a later date.

A growing threat comes from social media. Prominent reputable cryptocurrency company accounts are becoming impersonated on Twitter and Facebook. The scam pages directly get in touch with individuals, asking for investment in a potential opportunity, or to buy discounted Bitcoin or Ethereum.

If it sounds as well good to become true

Any burgeoning technology which allows an element of transactional anonymity and the potential of high financial return will attract criminal fraud.

A crucial component to staying safe in cryptocurrency, and equivalent financial schemes is, do your analysis. Know who you are potentially partnering with before you portion together with your money, and only invest what you can afford to lose.