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CRYPTOCURRENCY SCAMS

Updated: May 28, 2022

~ Gurnoor Singh and Harnoor Kochhar

Bitcoin!! Ethereum!! NFT!!


The hype is all around. Everybody is talking about it, some say it is safe, some say it is a bubble and some say it is the new revolution in the modernized world. But to understand all these terms it is important to first understand that bitcoin, Ethereum, dogecoin are not just some terms. Cryptocurrency is defined as a medium of exchange that is digital, encrypted, decentralized, and based on blockchain technology.


It is universally acknowledged that wherever money is involved scams come into the picture but with crypto the picture changes. If Cryptocurrency was made with the whole purpose of being safe and secure then how would a scam like “Squid Game '' be committed, in which the developers disappeared after the currency skyrocketed in price and seemingly cashed out with more than $3 million.



TYPES OF CRYPTOCURRENCY SCAMS


Given the exponential rise in reported crypto scams, awareness of the common types of scams and the various measures that can be adopted to protect oneself from being cheated becomes of great importance.



Pump-and-dump schemes .

A pump-and-dump scheme represents an individual or group's effort to inflate the price of an asset so that they can sell their own holdings to earn massive phony profits.


Rug pulls


Under Rug Pull, crypto developers undertake seemingly legitimate work on a blockchain, such as launching a working application. Then, they publicize their underway application via social media before even issuing and listing the token on a decentralized exchange (DEX). When investors funnel enough money, these scammers scratch the project and flee with the investor’s money.


Social Engineering Scams


Under these types of scams, fraudsters use psychological manipulation and deceit to gather vital information relating to user accounts.


Imposter and Giveaway Scams


Scammers try to pose as influential celebrities or businesspeople to capture the attention of prospective targets. Many scammers promise to match or multiply the cryptocurrency sent to them. However, once they receive money from innocent investors, they flee away.


Blackmail and Extortion Scams


Blackmail emails are another popular social engineering method scammers use. For such mails, scam artists claim to have a record of adult websites or other illicit web pages visited by the user and threaten to expose them unless they pay them in crypto coins.


Ponzi Schemes


A Ponzi scheme is an investment scam that involves the payment of purported returns


Case Segment


Case 1: Stolen Bored Apes NFT


Todd Kramer, Chelsea art gallery owner, had 615 ETH (about $2.3 million) worth of NFTs (Bored Apes and Mutant Apes) stolen by scammers.

Mr. Kramer is said to have clicked on a phishing link, resulting in the theft of the NFTs.


Kramer promptly moved to Twitter, pleading with OpenSea and the NFT community for assistance in retrieving his NFTs. Others in the community ripped him to shreds for not putting his important JPEGs in an offline wallet; nonetheless, OpenSea halted trade of the stolen NFTs on its site. Following this, Opensea received criticism, as cryptocurrency and other blockchain technologies were formed with a foundation that no external entity overlooks and may be managed by decentralized platforms.





Case 2: BITCONNECT: A PONZI SCHEME


Bitconnect was a cryptocurrency company that had introduced a new coin called ‘Bitconnect coin’ to reshape the crypto industry.


This company offered a wide array of features under this scheme :

  1. Investors were allowed to pour in their money to purchase the coins in exchange for USDs or Bitcoins.

  2. An interesting offering was that investors could lend their coins in exchange for a substantial interest income. The company vowed to invest these lent coins using a ‘volatility software’ which was another sham altogether.

  3. The company took assurance to pay back the capital in under 120 days if the investor poured in a lot of money.

These captivating schemes lured investors and the value of Bitconnect coins exploded. However, once the investors found out that ‘voluntary software’ did not exist, the value of the Bitconnect coin plummeted. Soon enough, the company was exposed and the founders were charged with wire fraud.



History of Cryptocurrencies in India


Cryptocurrency features a long history in India. In 2013, a circular was issued by the Reserve Bank of India (RBI), warning the general public against the utilization of cryptocurrencies.

On 1st Feb 2017, another warning was issued by RBI, and thereafter the finance ministry clarified that virtual currencies aren't a tender.


On April 6, 2018, a circular issued by RBI was circulated asking all commercial and co-operative banks, etc. to stop dealing in cryptocurrencies, or providing services to any entities which affect crypto exchanges.


In March 2020, The Supreme Court of India lifted the restrictions on cryptocurrency imposed by RBI.


Currently, cryptocurrency is not banned in India and as per the the recent 2022 Union Budget, crypto investors are obligated to pay a 30% tax on their profits. This move is speculated to be a landslide step in the Indian economy.



Ways to prevent Cryptocurrency Scams


1. Keep your wallet safe

Investors should protect their wallets wisely. They should ensure the private key is not disclosed to the public under any circumstances.


2. Thorough Research

Considerable time should be invested by potential investors to conduct a thorough research about the crypto coins. They should scan the crypto company’s founders, current backers and the availability of the project.


3. Identify Imposter websites and strictly avoid them

Investors have to be extra cautious about imposter websites. Some ways to spot an imposter website are:

  1. Gauge whether the website is secure or not

  2. Check the domain name to ensure that it is not a mimic of large brands.

  3. Look for spelling and grammatical errors in the website

Conclusion:

“Bitcoin is the best opportunity set we can think of over the next decade or so.” ~Bob Garfield, American Journalist

The idea of cryptocurrencies being secure or not totally depends upon how well the community weighs its pros and cons. Investors who have in-depth knowledge of its trends and crypto market sentiments can only unleash its true potential.


Glossary:


1. Blockchain the blockchain is a shared transaction log with a non-editable history and built-in security. The simplest comparison is to an accounting record book. Each “block” is really just a “line item” in the shared record book. Every time a new block is added to the chain, a new line item is added to the book. The book can contain all kinds of information, not just financial transactions.


2. NFTs (non-fungible tokens) are blockchain-based digital receipts for photographs. The code behind the replica or token' is owned by the buyer, not the copyright of the original image.


3. Volatility software: It essentially refers to a system in which profits are earned out of large price swings/fluctuations.


4. Decentralized exchanges (DEX) are a type of cryptocurrency exchange which allow for direct peer-to-peer cryptocurrency transactions to take place online securely and without the need for an intermediary.


5. Private key- Digital wallets are automatically signed off with a private key. Whenever a person initiates the transaction with a wallet, this software creates a signature digitally to process the working with a private Key. All the system has some exclusive points and contribution in making the working smooth and Secure


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ashwarya.219035
Mar 01, 2022

amazing blog guys!

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