Past years in cryptocurrency world was full of scams. Sometimes, these scams were so obvious that everyone knew that they are scam projects. But, most of the time the project was not that obvious and made you think “it is great to put my money in”, and puff! Your money is gone like a fur in the wind.
Knowing this it is great to know some of these scams and how they work. In this little article I am going to study some these scams and tell you exactly what they are and how they work.
1. Giveaway Scam
In this scam you are going to be promised that if you give some cryptocurrency for example 1 $BTC you will be given 2 $BTC in return. So that is a “GIVE”away scam. Usually these kinds of scams try to convince you that they are eligible, using big names like “Elon Musk”, “CZ”, “Jack Dorsey”, “Bill Gates”, etc.
They will tell you that for example, Elon Musk, is giving away some cryptocurrency like $ETH and if you send 1 $ETH to an address you will be given 2 $ETH instantly. They might even show you a page with transactions that are “happening”, which they don’t. If you go to a block explorer you can see that only the input transactions are there and no outputs. These scams usually have a timer that ticking just to rush you to send your cryptocurrency to them, without enough considering.
These scams usually happen on Twitter. But it is not limited to Twitter only. They even happen on YouTube, Instagram, etc. In the YouTube scams, there is usually a live stream of some famous person to make it eligible for you that this is them who is giving away the cryptocurrency. But the footage is stolen from somewhere else.
This kind of scam is not new and it is not special to cryptocurrencies. It started as an e-mail from a Nigerian Prince. In this e-mail it was told that if you send some amount of money, for example $1000, they will send you $10,000 right away. And they need you to send some money to confirm your bank account.
2. Rug Pull
A rug pull is a scam promotion of a cryptocurrency token via social media. After the price has been driven up, the scammer sells, and the price generally falls to zero.
One of the most famous rug pulls is the scam project, “Squid Game”. In this scam the price of the token went up during promotions and advertisements, and just in a few seconds the scammers went all in and sold all of their token and the price fell over to zero.
This scam is not just for fungible token. NFTs have been sold as a rug pull too. They promise a very great roadmap and price appreciation in the coming days and after this they g to some celebrities to advertise for them. After they minted and sold all the NFTs, they delete all the website, and every other footprint of themselves and they pull the rug out and you are on yourself with a valueless NFT.
All the rug pulls are not fast and in matter of seconds. In these slow rugs the creator slowly extricates themselves from the project over a number of weeks or months. Their goal is for the buyers to eventually lose interest and abandon their hopes. Slow rug is actually a lot more common than the quicker one, and usually it is harder to zone in on.
3. Phishing Scams
This kind of scam is such that it is so hard to spot. These scams are not exclusively related to cryptocurrencies and have existed long before to grab important details from users. Details such as bank account information, e-mail account information, etc.
Phishing is a type of online scam that targets consumers by sending them an e-mail that appears to be from a well-known source – an internet service provider, a bank, or a mortgage company, for example. It asks the consumer to provide personal identifying information. Then a scammer uses the information to open new accounts, or invade the consumer’s existing accounts.
These scams started working in the cryptocurrency space when they were used by hackers to get access to people’s exchange account details and steal their funds from there. However, noticing that how secure the exchanges became recently, the phishing schemes have evolved to start targeting users directly through their cryptocurrency wallets. One of the most damaging attacks is when the hacker is able to successfully phish the private keys or seed phrases.
One of the most common ways of getting these for the hacker is to fool user into handing over the private keys or seed phrases. These will never be requested by anyone unless you are resetting your wallet. If someone is requesting your seed phrases or private keys, they are most certainly attackers who are going to take away all your funds from your wallets.
Another way is for the hackers to give you their seed words, when you download a new wallet, a FAKE wallet! In this attack they will give you their seed words of the wallet and as soon as you deposit funds into the wallet, they will take it right away.
4. Impersonation Scams
This scam is not specific to cryptocurrency world, too. There are several variations of this scam. In many variations of this scam, it involves a phone call from someone purporting to be a government official (e.g. a police officer, immigration officer or court official) or staff from a bank or telecommunication service provider.
In this scam, the caller might claim to be a government official, an employee or representative of a Chinese bank or courier company. The caller might claim that your identity was used to send parcels containing fake passports or weapons, or to apply for overseas credit cards. They then refer you to another caller claiming to be a Chinese official, who will ask — or even threaten — you to give them personal information such as your passport or bank account number, internet banking credentials or One-Time Password (OTP).
In the world of cryptocurrencies, the attackers usually impersonate themselves as someone known to people. For example, Elon Musk, CZ, Coin Bureau, Jack Dorsey, etc. This attacks usually happens in Twitter but it is not limited to this application. YouTube, Instagram, Telegram, e-mail, etc. can face this kind of attack.
In this scam, the attacker usually provides a face account with name and profile picture similar to the real person and tries to respond to people commenting under a post of the real account, or they go to direct messaging of the application and try to fool you that they are the real person. Sometimes the attacker has more followers than the real person using bots and fake users.
But how can we make sure that the real person is the one that we are connecting with? In almost all of the social media platforms, there is a blue (or grey) tick that shows a verification for the real person. Also, you can find the real persons username using their website or other trusted ways like another social media that you trust the real person is behind the account.
5. Ponzi Schemes
A Ponzi scheme is an investment scam that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, rather than engaging in any legitimate investment activity, the fraudulent actors focus on attracting new money to make promised payments to earlier investors as well as to divert some of these “invested” funds for personal use.
As it is obvious, this kind of scamming is not specific to cryptocurrency world. Actually, Ponzi schemes have been around for ages and Ponzi schemers in cryptocurrency world are just copying the work of others and have usually have nothing new.
In the cryptocurrency world, there usually is a “cloud mining”, “lending”, or “trading bot” that “will give you money”. But actually, instead of making real money the schemer is paying someone above you or before you with your money and tries to make the network bigger by making a lot of trust that this scheme is working. After some time when the money in hand becomes large enough, the scammer will leave you empty-handed and runs off with your money.
6. One Scam I Faced Myself
In this scam, the scammer had made an Ethereum address and had filled it with some large amount of $USDT. Now, the scammer just gave away their seed phrase to someone else claiming that they can’t take out the $USDT lying in there. In this scam, the scammer actually can take out the $USDT but they won’t just as a bait. Now, the poor user deposits some $ETH to provide the gas fee, and poof!
There has been a bot set on this specific address that withdraws every $ETH deposited to this address in a matter of seconds. Before you can do anything with the $ETH you deposited, it is gone instantly to another address. Now, it is time for you to spread it out for the scammer.
You go to your friend with a bit more knowledge and tell them you have a wallet (you have the seed phrase, don’t you?), that you can’t take out $USDT from it. Your friend tries to put $ETH for the gas fee and again poof!
This will go on and on until someone with more knowledge or pessimistic enough finds out what actually is happening and stops you from depositing your $ETH to this address and give away your $ETH to the scammer.