From researching blockchain, cryptocurrency and cybercrime, I can see that some cryptocurrency fraudsters rely on tried-and-true Ponzi schemes that use income from newly participants to pay out returns to earlier investors .
Others use highly automatized and twist processes, including automated software that interacts with Telegram, an internet-based instant-messaging system popular among people matter to in cryptocurrencies. even when a cryptocurrency plan is legalize, fraudsters can still manipulate its price in the marketplace .
An even more basic interrogate arises, though : How are unsuspecting investors attracted to cryptocurrency frauds in the first place ?
Reading: How cryptocurrency scams work
Some cryptocurrency fraudsters appeal to people ’ s avarice, promising big returns. For example, an unknown group of entrepreneurs runs the victimize bot iCenter, which is a Ponzi scheme for Bitcoin and Litecoin. It doesn ’ triiodothyronine provide information on investment strategies, but somehow promises investors 1.2 % daily returns .
The iCenter outline operates through a group chat on Telegram. It starts with a small group of scammers who are in on the noise. They get a referral code that they share with others, in blogs and on social media, hoping to get them to join the old world chat. once there, the newcomers see encouraging and agitate messages from the original scammers. Some newcomers decide to invest, at which point they are assigned an individual bitcoin wallet, into which they can deposit bitcoins. They agree to wait some period of time – 99 or 120 days – to receive a significant return .
During that time, the newcomers often use social media to share their own referral codes with friends and contacts, bringing more people into the group new world chat and into the investment scheme. There ’ south no actual investment of the funds in any legitimate business. rather, when raw people join, the person who recruited them gets a share of the new funds, and the cycle continues, paying out to earlier participants from each attack of newer investors .
Some members work specially hard to bring in new funds, posting tutorial videos and pictures of themselves holding large amounts of money as enticements to join the scam .
Lies and more lies
Some scammers go for straight-up deception. The founders of victimize cryptocurrency OneCoin defrauded investors of $ 3.8 billion by convincing people their nonexistent cryptocurrency was real .
other scams are based on impressing potential victims with jargon or claims of speciate cognition. The ball-shaped trading scammers claimed they took advantage of price differences on versatile cryptocurrency exchanges to profit from what is called arbitrage – merely buying cheaply and sell at higher prices. very they merely took investors ’ money.
ball-shaped trade used a bot on Telegram, besides – investors could send a remainder question message and get a reply with false information about how much was in their account, sometimes even seeing balances climb by 1 % in an hour. With returns looking like that, who could blame people for sharing the dodge with their friends and family on sociable media ?
Exploiting friends and family
once a scheme has started, it stays active – at least for a while – through social media. One person gets taken in by the promise of big returns on cryptocurrency investments and spreads the word to friends and family members .
sometimes big names get involved. For exemplify, the kingpin behind GainBitcoin and other alleged scams in India convinced a number of Bollywood celebrities to promote his book, “ Cryptocurrency for Beginners. ” He even tried to make himself a bite of a fame, proclaiming himself a “ cryptocurrency guru, ” as he led efforts that cost investors between $ 769 million and $ 2 billion .
not all the celebrities know they ’ re involved. In one blog station, iCenter featured a video that purported to be an sanction by Dwayne “ The Rock ” Johnson, holding a sign featuring iCenter ’ randomness logo. Videos of Justin Timberlake and Christopher Walken were deceptively edited thus they appeared to praise iCenter, besides .
Fraudulent initial coin offerings
Another democratic victimize proficiency is called an “ initial coin offering. ” A potentially legitimate investment opportunity, an initial coin offer basically is a way for a startup cryptocurrency company to raise money from its future users : In exchange for sending active cryptocurrencies like bitcoin and ethereum, customers are promised a dismiss on the raw cryptocoins.
many initial coin offerings have turned out to be scams, with organizers engaging in cunning plots, even renting fake offices and creating fancy-looking market materials. In 2017, a batch of ballyhoo and media coverage about cryptocurrencies fed a huge wave of initial mint offer fraud. In 2018, approximately 1,000 initial coin propose efforts collapsed, costing backers at least $ 100 million. many of these projects had no original ideas – more than 15 % of them had copied ideas from other cryptocurrency efforts, or even plagiarize supporting software documentation .
Investors looking for returns in a newly technology sector are still interested in blockchains and cryptocurrencies – but should beware that they are building complex systems that are new flush to those who are selling them. Newcomers and relative experts alike have fallen prey to scams .
In an environment like the current cryptocurrency market, likely investors should be very careful to research what they ’ re putting their money into and be sure to find out who is involved a well as what the actual design is for making very money – without defrauding others .