In recent years, the world of
cryptocurrency has gotten attention and exceptional growth with Bitcoin and
other digital assets. But this surge has brought unusual scams and bought its
dark side out. Potential imposters target newcomers and seasoned investors in
this industry and create illegal transactions, which lead to monetary losses.
The rapid increase in cryptocurrency scams contributes to several factors. The
decentralized and cryptic nature of blockchain technology underpins the
cryptocurrency and makes it difficult to recover funds lost due to scams.
Moreover, the hype surrounding cryptocurrency has created a fertile ground for
scammers to exploit investors for missing out.
Let’s dive deep into the case studies
of crypto scams, the major causes of surged blockchain frauds, and how to
combat them precisely.
Cryptocurrency Scams | High-Profile Case Studies
- From 2020 to 2022,
there has been a big rise in how much money senior citizens in the U.S.
lose to cryptocurrency scams. In the most recent year studied, seniors
lost over a billion dollars to these scams. Cryptocurrency payments are
hard to trace, which is why many cybercrimes use this payment method.
- In 2022, there were
a lot more cryptocurrency hacks and thefts, especially involving Terra
Classic and FTX. The amount of money lost in these hacks was about five
times more than in 2021. In 2022, there were many significant incidents
that affected the whole cryptocurrency market. The fall of stablecoin UST
caused losses in other cryptocurrencies, and many crypto exchanges were
affected by the fall of FTX at the end of the year.
- Over the past five
years, cryptocurrency scams have caused investors to lose more than $20
billion. In 2021, a new type of scam called "rug pulls"
accounted for about a third of the $7.7 billion lost that year. Rug pulls
happen when cryptocurrency creators take investors' money and then
disappear without a trace.
Exploring the Root Causes of Rising Crypto Fraud Cases
As the world has moved towards digital
systems and blockchain technology is growing, users are getting familiar with
it and trying to fool potential investors.
Extortion and Blackmail Scam
According to a report by the Federal
Trade Commission (FTC), imposters claim to have users’ humiliating personal
credentials, including photos and videos, just to trap them. These intimidators
blackmail potential individuals to expose them until they provide their
cryptocurrency or private keys. These extortion attempts by fraudsters should
be reported to the enforcement department, such as the Federal Board of
Investigation (FBI), for further scrutiny.
Offering Business and Investment Opportunities
Cryptocurrency scammers propose
exciting business and investment opportunities to their target audience. They
set up the system in such a way that offers guaranteed returns after investing
a substantial amount of money. Similarly, business opportunities are also
offered by the imposters which lead to huge monetary losses to the individuals
who directly deal in cryptocurrency. These ensured prospects lead to “financial
disaster” for the users.
Fake Job Listings Scams
The illegal departments that carry out
cryptocurrency scams post fake job offers in order to target prospective
customers. The job listings include the tags of crypto mining and investors so
they can hire relevant users in this field. The main requirement of this
department is that the users have to make payment in crypto to get started on
this job. These scammers ask for extra payments after making a fake deposit
into the account.
Phishing Scams
Phishing attacks are carried out by illegal companies that pretend to be legitimate to ask for personal credentials. A lot of crypto phishing scams want users to share personal crypto wallet keys, usually by sending an official email asking for login to the account.
Cloud Mining
These faulty platforms advertise to
their regular crypto customers and investors to invest money to secure
continuous mining power and rewards. Sometimes, they do not own the mining
power they own but also do not present the required rewards to the customers.
Not all cloud mining platforms are scams but it is always advised to thoroughly
research and investigate the platforms before investing the money to mitigate
the risks of monetary losses.
Mitigating Crypto Frauds with KYC Regulations
Preventing cryptocurrency theft is
important for maintaining the integrity of the users and companies. Even
individuals and small businesses can be targeted by scams. One way to protect
against scams this is by using robust KYC (Know Your Customer) processes. KYC is a rule that financial institutions like banks follow
to make sure they know who their customers are. It helps stop people from using
fake identities or doing illicit activities with money. By using KYC,
cryptocurrency platforms can check if users are legitimate or not. This makes
it harder for scammers to steal money. So, using KYC is an advanced way to stay
safe and secure in the world of cryptocurrency.
Final Verdict
In this digital era of fast-growing
blockchain technology, imposters target potential investors who deposit digital
assets. To understand these scamming activities, it is important for users and
companies to comply with KYC and other related processes for secure digital
transactions. By understanding these scams, investors can safeguard their money
in online finance.
