Recently, the US Attorney’s Office for the Southern District of New York issued a press release stating that Asa St. Clair, the president of a fake UN affiliate, was convicted of wire fraud. The reason for this was that he promised consumers that his IGOBIT digital currency would generate high returns. He defrauded over 60 people in this way and used his victims’ funds to pay for meals, buy airline tickets and other luxuries, among other things, and now faces up to 20 years in prison.

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This is not the only example of similar scams.

Last June, South Korea also saw a massive cryptocurrency scam in which 70,000 people were defrauded out of a total of approximately 3.85 trillion won (approximately R22.1 billion), making this scam more than twice the total cumulative losses from cryptocurrency crime in South Korea over the past four years, making it the largest cryptocurrency scam in the country in recent years.

With so many cases in front of us, why do people always fall for it?

Aside from the increasingly sophisticated scams, a closer look reveals that most of the scam victims are people who know little about the industry, and these are the types of people who hope to make quick money by buying cryptocurrencies. With this in mind, most people may not be able to resist the promise of a large return on their investment and enter the scam with the intention of giving it a try.

Currently, the five most common scams on the market are these.

  1. Fake scams

This is the most typical type of fraud, by impersonating an official customer service agent to call you and tell you that your “account is at risk” (or any other strange reason) and you need to cooperate to remove the risk, so that you can follow the way he gave, if you do, you will fall into the trap of the fraudster.

  1. Phishing scams

Phishing is also one of the most popular scams, similar to the ‘phishing scam’ mentioned above, and is a relatively old-fashioned technique that many people still fall for. They mainly use chat tools, emails and SMS to steal personal information from users. Most of them are randomly scattered, with the same user receiving different phishing sites.

These phishing messages usually contain minor errors, such as poor phrasing, misspellings, strange domain names, etc. When you receive such messages, it is a good idea to check the link to see if the domain name is normal. Always be suspicious and verify through official verification channels if necessary.

  1. Investment scams

Scammers get you to invest in a non-existent company by setting up a fake website, which in reality is just doing things in the pocket of the scammers. Cryptocurrencies are perfect for this because scammers are always inventing new “cutting edge” technologies to attract investors and generate greater virtual profits. When the currency is virtual, it becomes easy to falsify data by giving investors false information to buy shares in little-known cryptocurrency companies or something else.

One of the most typical cases occurred in a cryptocurrency scam in India in February this year, an incident in which police arrested 11 people. The scammer lured people into investing in a company that he claimed was running an ethereum cryptocurrency, mainly by showing off his lavish lifestyle. By manipulating the company’s website to show that the value of the investment was steadily increasing. In total, this incident defrauded over 2,000 investors out of $5.4 million.

  1. Hacking

Hacking is one of the security issues facing cryptocurrencies at the moment. While there are many different ways to prevent crypto-hacking, none of them are 100% foolproof. The reality is so dire that no matter how well protected people’s accounts are, hackers will always find unexpected ways to break into those accounts.

Just last year, the largest theft ever in the DeFi space occurred - the cross-chain interoperability protocol Poly Network was hacked and over $600 million in cryptocurrency was stolen, including 302 million USDT, 55,000 ETH, 2,000 Bitcoin and several other types of tokens, with Ether, BSC, and Polygon networks were nearly wiped clean of assets in over 30 minutes. Although the hackers subsequently returned these assets, the safety of blockchain and DeFi funds has once again sparked a heated debate.

  1. ICO Fraud

ICOs are a new way of launching cryptocurrencies, designed to raise money from investors. It may seem like an opportunity to get in on the ground floor of cryptocurrencies and have a head start compared to other investors, but it’s not. Investing in an ICO is risky because you cannot predict how the new token will perform in the future, and some ICOs are not only risky, but completely fraudulent.

There are two types of ICO scams, one is a complete counterfeit token and the second is where the scammer has the actual ICO cryptocurrency.

Completely fake tokens: Criminals create a cryptocurrency that looks like a new cryptocurrency and launch and advertise it with great fanfare, however, they simply pocket the investors’ money. The most notorious of such ICO scams was OneCoin, a project that, according to the BBC, sold virtual currencies through a multi-level marketing and sales model, defrauding investors around the world out of a huge amount of money in excess of €4 billion (nearly $5 billion).

Cryptocurrencies with actual ICOs: Such scammers set up a fake website or social media account and use phishing emails to lure investors with fake “pre-sale” offers, claiming it is an early opportunity to get involved in the new cryptocurrency, but in reality investors are sending their money directly to the scammers.

How can I prevent this?

  1. Be vigilant. Don’t make transfers or payments blindly, but check the relevant information before making a decision.

  2. Beware of private messages on various social media. Most scammers send direct messages to their targets via social media applications such as Twitter, Telegram, Facebook, Instagram, WhatsApp, etc. These messages are often the beginning of a scam and the best way to ignore them is to ignore them.

  3. Install anti-virus software. Having an anti-virus application to protect your wallet and cryptocurrency apps from malware and cyber attacks is an effective way to avoid cryptocurrency scams.

As cryptocurrencies such as bitcoin, ethereum and dogcoin continue to be hyped up and these types of investments interest more and more users, the forms of scams that come with them will gradually increase. There is currently no method on the market to stop the transfer of assets after these scams have occurred and the best we can do is to be vigilant, not to be gullible and not to blindly follow the crowd.