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Crypto is an asset class that involves risk due to its volatile markets. But like in any other industry, there is another risk involved. Scammers! Yes, even though the decentralized nature of crypto ensures privacy and high-level security, the asset class isn’t devoid of scams and criminals. Hence, like in any other market, investor vigilance is an important aspect here too.
Let us discuss a few crypto scams that are on the rise in 2022.
Crypto Scams to Avoid in 2022
1. Imposter crypto scams
When a cybercriminal impersonates a reliable source to persuade people to complete a transaction, it is known as an impostor scam. They might also tell their victim that they can offer them a large number of coins for a certain amount of fiat, which is lesser than the market value. The con could be administered by pretending to be a financial institution, a service provider, a famous crypto BUIDLer, a credit card company, a government official, or a fake celebrity. These malign agents frequently send emails or direct messages on social media and ask you to complete a crypto payment. Since crypto coins are not yet commonly recognized by businesses, you should be wary of any email requests for crypto payments. Hence, before clicking on any links, examine the website’s security as a precaution.
A lot of education has been imparted on how to keep yourself safe from this method used by scammers to extort assets from an individual. Extortion and blackmail are the oldest tricks scammers use to fraud people. The victim receives an email or any other form of communication claiming that there is some compromising material about them, such as images, videos, or personal data, in the other party’s possession. The other party with malignant tendencies tries to blackmail the victim and ask for money in exchange for its release. Furthermore, sometimes they send out morphed material to make the victim believe they possess the compromised material. Nowadays, con artists demand payment in bitcoin or any private currency, frequently because the transactions cannot be undone and sometimes are non-traceable. These scams are on the rise; therefore, reporting the sender to the authorities is an essential step that the receiver of such texts should take immediately.
3. Giveaway scams
Giveaway scams occur when victims are persuaded to send fiat currency or crypto to someone with the promise that they would multiply the payment. The con account might depict itself as a false celebrity account on social media. In most cases, the account will advertise that if fans pay them a specific amount of bitcoin, they’ll send back twice that amount. Further, in some cases, users receive messages from these fake accounts stating that they “guarantee” the payer a multiplied amount in a particular period. One would witness a quick disappearance of the con account once the payment is debited from their account. Hence, the wisest step you can take is to report and block them as soon as possible.
4. Rug pull
With “rug pull,” fraudsters get investors to provide seed money for what they falsely represent as creating a new coin or any kind of Web 3 project. In some cases, they gain the trust of these investors (who are actually the victims) by forming a community and luring them with the chance to get whitelisted. Naturally, investors are eager to get in on a new crypto project, expecting a healthy return once the crypto enters the market. However, after raising a sizeable sum of funds, rug-pull con artists “pull the rug out from under” and vanish with the investors’ money. Hence, before investing any amount of funds into crypto projects, the investors should weigh the organization’s promise by researching the project.
5. Pump & Dump
Pump-and-dump is an investment fraud that is immensely prominent in the traditional finance sphere. However, this scam is also spreading its wings into the crypto sector. In a pump-and-dump scam, a crypto coin is “pumped up,” using false or misleading information on social media and other publicity channels to get additional investors to purchase it. The price rises as a result. The early investors sell off or “dump” the crypto at a premium once its value has peaked. Other investors get influenced by the fear in the market and rush to liquidate their holdings, hence suffering losses. Therefore, research is essential before picking up a piece of news about any asset from social media and acting on it. Investors should not make decisions based on social media posts coming from unknown and unreliable sources.
Crypto investment can be a risky endeavor. Now that we have talked about some of the scams that are going about in the industry. But what can one do?
Fortunately, there are steps you may take to guard yourself against fraud:
- Watch out for “get rich quick guaranteed” scams.
- DYOR! DYOR! DYOR!
- Don’t fall prey to unsolicited advice on what assets to buy.
- Immediately report any suspicious conduct.
- Ensure that you do not click on suspicious-looking links or visit websites that aren’t secure.
Diligence is the key when looking out for yourself and your funds. While being vigilant about these scams, we should conduct our own research systematically, ensuring that we do not fall for these scams.Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.