Scams & Fraudulent Activities Exposed

Fraudulent ICO

Fraudulent ICO / Presales

We have learned in a previous chapter about ICO and how innovative some could be. However, it is also easy to pull off a scam by fabricating a fake ICO, creating a marketing hype, and take investor’s money.

Fraudulent ICO often have the same red flags:

  • Copied Whitepaper
  • No or unclear Roadmap
  • Mismatch of written and said words
  • Half team anonymous or fake pictures
  • Ignoring hard questions or strict moderation of public chat groups
  • Bad token economy

Icobench – This website uses to list and rank every ICO, but be careful, even the most legit website might be corrupted once.

Fraudulent & Scammy Exchanges

In the previous chapters, we taught you how to chose an exchange that suits your needs, but also we gave you some advice to avoid scammy exchanges. Some exchanges can start well, acquiring the trust of their customers, then might “exit-scam” by taking all the funds with them.

As with the ICO, be sure to do your work. There is always a team behind an exchange, and if the team chooses to remain anonymous, this is a first red flag.

scammy exchanges

Scammy Exchanges Techniques:

Some exchanges are making shady marketing campaigns by offering significant amounts of bitcoins if people deposit a large amount into their wallets.

Before depositing into an exchange, make sure its reputation is good, and the team transparent. The most decisive factor is that the exchange has been appropriately managed for years without endangering their customers and has not been accused of stealing funds. The best places to look for advice are Bitcointalk.org and Reddit.

Fake Wallets

If you ever download a multi-currency wallet or a wallet that is provided by a 3rd party and not the original developers of the currency, you must know that you are vulnerable.

Fake Wallets VS Mobile Wallets:

Many fake wallets have been released, and most of them are on mobile. We will never recommend anyone to use a mobile wallet to hold large funds since their security is easily compromised, but also since a lot of them are fake and just here to steal your funds by making your deposit into the scammer’s wallets, or by taking your private keys.

It is one of the easiest ways to scam people.

Also, be aware of the unofficial forks of coins. Some forks promise you to give you their forked coins if you send them your private keys and then steal your coins.

Not only fake wallets can steal all your coins, but they can also be malware that can access to your private information or even be ransomware that will encrypt all your data and erase them unless you send the hacker a large number of bitcoins.

Ponzi Schemes

A Ponzi Scheme, also known as Pyramidal Scheme, is an investing scam promising rates of return with no risk to investors. The Scheme will eventually generate returns for the early investors by the acquisition of new investors.

Ponzi Scheme

When the new investors are not sufficient enough to pay for the returns of the old ones, the project will fail, and the founders will exit with investor’s money.

Famous Ponzi Scheme In Cryptocurrency:

This form of scam is the easiest to spot, but many people still fall for it. They often actively encourage you to recruit new investors and always promise a fixed return rate. The most famous Ponzi scheme in Cryptocurrency was Bitconnect. You can read more on this article: https://totalcrypto.io/bitconnect-scam/

Phishing Scams

Phishing is a fraudulent attempt to obtain your private information by disguising oneself as a trustworthy website. It is prevalent in cryptocurrencies. The attackers mostly use two methods to achieve this:

Phishing Types and Attacks:

  • Clone phishing: the attacker will clone a legitimate email, but will redirect the links into a malicious site.
  • Spear phishing: more sophisticated, the attacker will first collect information about the victim and then, based on those data, will message and convince the victim to visit a malicious website or download a file.
  • Pharming: this cyber attack intends to redirect a website’s traffic to a malicious site by changing the host’s file on a victim’s computer, or by exploiting a vulnerability in the DNS server.
  • Whaling: malicious hacking, which involves hunting for data that can be used by the hacker to blackmail the victim.
  • Email Spoofing: The emails spoof communications from legitimate entities or people. They present links to malicious sites where the attacks will collect your login and private information.
  • Typosquatting: this technique is also known as URL hijacking. It targets users who incorrectly type a website address into their browser.
  • Impersonation & Giveaways: probably the most common phishing attacks that anyone in Cryptocurrency for more than 2 months already saw once.  This technique involves impersonating an influent figure on social media and advertising giveaways or engage in other shady practices. Be careful about any direct message on Slack, Discord, Telegram, and Twitter.

Pump and Dump groups

A cryptocurrency Pump and Dump group, also called PnD, is a group of scam artists that will first purchase an altcoin, often lacking liquidity, and then will tell their group to massively buy the same coin, driving the price of this coin higher and higher, hyping the coin.

Technique of Pump and Dump group:

A lot of traders will then see the price increase and “FOMO” into the market, making the rise even crazier. A few minutes after the pump, the buyers from the lowest price will sell their coins but telling their group to hold and not sell, because it is going higher.

However, their selling pressure is so big that the price will recover to its initial price a few seconds after they started selling.

Pump and Dump group

Do not be naïve, this move is often too quick to be traded, and the risks are too significant.

If you search on Telegram, you will find many cryptocurrency groups with more than 50,000 members in it. Some of them offer “Free Calls,” but those calls can disguise pump and dumps scheme, even on the biggest exchange, some can have enough audience to make a coin pump more than 50% in a few seconds. We recommend staying away from this kind of scheme, which is supposed to be illegal by the way, but is not since we are in the cryptocurrency market, and thus, not regulated.