Crypto-currency scams are a growing phenomenon after Binary scams

Crypto-currency scams are a growing phenomenon after Binary scams

By Miss Victoria Malela, contributing writer at WinChargeback

The facts : In 2016 most major banks, governments and accounting firms published papers on crypto-currency, otherwise known as digital money, deemed to possibly become the currency of the future. Nowadays the medias are flooded with opportunities to purchase, exchange or invest crypto-currencies with the rise of investment forms, such as Initial Coin Offerings (ICOs). Everyone wants their piece of the pie.

March 27 2018 — the European Securities and Markets Authority (ESMA) announced the official ban of Binary Options to retail investors. As the chapter on Binary Options is coming to an end, crypto-currencies are attracting more and more attention, including that of former Binary Options scammers looking for a getaway.

ESMA Bans Binaries
ESMA Bans Binaries

By now, you will have certainly heard about the Bitcoin, as we have gone from the idea of a decentralized currency to a collective hype. From social media to growing concerns coming from financial authorities in the favor of crypto-currency regulations, ICO fraud/scam, hacked wallets, crypto-hacking and other more sophisticated scams have brought investors to question the safety of crypto-currencies, which despite it all remain a trending topic.

Since the ban of the Binary Options, the lawsuits which followed and the law enforcement by respective financial authorities, crypto-currencies are becoming the new trendy phenomenon in the world of financial scams and naturally raise concerns. This April, 2018 alone, the Vietnamese government shed light on what has been reported as a $658 million ICO fraud. The fraudsters achieved this by putting into place a pyramid scheme, prompting investors to recruit more investors — 32 000 fraud victims in total. Even though people were initially able to track the value of their token on the system and see it rise, they were unable to proceed to withdraw any money — which hereby recalls how binary option scams operated.

“We’re very concerned about initial coin offerings and crypto-currencies. We don’t want this to become the next mutation of binary options or a haven for fraudsters.”

These are the words of Israel Securities Authority chairman Shmuel Hauser who saw in the brisk rise of crypto-currencies, the possibility for it to be another opportunity for cyber-fraudsters to extort money from unaware investors.

As the law banning Binary Options has been unanimously approved by the Knesset on October 23rd 2017, a lot of companies previously dealing with binary have chosen to continue their unscrupulous activities in the field of crypto-currencies by merely changing their names to endorse crypto-currencies — which they deem more financially profitable. Since 2014 over 20 companies and people have been arrested or accused of fraud.

The different shades of crypto-scams

By all means, the biggest asset of crypto-currencies might also be its greatest pitfall, as the system of Blockchain — which allows clients to stay anonymous — also prevents the government or higher authorities to intervene and ensure that funds are transferred as they should be.

The decentralization of currency comes with the risk of not being able to put a face on individuals responsible for fraud. It is unlikely to connect transactions and addresses to real identities. To illustrate this, let’s take the course of a typical transaction : normally once a transaction is complete there is no charge back, but likewise whist the transaction is being confirmed or pending, you are exposed to a risk of being hacked, and people have no authorities to turn to in case of financial scam. Because it is still growing, crypto-currencies are a slippery slope where only recently authority have started looking into.

Some common scams to watch out for and alleged risks associated with crypto-currencies


Crypto-jacking happens when your computer gets temporarily borrowed to generate funds on behalf of a scammer. The unauthorized use of your CPU can be used to ‘mine’ currencies for a hacker. That means that the hacker will use your CPU power to generate remotely crypto-currencies. This can happen seemingly innocently, while browsing through a website. If the website contains a malware and your device is not protected, it will infect your computer. This in turn slows it down, causing overheating, battery issues and skyrocketing electricity bills. Some websites that have been known to carry these malwares are PirateBay, ShowTime Youtube and some official government websites. Crypto-jacking can be prevented by adding something simple as an ad-blocker or using extensions like MinerBlock or no Coin Chrome. They effectively and immediately block JavaScript miners.

The mother of all coins — a calculated risk ?

New crypto-currencies are being created on a daily basis and it all comes down to which one will eventually be assigned as the “mother of all currencies”. In the meantime, we are left to bet in a sea of currencies more or less reliable like IOTA, Ripple, YbCoin, Dogecoin, Dash, MaidSafeCoin, Lisk, Storjcoin X, SiaCoin, Counterparty,… you name it. The nature of the market is that it keeps changing and while it may be tempting to try to predict which new currency is on the rise and is worth investing in, common sense is necessary. New currencies emerge as fast as they go and have no fixed price, as we have seen it even in the case of more established currencies such as Bitcoin.

Shady exchange platforms

The purchase of currencies goes through exchange platforms and exchange platforms come with transaction fees. But transaction fees are not the only major concern : at the end of a trading day, investors should be able to withdraw their Bitcoin to an offline wallet and keep it secure there. Some platforms do not allow this and it should be flagged as a red flag. When it comes to using exchange platforms, run your search and verify that all data is accurate. Speak to the account managers, find out about their financial qualifications. Some of the most common exchange platforms are : Coinbase, Kraken, Bittrex and Cryptopia.

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ICO exit scams

Savedroid, a German StartUp, which managed to raise $50 million in an Initial Coin Offering (ICO) has recently made headlines after perpetrating a big exit scam, which was later found out to be a prank but shows how much of a jungle the crypto market really is. There is never enough caution to prevent exit scams, but diligence must be exercised when it comes to investing in ICOs. Do your research and leave no stone unturned. In case of doubt or if it feels like a scam, do not invest. Ask for as much information as possible on the product. Look out for clear communication, a verified CEO, ask sensible questions regarding yearly forecast and make sure that the outcomes sound reachable and realistic, before you make a decision. Investing in ICOs also raises other concerns, such as the fact that there is no guarantee that a given start-up comes up with a successful product, and there is guarantee over the value of the crypto-currency which the investor gets in exchange. ICOs have no geographical restrictions, which means that anyone worldwide can participate in a coin offering. in 2017, there were over 200 ICOs, which means a tedious and time-consuming process for cautious investors, when it comes to making a sensible choice as where to invest their crypto-currency.

Social media impersonation

Social media impersonation happens when a scammer uses social media to create a fake account (usually detectable through almost identical spelling) and offers to give away a big amount of crypto coins in exchange for a smaller amount. These scams are mostly perpetrated on platforms such as Twitter. To avoid being a victim of this type of scam, you can use EtherScurityLookup extension for google chrome, it will show what twitter accounts are fake impersonation.

Phishing websites and fake adverts

As its name goes, phishing websites aim at extorting wallet keys in order to take possession of tokens or crypto-currencies within that wallet.

Fake advert

One way to avoid them are to pay extra attention to URLs, as the differences are sometimes slight in the spelling or the use of special characters, but consequences can become dramatic. There are a lot of online resources to avoid scam. You can verify is a company is registered with a competent authority and never act under pressure. If somebody is trying to sell you something, exercise caution. Other simple ways to protect yourself is to use a protection on your device, such as an appropriate chrome extension that will prevent you from visiting known phishing websites. Use links that are preferably from a reputable source and verify address links by hovering your mouse over it, before you actually click.

Pre-configured Hardware wallet

Hardware wallets can also be stolen. One common case of wallet theft involves a pre-configured seed phrase. The pre-configured seed phrase only gives the scammer the ability to access the set up wallet and steal the coins or tokens. As a rule of thumb, no wallet should come with a pre-configured seed phrase. To avoid this situation, only purchase a hardware wallet from a trusted and genuine source. A hardware wallet should let you set up your own seed phrase.

Crypto-currencies and the future

Behind a decentralized currency the idea that money is no longer controlled by institutions, banks or government. We are undeniably undergoing some major changes in the financial system, as venture capitalist and entrepreneur Tim Draper puts it in his recent Interview with Forbes, in the future, “fiat currency will resemble carrying around change”.

Some companies have even come up with a plan to exchange their clients’ CPU power for a service, so the company could remotely use devises to ‘mine’ crypto-currencies. Everywhere one looks, crypto-currencies appear with the promise of a prosperous return, but what really hides behind the hype and what should an investor bear in mind, before they rush to purchase or exchange crypto-currencies?

As for now, crypto-currencies are under close scrutiny of financial authorities. It is essential to bear in mind that no regulations at all are the open door to cyber scammers. This year alone saw $1,36 billion stolen by cypto-currency scammers. This numbers keep rising, so is there a safe way to invest in crypto-currency at all?

Investment is by definition a risky venture, but you can minimize the loss by showing more diligence and paying attention to signs signaling a potential scam. Investors must also bear in mind the cyclical value of crypto-currencies, as demonstrated by the rise of the Bitcoin in 2017 — which reached a high of $19,783 on December 17th.. Bitcoin has since gone down showing herein the uncertainty of the market. Today, the Bitcoin is at $ 8100,01, its value could drop due to the general growing enthusiasm but no finite prediction can be voiced. While potential returns may looks promising, a good way to prepare before you invest in crypto-currencies is to go over the following points :

  • Have a clear understanding of what investing means versus speculation.
  • Define an action plan.
  • Develop a thorough understanding of the currency you want to invest in and establish your goals.
  • Have your investment risk tolerance assessed.
  • Be ready to lose money and be willing to only invest the money that does not compromise your safety.
  • Develop your knowledge through trusted sources and do not rush.

In conclusion : A lot of speculations surround crypto-currencies, including the fact that in the future the digital-based coins will eventually come to replace official currencies. One sure thing is that with the amount of money invested in crypto-currencies, at this rate, it will definitely end up reshaping the global economy, slowly turning into a “Blockchain economy’ according to Dr James Canton of the Institute for Global Futures.

At this point in time however, as crypto-currencies are widespread, people are gaining more and more awareness on how they can safely invest in them. As a rule of thumb, financial awareness involves knowing that no matter what, when it comes to the market it is more like learning to swim rather than fighting the waves.



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