The barbarians are at the gate. Theyâre out there trying to get you, but now youâve got someÂ ideas on how to protect yourself from all these scams trying to get you from every whichÂ way.
What are you going to do with this new-found financial freedom as you embrace cryptosÂ and the blockchain-based future that awaits us all?
Youâre going to go out through that gate, past the barbarians and into the world and ...
youâre going to get scammed.
Of course not! Weâre here to help.
Weâve already talked about all the things that can happen to you, but now weâre going toÂ look at the kinds of scams out there in cryptoland that you can actually get yourself into.
Weâre going to tell you exactly what to look for. We canât catch everything, but by the timeÂ youâve read up on this stuff, and youâve seen some of these scams yourself, youâll be anÂ expert.
Fake Bitcoin Wallets
This is something Iâve already talked about, but is a particularly hot scam right at the moment. Remember that âspoofing?â Thatâs where the scammers duplicate a site as exactly as possible so you think youâre logging in to the real thing? Itâs very popular right now to duplicate a wallet app and use a phishing attempt to get the recipient to login to their online wallet.
Then the scammers, of course, have your login info for the real site, and you no longer have the coins that were there. Itâs insidious because the sites are sophisticated. They appear just like the original, usually with just some subtle variation of the name, something you probably wouldnât notice.
But it doesnât just work with phishing. It works with searches, too. You may make a mistake typing in the wallet name in the search engine or browser search window. They choseÂ that name because it is a common mistype of the wallet name.
And this can be done with a wallet that is just promoted as a new wallet service. PeopleÂ sign up for the new wallet, like how it looks, and then start depositing coins. And thatâs that. Scam completed, they got your coins. Who can you complain to? Theyâll just stringÂ you along with several (fake) service reps and bounce you around until you just give up.
Typically, any info on their site about contacts, phone numbers, names of staff or owners,Â are all fake. You lose.
As a rule of thumb, only use wallets and exchanges recommended by people and businesses you know and trust, and websites reputable in the industry. The longer they have beenÂ around, the better. Once you have an online wallet set up (a real one, that is), save the siteÂ in your Favorites. Just use that to access the site. Donât use search unless you have to, andÂ be careful. Best practices apply.
As a rule of thumb, for new wallets, open source software, vetted by the industry, is generally trustable. The more open source the code is, the better. Someone is always working onÂ a new wallet app. Just be especially careful with new apps until they are fully vetted in theÂ industry.
Donât deposit large amount of coins, read reviews from known or trusted writers,Â and stay current in industry news at reputable sites. Test the service - just deposit a smallÂ amount and try the service for a while. A good test is to try to withdraw some coins, orÂ even all of what you deposited. If you can do that without any problems, then deposit moreÂ later. Let them earn your trust over time. Withdrawal problems are a red flag. It doesnâtÂ always mean scam, but you should be careful.
Itâs best to go with recommended products until you know more about the industry, but even the industry can be temporarily fooled.
There have even been several fake wallet apps that have slipped through Appleâs reviewÂ process and made it into their marketplace - with names and logos that looked legit, completely copied elements of the real businesses, but with links that went to a bogus wallet.
This brings us to the ever-present Ponzi scheme. This scam typically works by promising investors spectacular returns, the kind they canât pass up. Then, the money from newÂ investors brought in pays the initial investors, making it look like the investment worksÂ great. This is what then attracts a whole new, larger, round of investors. The problem is,Â thereâs no real investment. The scam ends when there just arenât enough investors to keepÂ it going. Then the organizers just run off with all the money that the final investors put in.
In cryptos, the Ponzi found its next great playground.
These scams usually take the form of fake cloud mining schemes, shared profits from aÂ ârevolutionaryâ trading algorithm, or even investor clubs. These are whatâs known as anÂ HYIP, a High Yield Investment Program.
Now, technically, cloud mining platforms, shared trading algorithms, and investor clubsÂ arenât inherently scams. But anyone who has been around cryptos for any length of timeÂ has seen so many of these âinvestmentsâ come and go, and many have even given in andÂ tried one or two of them. They are almost invariably scams.
Typically they will go something like this. You deposit money, buying into some contractÂ where you will receive profits on, letâs say a weekly basis. At first it seems to work as youÂ get your returns. But then there will be a delay in payment. Maybe they will resume, maybe not. Again, who will you complain to? They can string you along if they like.
Eventually, you will try to withdraw your investment only to find you canât - thereâs a technical problem, or itâs not in your contract, or they just plain take your coins and never talk to you again.
Some people intentionally invest knowing itâs a Ponzi scheme. They want to be in earlyÂ to get the gains that the organizers will pay out to the first investors - they will spread theÂ word and be the first line of defense against accusers of fraud - âbut I got paid those returns! I know it works.â They may know the fraudster, or may just be trying to take advantage of the opportunity. People like that make it harder to tell the rip-offs from the real investment opportunities.
There are usually a number of red flags you should look out for. Do they promise âguaranteedâ profits? Not too many investments can guarantee profits, especially with the absurdly high rates of return they throw around. What kinds of reviews are they getting from reputable reviewers? Do they have a social media presence? Are the owners and staff accessible? Do they attend trade conferences? Does anyone even know who they are? Are theirÂ contracts or mining addresses public? How transparent are they? These are the questionsÂ you need to ask, and the answers are usually not satisfactory.
If it sounds too good to be true, it probably is. If they were making such great returns,Â why would they need your money to do it? The bottom line is - if they were, they probablyÂ wouldnât even tell anyone about it, let alone share the profits with strangers.
Itâs possible that you can find some good investments out there. Just do your research first,Â and expect the worst if you do invest. If it actually works out, congratulations.
Bitcoin Donation Scams
This one is as bad as it sounds. People will go to great lengths, and without a shred ofÂ moral decency, to get your coins. These scams can be as sophisticated as a great-lookingÂ website with lots of heart-wrenching stories of hungry children and needy puppies. Of course, they can cut-and-paste those stories from legitimate charities, and get those puppy pictures from free stock photo sites just like we could.
Or they can be as simple as a Retweet or Facebook post asking you to send some coins to help their great cause. Theyâll even give you the address to send it to. Itâs so easy! Please donât fall for it. Either donate only through established charities or at least do some work reviewing their project using the safeguards we will supply you with in this report.
For now, keep your eyes open, start doing research as you see potential scams or potentialÂ investments, do your due diligence, and employ best practices in all that you do.
Written by The Crypto.IQ Team
Charlie Shrem is a Bitcoin pioneer. A social economist. A digital currency trader who has made millions. His work in this field is legendary. In 2011, at the dawn of the crypto era, he founded BitInstant, the first and largest Bitcoin company.
In 2013, he founded the Bitcoin Foundation and serve as its Vice Chairman. Since then, Charlie has advised more than a dozen digital currency companies, launched and managed numerous partnerships between crypto and non-crypto companies, and is the go-to guy for some of the worldâs wealthiest entrepreneurs. In short, he is the ultimate insider at the epicenter of the crypto universe. Charlie holds a BS in Finance and Economics from City University of New York and studied at Florence University of the Arts.
Charlie Shrem isn't the only legendary trader on the CryptoIQ team. Â Randall Oser founded TRK Group in 1999 leading the company as its Head Trader until its sale to E*Trade in 2003. Â He grew TRK to 150 employees while deploying over $100 Million in trading capital. Â He trained dozens of Wall Street traders on not only how to make millions of dollars but more importantly how to preserve their newfound wealth.
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