Cryptocurrency Scams and How To Identify The Main Methods Used to Cause Mayhem


Cryptocurrency Scams And How To Identify Them

Cryptocurrencies are often promoted as next-gen money which is advanced, secure and privacy-focused. However, the security features of the cryptocurrency token do not really make much of a difference if you are scammed by someone in giving away your hard-earned crypto.

With the rise in popularity of cryptocurrencies, the number of scams has also increased significantly over the years. The scams could be of any order, be it a seasoned investor scammed into investing a Ponzi scheme, or a newbie being robbed of their precious crypto asset by luring them for high unbelievable returns. In 2018 alone the frauds related to crypto has amounted to $1.7 billion.

Criminals use both old-fashioned as well as new age technology to attract crypto holders to their Ponzi schemes and given the limited knowledge of the majority of new investors, it has become much easier for the scammers to pull off a heist. In certain cases, the added privacy and security features work in favor of the scammers. Its harder to track these scams in their initial phases because of the sophistication with which they are executed.

Scammers make use of high-end software programs as well as malwares which are coded in a way that, by the time the victim realize their mistake it’s already too late. So, the obvious question is how to identify such Ponzi schemes and scammers before they get away with people’s crypto. Although there is no certain hard-bound rule to identify such schemes, however a little attention to details and taking necessary precautions can actually help in substantially reducing such crimes.

How To Identify Potential Ponzi Schemes?

Pyramid Schemes

Scammers mostly prey on the vulnerabilities of the users and the basic human instinct of greed. Most of these scams offer high lucrative returns in a very short period of time. For example, take iCenter into consideration it is a Ponzi scheme built to lure Bitcoin and Litecoin traders. The first sign of a potential scam is the lack of strategy for their promise of high returns. iCenter does not really provide a roadmap of their schemes but promises 12% daily returns.

The scam is run by a group through a Telegram chat, where the small group of scammers generates a referral code that they share on a number of online platforms in hopes that someone would be persuaded to click on the link which would take them to the chat. The gullible newbies mostly fall for these tricks and when they arrive on the chat, they get hyped to see optimistic messages from the original scammer. Those who decide to invest in the scheme are assigned a digital Bitcoin wallet in which they can deposit their Bitcoin in hopes of high returns. The waiting time is around 99 to 120 days.

During the waiting period time, those who have invested in the scheme are encouraged to invite others to the platform, and each addition carries some reward with it. There is no real investment from the scammer and they mostly payout a portion of the new investment to the person who has brought in the new investor. This type of Ponzi Scheme is referred to as the “Pyramid scheme” and has been quite a popular choice of scammers for ages.

Once the scam garners a hefty amount, they vanish overnight, as there is no solid investment or infrastructure that they need to take care of. So, before making any investment in a lucrative scheme which sounds too good to be true, make sure to check finer details and the roadmap of the program. If a scheme looks too good to be true, chances are they are Ponzi.

The Game Of Lies And Technical Jargon

While Pyramid Scheme type Ponzi schemes are tried and tested game for scammers, and those who become a victim mostly realize it too late. However, others go for straight out lies, where they use technical jargons in a very vague manner to manipulate people into believing in their claims. OneCoin carried out a similar Ponzi scheme where they defrauded investors of $3.8 billion. They promised investors of high returns from a cryptocurrency which does not even exist.

Another similar scam was carried out by Global Trading who convinced the victims that they have devised a new technique called arbitrage, which make use of price differences on different crypto exchanges to make profits. They simply convinced the investors that they would be buying crypto from the exchanges with cheaper price listing and then sell it those which have a higher price value for the same token. Here the use of the technical jargon arbitrage made investors believe in a stupid claim.

Global Trading also made good use of Telegram bots, where whenever an investor enquired about the balance, the scammers put out false information, in certain cases the investment returns rose by 1 percent in an hour.

The Use Of Technology And Power Of Influence

Scammers understand the nerve of the trade they are dealing in, and the added benefit of technology help them pull off the scams in a more sophisticated manner. Take the example of GainBitcoin scam in India, where the alleged scammer convinced many Bollywood celebrities to promote his book “Cryptocurrency for Beginners.” This formula of using the credibility and fandom of celebrities led to a total loss of $769 million and $2 billion.

Technology has proven to be a great aid for the scammers, take iCenter for example, where the scammers edited several videos involving celebrities like Dwayne Jhonson, Justin Timberlake, and Christopher Walken which show them promoting the Ponzi schemes just because of good editing work.

The Fraudulent Initial Coin Offerings (ICO)

ICOs were the modern day crowd-funding for the crypto space, where a new startup launching their coin ask for a certain amount of money from its future users and offers various discounts for the early investors. Users have seen the volatility in the prices of crypto tokens cling on to these ICOs in hope of making 10X to 100X returns once the token becomes famous.

However, ICOs became a hotspot for scammers given the fundraising only require promises and not a complete finished product. The ICO related frauds became so popular that organizers of ICOs started to rent out fake offices and creating fancy looking fake marketing materials. The rise of cryptocurrencies in 2017 gave the ICOs thumping popularity which resulted in thousands of ICOs in 2018 being a fraud and made investors lose a combined total of over $100 million. This is the reason that today in 2019, ICOs have almost got out of trend as fast as it came into the trend.


Scammers are there in every field and cryptocurrency market being fairly new with promises of huge returns make it easier for these scammers to pull off their schemes. However, one should always follow the methodology of “Prevention is Better Than Cure.” If a scheme that sounds too good to be true, chances are it is a scam.

Always make sure that the scheme you are relying on has credible backing and verifiable history. If any scheme or program fails to make you understand how it operates, and indulge in vagueness by using technical jargons, try to avoid it.

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