While talking about Scams in Crypto we take a look into the various scams that have been in effect starting from the earliest Ponzi schemes to the latest cryptocurrency scams. We take into account the Scams in Crypto due to the nature of the cryptocurrency industry, many scams operate. Hype, technical complexity, regulatory uncertainty, and naïve investors hoping to make a quick buck all make for an environment ripe for fraudsters.
Scams in Crypto: Popular Financial scams
- Ponzi schemes: Before the Scams in Crypto, investors are promised good returns and old investors are paid with new investors ‘money.
- Exit scams: Founders of a project, wallet and exchange or investment scheme run off with customer money.
- Fake hacks: The project gets hacked by an associate who shares profit with the project team.
- Pump & Dumps: Illiquid coins are bought cheaply by fraudsters then hyped on social media and sold at a higher price to new investors.
- Scam ICOs: Under the Scams in Crypto category, ICO raises money with no intention of delivering a product. Sometimes they will list well-known industry experts as advisors or as part of the team to get credibility, without the knowledge or approval of the expert.
- Spoof ICOs: Clones of real ICO websites made with the scammer’s deposit address instead of the legitimate deposit address.
- Scam mining schemes: Claims that investors will earn lots of cryptocurrencies but key information such as difficulty increases is not disclosed.
- Fake wallets: Wallet software that allows the scammer to access private keys, so the coins can be stolen from the user. And so on. There are many variations to these, and scammers are proving increasingly innovative!
Through Scams in Crypto people have made and lost fortunes trading Cryptocurrencies and investing in ICOs, but there are many risks. If you do decide to get involved, be careful and do a lot of research before committing your money.
Spoofing: Another scam in Crypto, spoofing is about submitting orders with the intention of canceling them before they are matched. This trick can be used to drive prices up or down.
- Front-running: An exchange can see a customer’s order and use the information to trade before the customer’s order is accepted.
- Running stops: A certain type of customer order, called a ‘stop loss,’ is not visible to other customers of the exchange but is visible to the exchange. Insiders who can see customers’ stop-loss orders can use this information to trade against their own customers. This is a popular trick in FX markets.
- Fake liquidity: Exchanges can publish ‘infallible’ orders that disappear, or only partially fill when a customer tries to match them. This makes it look like there is more liquidity on the exchange than there actually is.
There are many other tricks under Scams in Crypto that may be used either by exchanges or by customers of exchanges while the management of the exchange looks the other way. Different exchanges behave with different levels of professionalism. Many exchanges are dodgy. Do your own research!
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