Scams are not a recent phenomenon, in which Stories about them date back to biblical times, What has changed fundamentally is the ease by which scammers can reach millions, if not billions, of people with the press of a button. The Internet and other technologies have simply changed the rules of the game, with cryptocurrencies symbolizing the leading edge of these. new cyber crime opportunities,
For example, in 2021, two brothers from South Africa managed Fraud of $ 3.6 billion from investors From a cryptocurrency investment platform. In February 2022, the FBI announced that it had arrested a couple who used fake cryptocurrency platforms. Fraud of another $3.6 billion investors
You might be surprised how they did it.
There are two main types of cryptocurrency scams that target different populations.
Targets a cryptocurrency investors, who are Active traders with risky portfolios, They are mostly young investors below the age of 35, who earn a high income, are well educated and work in engineering, finance or IT, In this type of fraud scammers create fake coins or fake exchanges.
A recent example is SQUID, a cryptocurrency coin named after the TV drama. squid game, After the price of the new coin skyrocketed, its creators just disappeared with the money,
A variation on this scam involves investors being among the first to buy a new cryptocurrency—a process called an initial coin offering—with the promise of big and fast returns. But unlike the SQUID offering, no coins are ever issued, and potential investors are left empty-handed. really, Many early coins turned out to be counterfeitBut the complex and evolving nature of these new coins and technologies can fool even educated, experienced investors.
Like all risky financial ventures, anyone considering buying cryptocurrency should follow age-old advice to thoroughly research what’s on offer. Who is behind the offering? What is known about the company? Is a white paper, an informational document issued by a company outlining the features of its product, available?
In the SQUID case, a warning sign was that investors who had bought the coins were unable to sell them. The SQUID website was also replete with grammatical errors, which are characteristic of many scams.
The second basic type of cryptocurrency scam uses cryptocurrencies as a payment method to transfer funds from victims to scammers. All ages and demographics can be targets. These include ransomware cases, romance scams, computer repair scams, sextortion cases, Ponzi schemes, etc. Scammers are taking advantage of the anonymous nature of cryptocurrencies to hide their identities and avoid consequences.
In recent times, scammers will request wire transfers or gift cards to receive funds—as they are irreversible, anonymous, and untraceable. However, such payment methods require potential victims to leave their homes, where they may encounter a third party who can intervene and possibly intercept them. On the other hand, crypto can be bought from anywhere at any time.
In fact, bitcoin has become the most common currency requested in ransomware cases, Demand is being made in about 98% of cases, According to the UK’s National Cyber Security Centre, sextortion scams often request individuals to Pay in bitcoin and other cryptocurrencies, There are romance scams targeting young adults increasingly using cryptocurrency As part of the scam.
If someone is asking you to transfer money to them via cryptocurrency, you should see a huge red flag.
the wild West
In the area of financial exploitation, more work has been done to study and educate elderly scam victims, because High level of vulnerability in this group, Research has identified common traits that make someone particularly vulnerable to scam urges. they include Differences in cognitive ability, learning, risk taking and self-control,
Of course, young adults can also be vulnerable and are actually becoming victims. There is a clear need to broaden the education campaigns to cover all age groups including young, educated, affluent investors. We believe that the authorities need to try and adopt new methods of protection. For example, regulations that currently apply to financial advice and products can be extended to the cryptocurrency environment. Data scientists also need to better track and trace fraudulent activities.
Cryptocurrency scams are particularly painful because the chances of recovering lost funds are close to zero. For now, there is no monitoring of cryptocurrencies. They are simply the wild west of the financial world.
Yaniv Enoch is an associate professor in risk management at the University of Southampton. Stacey Wood is a professor of psychology at Scripps College.