I am glad to be part of this lecture presented by professor @yohan2on, quite an interesting amd informative class on crypto scams and how to avoid them. Below is my homework task
The crypto industry is one of the innovative fast rising sector in the world today, and has attracted many investors and business leaders to grab the numerous investment opportunities it provides to individuals in the space to do business and make good profit for themselves.
Although, it is said that one "bad egg in a basket can infect some good eggs", and hence some dubious individuals also exist in the crypto ecosystem, these dubious individuals otherwise known as hackers or scammers manoveer their way into the crypto account of individuals and dupe innocent investors of their assets and vanish into thin air, sometimes within a trace. This act is known as Crypto scam.
Crypto scams are fraudulent and criminal activities carried out by individuals or group of persons to dupe and steal assets(tokens, money etc) of investors or traders in a platform. These scammers or hackers device various patterns to gain access into a person's digital asset, get their private keys and relevant details of the person's account and successfully access the funds or assets of the person and steal from them. These scammers are critically smart and tend to out-smart people by sweet talking and luring their victims and steal from them. The scammers most target newbies of the crypto ecosystem,knowing that they are new with no much knowledge or insight of how crypto space operates, and hence they take advantage of them.
There are many ways Crypto scam happens in crypto space, some of which includes;
▪︎Fake Websites and Links
Crypto Scammers creates fake websites that looks so identical to the original website and create fake links that comes with sweet persuasive offers, to trick their victims and steal from them. These scammers carefully alter a feature in the original website and if one is not very observant, they fall prey to them. Hackers creates a fake URL for the identical website, by swapping letters in the website, ** for example adding '0'(zero) in it instead of a letter ‘O', a naive trader or investor might fall victim to this trick.
For instance, if investor Krisani gets a link and click on the link and puts her private key and necessary information to access her account, without observing its a fake website the scammers would have succeeded in stealing from her, because she was not observant enough to see the slight change from the original website.
One thing every investor and trader in crypto space should check out for in a legitimate website is the presence of a security icon close to the URL bar, most atimes the icon is coloured green to show the website is secure and genuine.
▪︎Crypto Ponzi schemes
Ponzi schemes is one of the commonest pattern scammers use to dupe and steal people's crypto asset and funds. This scheme is often seen in the form of investment, where victims are sweet-talked into how they will invest on products or crypto asset and get high return on investment. In this ponzi scheme, few persons who invest early benefits and leaving those that invested later as victims.
Ponzi scheme offers huge Returns on investment within a short period and many people fall prey to this trick. Once the scammers gets their target amount, they flee and go into thin air. This is one scam I fell victim to in 2016(MMM saga in Nigeria). Some famous ponzi schemes are Onecoin scam, Pincoin and Plexcoin.
The use of emails to get and steal the account details of their victims is another way of crypto scamming. Scammers construct fack Emails and sends to individuals, most of these emails are sent from person's claiming to be representatives of an exchange firm or companies you have an account with, asking the trader/ investors to login with their account details in other to unlock a prize package, rewards, or bonus(ICO's) given to them by the firm. Once you do this, you automatically fall victim to them and they steal from you.
Crypto traders and investors should always any email sent to them even if it looks so original, and if they suspect any foulplay they should disregard such emails. Some critical aspects every crypto investors should look out from emails telling them to investing in any crypto asset are;
• If the email looks like a previous email gotten from the exchange platform.
•If the logo and brand on the new email gotten is same as the logo and brand of the previous one.
• If that email address is legitimately connected to an exchange platform or a company.
▪︎Fake Crypto Mobile Apps
Crypto scammers also create fake Crypto exchange Apps that is identical to the original version, when users download the fake App and do not verify the authenticity of the App, and login the scammers invades their victims account and steal their assets and funds. These Apps can be in form of crypto wallet or Exchange App for carrying out transactions. The scammers create these App in such a way that it looks so much alike to the original version, and it takes a careful and well observant person to notice the difference.
▪︎Social Media updates.
The use of social media platforms in scamming people is one of the newest way used by crypto scammers. These scams happen like a giveaway by a celebrity person or a big name in crypto space, the scammers create fake social media accounts with a celebrity or a big name and act like they are doing a giveaway or investment, most persons get convinced and if asked to login their account details, they do so and fall victim to the scammers.
In course of my research on cryptocurrency scam, I came across many crypto scam, but I'll be talking on Pincoin (PIN) Scam
Pincoin scam is one of the latest high profile exit scams in crypto space. This is an example of ICO and ponzi scheme used by crypto scammers.
Pincoin (PIN) was introduced into crypto space on the12th of January 2018, by an anonymous Vietnamese team with the backing of a Vietnamese Tech company called Modern Tech in Ho Chi Minh. The pincoin project presented to be very legitimate with an impressive whitepaper and roadmap plan that promised its investors a whooping eight blockchain based products. This was too real to be true, but still investors wanted to take advantage of the large profit they would make and they got lured and invested in the Pincoin project.
After the launching of Pincoin, an ICO of 48% monthly returns was promised to the investors, this was mind-blowing and appetizing, that everyone that got the information was interested and they began investigating. Within a short period of term about $660, 000, 000 was invested in Pincoin project by over 32,000 people which was kept in an account with the name "PIN Foundation".
As usual, the Pincoin made first payment to the investors that invested early, after making the first payment to investors in cash, the cause for deception arose as the PIN Foundation created another cryptocurrency called iFan and started paying their investors with it, little did they know that the new coin cannot be traded on any other crypto exchange platform, making it worthless and invaluable to the investors
It was at this point the investors knew they might have been scammed, they ran immediately to the office of the Modern Tech in Ho Chi Minh, only to find out that they had moved and the premises was like a graveyard. At this point the investors knew they have been actually scammed and raised alarm. In response to their alarm, the Vietnamese authorities organized an investigation on the scam, in the course of investigation they found out that the Modern Tech company and Pincoin team had enlopedand vanished with whooping millions of dollars of people's investments.
BELOW ARE SOME REFERENCES TO MY RESEARCH ON PINCOIN SCAM
Crypto scams has greatly affected the crypto space over the years, this has made most investors to leave the crypto ecosystem and instilled fear in the hearts of many investors and mostly newbies in the crypto industry.
Below are a few extent on how crypto scams has affected crypto space.
Alot of doubt have been instilled in many investors due to the numerous scams that have happened in crypto space. Most people now find it difficult to trust and invest in crypto industry even though crypto industry is a decentralized system that is open and transparent to it users.
These crypto scams are gradually reducing the reputation of crypto space, making individuals to have little or no interest in cryptocurrency trading, most especially to persons who have once fallen victim to these scams. For instance, if investor Krisani was a victim of Pincoin scam,it will be almost impossible for her to trust and invest in cryptocurrency trading again due to her previous scam experience.
▪︎Restrictions and Ban.
The enormous record of scams in the crypto space have raised alot of eyebrows and resulted to various forms of restrictions and ban from private institutions and government authorities in some countries. Crypto Schemes and money laundering have made many countries to restrict the use of cryptocurrencies and even ban the usage in some countries too, all in the quest of protecting her citizens, and this has hindered many citizens from benefitting from the crypto space. One of such countries is Nigeria, as at 5th of February 2021, the Central Bank of Nigeria sent a letter to banks and other financial institutions in the country, stating that any account found dealing in cryptocurrency and facilitating cryptocurrency exchanges payment will be closed down as it is now prohibited. As such crypto traders in Nigeria deviced another means for cryptocurrency exchange, which is known as Peer-2-Peer.
▪︎Negative Mindset towards Crypto space
As a result of the many crypto scams and criminal activities in the crypto industry, alot of persons have developed a negative mindset towards investing in cryptocurrencies especially among intending people and newbies who have little or no knowledge about the crypto space and how it works. This has somehow slowed down investments in cryptocurrencies in some nations especially in third world countries.
Every system or sector in the world that is regulated exhibits some extent orderliness, to help keep the system to function more effectively and secure.
So a little regulation in crypto space will add value to it and create an avenue for investors to safely, consistently and securely invest again
The regulation of the real-world identities of crypto space users following the recommendations of some financial regulatory bodies like Financial Action Task Force’s (FATF’s) Recommendation 16, Financial Crimes Enforcement Network (FinCEN’s), and Money Services Businesses (MSB), will greatly help to reduce the alarming rate of crypto scams and frauds. These regulatory bodies will request for the details of the sender and recipients of any transaction, and any fraudulent act by any user can be traced.
Also ICOs should be regulated to ensure that only well investigated persons or institutions that meet the requirements and suitable qualifications of the regulatory body will be able to introduce new ICOs. With these regulation in place, there will be more orderliness in crypto space for investors to be assured of their funds and returns when they invest in the projects.
Regulation of crypto space will give the real value of cryptocurrencies in the marketplace, rather than having a cryptocurrency being over valued, which may lead to massive losses to investors, also help in reducing fraudulent activities and crypto scams. For instance, in late 2017 Bitcoin’s value was greatly hicked and led to a drastic price reduction, in which many investors encured massive losses due to the over-valuation of the coin and market manipulation by some whales in the system and it led to an outright scam in crypto industry.
Although, crypto space will experience more orderliness and become valuable if regulated, but from the other angle of some negative effect will be seen in crypto space, such as;
▪︎Crypto space is a decentralized system which holds the privacy and anonymity of its users dearly and of utmost importance, with time this right of the users will be lost, thereby diverting from its original design as a decentralized blockchain.
▪︎There will be an increase in transactions fees and a high tax rate on the crypto space, making it indifferent from the use of Fait currency for transactions.
This could make many investors return to their transactions with fiat currencies since they are actually more accepted and there is no more advantage in using crypto space.
▪︎There will definitely be high tax on the crypto space and before long there will be little or no difference between cryptocurrency and fiat currencies and this will make many investors return fully to fiat currencies since they are actually more popular and accepted and there is no advantage in using crypto anymore
In all I'll say, the crypto space should be regulated to some extent to ensure some order in the system and add more value of trust and security to crypto space
Crypto scam is one of the greatest challenges faced by crypto industry in the world today, as it has have caused significant damage to both investors and the crypto space at large. Many persons have fallen prey to one or two of crypto scams and incured huge losses, some even lost their life due to this scam. This has however, brought about great doubt and negative mentality towards the crypto industry.
Notwithstanding, the crypto industry is still growing fast in the world and regulation of the crypto space will greatly limit these scams to improve the functionality and consistency of crypto space, and also add value to it in terms of trust and security.
Thanks prof @yohan2on for an interesting lecture this week, I really benefited much knowledge. Thank you for reading through.