The criminals use both old-fashioned and new-technology tactics to swindle their marks in schemes based on digital currencies exchanged through online databases called blockchains.
Others use , including automated software that interacts with Telegram, an internet-based instant-messaging system popular among people interested in cryptocurrencies. Even when a cryptocurrency plan is legitimate, fraudsters can still .
An even more basic question arises, though: How are unsuspecting investors attracted to cryptocurrency frauds in the first place?
Some cryptocurrency fraudsters appeal to people’s greed, promising big returns. For example, an unknown group of entrepreneurs runs the scam bot iCenter, which is a . It doesn’t provide information on investment strategies, but somehow .
The iCenter scheme operates through a group chat on Telegram. It starts with a small group of scammers who are in on the racket. They get a referral code that they share with others, in blogs and on social media, hoping to get them to join the chat. Once there, the newcomers see encouraging and exciting messages from the original scammers. Some newcomers decide to invest, at which point they are assigned an individual bitcoin wallet, into which they can deposit bitcoins. They agree to wait some period of time – 99 or 120 days – to receive a significant return.
During that time, the newcomers often use with friends and contacts, bringing more people into the group chat and into the investment scheme. There’s no actual investment of the funds in any legitimate business. Instead, when new people join, the person who recruited them gets a percentage of the new funds, and the cycle continues, paying out to earlier participants from each round of newer investors.
Lies and More Lies
Other scams are based on impressing potential victims with jargon or claims of specialized knowledge. The Global Trading scammers claimed they took advantage of to profit from what is called arbitrage – simply buying cheaply and selling at higher prices. Really they just took investors’ money.
Global Trading used a bot on Telegram, too – investors could send a balance inquiry message and about how much was in their account, sometimes even seeing balances . With returns looking like that, who could blame people for with their friends and family on social media?
Exploiting Friends and Family
Sometimes big names get involved. For instance, the kingpin behind and other alleged scams in India convinced a number of Bollywood celebrities to .” He even tried to make himself , proclaiming himself a “,” as he investors between .
Not all the celebrities know they’re involved. In one blog post, iCenter featured a video that purported to be an , holding a sign featuring iCenter’s logo. Videos of Justin Timberlake and Christopher Walken were deceptively edited so they appeared to praise iCenter, too.
Fraudulent Initial Coin Offerings
Another popular scam technique is called an “initial coin offering.” A potentially legitimate investment opportunity, an initial coin offering essentially is a way for a startup cryptocurrency company to raise money from its future users: In exchange for sending active cryptocurrencies like bitcoin and ethereum, customers are promised a discount on the new cryptocoins.
Many initial coin offerings have , with organizers engaging in cunning plots, even renting fake offices and creating fancy-looking marketing materials. In 2017, a lot of hype and media coverage about cryptocurrencies fed a huge wave of initial coin offering fraud. In 2018, collapsed, costing backers at least $100 million. Many of these projects had no original ideas – had copied ideas from other cryptocurrency efforts, or even plagiarized supporting documentation.
Investors looking for returns in a new technology sector are still interested in blockchains and cryptocurrencies – but should beware that they are complex systems that are new even to those who are selling them. Newcomers and relative experts alike have fallen prey to scams.
In an environment like the current cryptocurrency market, potential investors should be very careful to research what they’re putting their money into and be sure to find out who is involved as well as what the actual plan is for making real money – without defrauding others.
(This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same. This article was originally published on The Conversation. Read the original article here.)
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