No matter how hard governments try to regulate it, the Cryptocurrency industry is still alive and kicking. Since the topic is quite ambiguous to the general public, frauds use it to scam people out of their money, with what looks like a genuine investment opportunity.

If you fell into a Cryptocurrency scam, please contact us now. Although it is extremely difficult to recover money from Crypto scams, we will give you our honest evaluation of your case, and if possible, we will give it our best effort to recover your money.

The first step to protecting yourself from frauds or scams is to be knowledge of the threats. But hope is not lost, if you have been scammed. Read on to learn about the most common cryptocurrency scams and how we can help.

What is cryptocurrency?

Cryptocurrency has quickly become one of the most fascinating and volatile financial asset classes in the markets. As an investment, Bitcoin has had one of the highest returns in history. Bitcoin was created when the first significant impacts of the Great Recession were felt.

Bitcoin was designed to be a source of value and a medium of trade, a decentralized virtual currency with a truly fixed supply to combat the rampant money printing by central banks. Bitcoin can be decentralized because of the blockchain technology and the distributed ledger.

Bitcoin mining scams

Mining is how cryptocurrencies like Bitcoin are created, a process known as Proof of Work. Mining requires significant computational power to complete highly sophisticated algorithms to record transactions on the distributed ledger. When ‘blocks’ are mined and added to the ‘chain,’ the miner is rewarded with Bitcoin.

Because mining requires time, resources, power, and infrastructure, many scams seek individuals to ‘invest’ in mining projects, a form of passive income. Thankfully, this scam is less common with the advent of 3rd generation blockchains like Cardano that use a staking system versus mining – no massive power or infrastructure requirements and allows individuals the opportunity to make passive income much easier than with the legacy mining processes.

Bitcoin wallet scams

Bitcoin (and all cryptocurrency) is held in digital wallets. Wallets have two keys – a private key and a public key. A public key is basically like an address to send something to. A private key is what gives permission to spend or send your cryptocurrency.

Bitcoin wallet scams are a common scam that targets new entrants to the cryptocurrency space. Because cryptocurrency is held in digital wallets, many cryptocurrency fraud schemes have come into the space encouraging you to utilize their wallets. Some scams involve asking you to send your private key – don’t!

Pump and Dump scams

A scam that is almost endemic in the cryptocurrency space are pump and dump schemes. Similar to what happens to stocks, pump and dump scams involve an individual or entity acquiring a large amount of an alt-coin and then pushing positive news (fake or real) to encourage as many people to buy as possible.

Social media platforms are the primary outlet that pump and dump operators utilize. Once the price has moved up, the operators sell at the top and then let everyone else suffer the consequences of rapidly falling prices.

Pyramid Schemes

If you want to learn an excellent example of a pyramid scheme in the cryptocurrency space, look up OneCoin. Pyramid schemes in cryptocurrencies are the same as Ponzi schemes in any other market; the only difference here is that the fraudsters are now capitalizing on the growth of cryptocurrencies to target you and make you believe you’ll become wealthy overnight.

ICO Scams/Exit Scams

ICO stands for Initial Coin Offering. This is similar to the IPO (Initial Public Offering) process – but without the traditional regulatory process. Between 2016 and late 2018, the cryptocurrency market was slammed with, literally, tens of thousands of new altcoins entering the market, all promising to be the next Bitcoin or Ethereum. Some of these new altcoins generated millions of initial investment from individuals, and when prices spiked, the owners sold.

This is similar to a pump and dump, but it’s an exit scam when it involves an ICO. While the industry is still very new, it has matured some since 2008. It’s crucial that you do your due diligence and investigate, thoroughly, any new cryptocurrency. This is especially true if you came across it on social media.

High-Interest Return Scams

A growing trend in the cryptocurrency space, specifically the decentralized finance (DeFi) space, is high yield interest rates. There are many legitimate platforms that allow you to deposit or ‘stake’ various cryptocurrencies and reward you with a high-interest rate. It is not uncommon to see regulated and legitimate projects offer up to 10% interest on stablecoins (essentially cash) or up to 15% for Bitcoin and Ethereum deposits! But be very, very cautious about any promise of return higher than 10% to 15%. And you must read the ‘fine print’ of even legitimate and regulated entities. There are some projects that require you to leave your deposit for up to 90-days in order to earn the highest yield.