The Cost of Cryptocurrency Scams
As the price of crypto fluctuates wildly, scammers can take advantage of the buyer’s confusion and offer to sell cheap but counterfeit tokens, according to Marc Weinstein, a senior technology attorney at the law firm Reed Smith, in an email interview with Small Business Trends. “There are a number of internet scams where unscrupulous marketers sell illiquid cryptos like Monero for next to nothing, and are selling it with promises of extraordinary returns,” Weinstein says.
While most scams involve newbie investors, known as “Tinder scammers,” the fake website may not be looking to sell at all. It could simply be trying to lure a victim into giving out their email address. Scammers are making fraudulent cryptocurrency investments in everything from Bitcoin, to Dogecoin, to Parity.
What You Can Do to Protect Yourself
While cryptocurrencies are great for doing quick transactions and transferring money between friends, they’re not immune to scams. The safest way to do cryptocurrency transactions is through an exchange, which is where you convert a dollar-denominated currency into a cryptocurrency or vice versa.
Treat cryptocurrency exchanges as you would any other online store, such as Amazon or eBay, by researching which exchange is the most reliable and taking precautions such as setting up a unique username and password and choosing a strong password, just like you would with any online account. You can also check out a tool that provides clear information about several reputable exchanges.
How To Spot A Crypto Scam
For instance, unless the company selling you their products/services is transparent about their business, you should probably stay away. Too many scams hide under blockchain-related covers, often using the same names and small-cap public cryptos as their real business. According to the US Department of Justice, these scams include:
Cryptocurrency promoters who prey on customers and promise high returns on initial investments, or of money made from selling tokens, with no legitimacy in mind;
Prize/vendor promotions, offers of free accounts, free mining, etc.
The Future Of Scams And Cryptocurrency
We’ll probably still see some scams in the near future, but we’ll also see more legitimate ventures pop up. As our society evolves, so do its means of exchange, as people seek new ways to make money. If you are planning on investing in cryptocurrency, make sure you’re fully aware of how your money is being handled before signing any agreement or handing over your bitcoin.