Cryptocurrencies, in the eyes of a novice investor, ensure fabulous dividends with few chips. However, the path to this golden palace is strewn with threats. What are the four most common scams and how to escape these traps.
The inclusive norm of the cryptocurrency world means that anyone can participate in this wheel, from the saver who wants to avoid the clutches of inflation to the fraudster hiding in the shadows. Not only is investing very simple, but also be deceived.
In practice, digital currencies do not have an official price or face value. Due to this lack of regulation, investors have no statutory guarantee of repayment in the event of loss. Both for a technical failure, human error or theft.
Finance experts say speculating with cryptocurrencies is similar bet in a casino. The risk is high, even if the potential return is extraordinary. Therefore, those who invest cannot avoid the dangers, but can reduce them as much as possible.
Pump and dump
Inexpensive influencers have large audiences, and many trust their recommendations to be disinterested. That same credibility drives them, on occasion, to do so betray his own followers.
YouTube, TikTok, Instagram, Reddit, Twitter, Telegram, Facebook or any platform serves as a bridge for these gurus to get their followers to buy shares of dubious companies.
“They agree to buy cryptocurrencies at a lower price, drive them up quickly and then agree to sell them together, achieving high returns in minutes,” explains Pablo Lema, business architect at Ingenia.
From influencers like Dave Portnoy to Reddit groups like WallStreetBets, an entire culture of investing has been built on a glass pedestal.
“Swindlers buy goods when they have no value and use the community to increase their value. At their highest point they liquidate the accumulated. This produces a sharp decline that leaves the rest empty-handed,” Lema describes.
This pyramid type model aims to attract savers with the intention of joining them in a program that promises a high financial return with a low investment.
Cryptocurrencies are ideal for embezzlement, as the authors are looking for ambitious minds. Furthermore, falsifying data is very simple. when it comes to play money.
One of the challenges for attackers is to appeal to the greed of taxpayers to move to the next level and thereby access greater returns on investment.
The reward for bringing new people into the system is always greater than the profit made with cryptocurrencies, so the business is always in recruiting not selling bitcoin.
At the local level, the most emblematic case is that of Generación Zoe, an organization that presented itself in society as a coaching and leadership company, offering everything from educational packages to cryptocurrencies.
This company was directed by coach Leonardo Cositorto, who promoted returns on investment with unprecedented values, many times higher than any other financial enterprise.
One of the first calls to attention came from the Argentine Bitcoin NGO, which denounced Generación ZOE before the Office of the Prosecutor for Economic Crimes and Money Laundering (Procelac).
Participants in this program access a circle of unique benefits based on the promise of a high profitability and immediate earnings. The only requirement to enter is through a member’s invitation. Once accepted, a fee must be paid.
In return, they guarantee you a phenomenal 25% monthly return and 250% annual return on digital currencies, well above any other investment instrument the stock market can offer.
One of the most notorious cases occurred in Argentina and the protagonist was the Spanish company Ganancias Deportivas, whose scam affected more than 40,000 innocent people in the Mendoza city of San Rafael.
From its official website, this company has demanded payment of a Subscription 100 euros. The package was completed with the purchase of bitcoin for sports betting agreed in advance.
But the curious thing is that the company didn’t produce something tangible, but was governed by the rules of chance. The earnings were actually the users’ investments and the money flow was a closed loop.
And although the results accumulated positively, there was a clause that the initial amount and profits could not be withdrawn for 6 months.
The scammers, to hide the trick with a cloak of legitimacy, hire some celebrities who recommend said cryptocurrency through their personal accounts. This works as popular support. Without suspecting that they are part of the master plan of deception.
Locally, the most flagrant case is that of Vayo Coin, hypothesized as a lifeline for Argentina’s inflationary problems by preserve the value of savings making profits of 135% in nine months by submitting only the DNI.
Julieta Nair Calvo, Horacio Cabak, José María Listorti, Candelaria Ruggeri, Jimena Barón, Cinthia Fernández and even Marcelo Tinelli have participated in the promotion of this digital token, sharing videos on their social networks.
Zaira Nara also pointed out that she had been operating the system “with her personal savings” and Pampita announced the extraction of an iPhone 11 by the company and invited to follow Vayo’s networks for chances.
Natalia Oreiro has announced a “mega giveaway!” whose prize was a kilometer zero. The only requirement was to be a fan of Vayo on their networks.
They also opened an electronics sales site and announced Universal Exchange, their exchange site, with a lavish event held at the Hilton hotel.
The Vayo Coin cryptocurrency, to date, is not listed as an option on major digital asset buying and selling sites. Its price and traffic volume are also not listed on sites like Coin Market Cap.
How to spot a scam
Losses from cryptocurrency-related investment fraud jumped from $33 million (mdd) in 2019 to $680 million bdd last year, and $329 million bdd were recorded in the first quarter of 2022, reports the Federal Trade Commission ( FTC).
Social media is cryptocurrency’s worst ally as, according to the FTC, nearly half of those who have lost money to a digital ticket scam said it started with an announcement, post or message on Instagram, Twitter or Facebook.
As indicated by the security company Kaspersky, there are certain signs that repeat themselves and if they occur, should be vigilant. These are some:
No financial investment can guarantee initial success, because these currencies can go up or down. Any cryptocurrency offering that offers this is a red flag.
Every cryptocurrency must have a white paper, as it is one of the most important aspects of an initial offering. The document should explain how the coin was designed and how it will work. Be wary of vagueness and inconsistencies.
Some scammers lure people in with an aggressive marketing campaign. With so many advertisements online and on public roads, paying influencers. This is designed to reach as many people as possible in the shortest amount of time, and therefore raise money quickly.
In most investment rounds it should be possible to find out who the people behind it are. In general, there are biographies of their representatives, as well as having an active presence on social networks. If not everything is anonymous, it is a reason for mistrust.