The term crypto scam means a scam or scam related to cryptocurrency. Given the lack of regulation and the opacity of the sector, scams are unfortunately legion within the cryptosphere. Why is it a scourge for the industry? What is this ? How to spot them? Can the stolen amount be recovered? Who are the victims ? How many are there each year? We will address all these questions in this article.
Crypto scams: the scourge of the ecosystem?
A report from the Sift companyspecializing in digital security, revealed how ubiquitous crypto scams have become on the internet. 43% of internet users have already faced scam advertisements asking them to join sulphurous crypto projects.
Thus, there are a lot of scams in the crypto industry. However, it is essential to distinguish between scams, exchange hacks and errors on your part. According chain analysisrevenue from cryptocurrency scams decreased significantly in 2022, from $10.9 billion in 2021 to $5.9 billion.
Social networks: the preferred means of crypto scams
Sift’s report also stated that victims of crypto scams tend to be young people, especially manipulated on social networks (especially Instagram, Telegram and Facebook, but also TikTok, Twitter and Youtube). Indeed, in 2021, 64% of scams by payment method via social networks were crypto scams.
For example, in January 2022, celebrities like Kim Kardashian, Paul Pierce, and Floyd Mayweather faced lawsuits for promoting EthereumMax (EMAX). The same year, in October, Kim Kardashian was fined $1.26 million in this case. In November, the stars were finally acquitted. However, this case reveals the role of influencers in the manipulation of their subscribers towards shaky and obscure projects.
Another famous example in France concerns the couple Marc and Nadé Blata. The latter have made a lot of talk about the scandals of sulphurous and manipulative influencers. The couple would have greatly encouraged their community via a Telegram channel to venture into the “copy trading”which consists of entrusting your money to investment platforms that imitate the purchases of professional NFT traders in order to “get rich easily”. It was obviously a scam. Additionally, the couple promoted an NFT video game project, Animoon, modeled after the Pokémon game. This project managed to raise $ 6.3 million from 5,000 users before the founders left… The couple is currently being sued for “organized gang scam” And ” breach of trust “.
The different types of scams
There are a host of crypto scams. According to the Federal Trade Commission, the most common scams are:
- Sending BTC or ETH to a given address to then receive double or triple it a few minutes later. Of course, once you’ve sent your money, you won’t receive anything.
- Making contact on social networks following the impersonation of a personality in the crypto sector. The scammer will try to impersonate them to get digital assets from you by promising to invest them for you.
- THE rug sweatshirts. These are well-developed crypto projects (website, white papersocial networks, sponsorship…) where the developers disappear with the funds of the investors.
With the bear marketthe number of scams and the total amount stolen decreased. “Scam revenue throughout the year tracks bitcoin price almost perfectly, consistently maintaining a three-week lag between price movements and revenue changes”according chain analysis. “However, not all types of scams follow this pattern. Some types of scams see revenue changes increase when crypto prices decrease”. Romance scams are the type of scam that particularly stood out the previous year. They consist of establishing a relationship with the victim for several months, then asking him for a sum of money by making him believe that we need help. This scam is therefore based on the victim’s compassion and not his greed.
A concrete example of scamming: the Squid Game Token (SQUID)
In 2021, riding on the success of the Korean series “Squid Game”, a new cryptocurrency appeared, the Squid Game Token (SQUID). This new token had no connection to the series, but the cryptocurrency price quickly exploded past $2,850 with a 75,000% surge. However, an address then monopolized the entire capitalization, i.e. nearly $3.38 million, by exchanging the SQUID token for BNB. Then, all social networks and the site associated with the project were deleted. SQUID holders then encountered difficulties in selling their tokens on PancakeSwap. The latter was the only decentralized exchange where the SQUID could be liquidated. The value of the token finally fell sharply, reaching $0.0003 in a few minutes.
Crypto industry watchers had sounded the alarm, however, saying there were all the signs of a scam, such as closed social media accounts, anonymous developers and a suspicious white paper.
An example of scam dismantling by the authorities
Recently, Europol welcomed the success of its investigation into cross-border cryptocurrency scams. A whole network of malefactors tricked victims from different countries into investing in fake cryptocurrency investment systems and websites for huge gains. Sometimes they posed as government authorities or companies using at least 4 call centers in Eastern Europe.
According to the results of the investigation:
“The January 11, 2022 day of action led to:
- 15 arrests, including 14 in Serbia and one in Germany;
- 261 people interviewed;
- 22 places searched (5 in Bulgaria, 2 in Cyprus, 15 in Serbia);
- seizures include 3 hardware wallets containing approximately $1 million in cryptocurrency and approximately €50,000 in cash, 3 vehicles, electronic equipment and data backups, documents. »
Crypto scams are the main justification for the various regulations sprouting up around the world
While cryptocurrency prices reached historic highs in 2021, they crashed in 2022. Currently, in full bear marketthe future of cryptocurrency depends on a combination of factors, including regulations. Both the Biden administration and the European Union (with MiCA) are looking into a regulation that justifies its legitimacy by the need for user protections. During the last G20 meeting in Indonesia, leaders even called the need for international rules to govern the crypto industry “critical”.
In short, you will understand, cryptocurrency is a young market in full expansion. This attracts millions of individuals, businesses, but also scammers. Scams, volatility and opacity in the crypto sector can disrupt financial stability and consumer protection. Governments therefore see it as their duty to regulate this industry. However, drastic, inadequate or different regulations depending on the country can hinder the development of the sector…
How to spot them?
To guard against scams in crypto, the NGO American Association of Retired Persons recommends following the following protocol:
- It is essential to understand the crypto project or how cryptocurrency works, in which he wishes to invest. To do this, it is essential to read the white paper of the project, to look at the official site and to be interested in the team which hides behind the project;
- Obviously, in cryptocurrency, we can never remember it enough, we must not invest only the money you can afford to lose ;
- Of course, you don’t have to in no case share his private wallet keys ;
- Finally, it is highly recommended to do not trust social media posts promoting crypto projects or very vague tokens. And that, even if it’s your favorite influencer trying to convince you.
More pragmatically, when the performance promises are too exuberant and easily attainable, it’s almost always a scam.
Can the lost money be recovered?
Unfortunately, for the victims of scam crypto, it is practically impossible to recover lost money. Due to blockchain technology, when you make a crypto transaction, it is irreversible. In other words, once the money has been sent from one wallet to another, it is no longer possible to cancel it. In addition, due to the lack of regulation and the youth of the sector, the authorities and judges are often helpless in the face of these new crooks. There are very few judgments regarding cases of cryptocurrency scams. According to Immunefy, only 5.2% of the losses of the total stolen in 2022 by hacks or frauds could be recovered, and this amount mainly relates to hacks (and not scams).
Due to its opacity, complexity, youth and lack of regulation, the crypto sector is a vast playground for scammers. There are a multitude of them, more or less sophisticated and easily discernible. It is fundamental to be aware of this, not to be naïve and to remain alert. Any investor should research well beforehand to discern crypto scams and ghost projects.
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