The general perception around bitcoin is that it is often used for illicit activities, which is why investors are often reluctant to invest in it. Even for someone using bitcoin on a regular basis, crypto scams can hide in plain sight.
For fighting such scams it is necessary for both investors as wells bitcoin exchanges to beware of them. A little vigilance, common sense combined with some protective measures like Know Your Customer (KYC) and Anti Money Laundering (AML) checks, on part of crypto companies, can go a long way to protect the industry from scams.
Fraudulent Exchanges and Wallets
For every one authentic bitcoin exchange or wallet, there are at least ten that are fake or fraudulent. Mostly fake exchanges and wallets mirror an authentic one so users can’t tell the difference most of the time. To avoid falling for such scams always check if the URL of the website has a small lock sign and ‘https’, instead of ‘http’ at the beginning.
Phishing or Ad Scams
Phishing or Ad scams are common in the world of cybercrime. But normally people are unable to distinguish between an genuine ad or one containing malware. When you search for a specific keyword on Google, you end up seeing a couple or more ads at the beginning of the results. It is generally wise to avoid clicking on such ads as they tend to be scams some, if not most, of the times. Additionally, ad scams are also hidden in emails through phishing. Thus, avoid clicking on links provided in emails.
Ponzi Schemes are common in the conventional trading sector. However, they also exist in the crypto sector and are used to defraud a number of investors. They primarily attract investors by promising unusually high returns in exchange for bringing in other investors. As early coming investors receive those returns paid from funds of investors coming later, they manage to spread the word. People investing in the scheme later are the ones that usually end up losing all their money.
ICOs or Initial Coin Offerings are used to fund new projects or startups. ICO scams can work both ways. They can also be used to defraud money from legitimate investors. Contrarily, they can also be used by money launderers or financial criminals to dump their dirty money in exchange for authentic digital tokens that can later be liquidated for fiat money. To avoid fake ICOs it is advisable to do some research before investing your money in it. For securing your ICO from criminals, make sure you implement strong KYC and AML verification measures to authenticate investors. Third party identity verification services like Shufti Pro are available for that can provide verification for ICOs.
Pump and Dump Schemes
Pump and dump schemes work to drive the price up of bitcoin or any other cryptocurrency by buying it at once. Once the price goes up they sell their tokens at a premium price thus bringing its value down at the same time. Investors can be tempted to invest at such times but should be aware of such schemes as well.