Introduction
Your cryptocurrencies have become an immensely useful commodity for criminals in today's world. They are liquid, very compact, and once a transaction has been made it is almost impossible to reverse it. As a result, a surge of scams has entered the digital domain, both classics with decades of experience and unique scams from the crypto-currency market.
We're going to describe some of the most popular cryptocurrency scams in this post.
- Social Networks Giveaway Style Scam (raffle)
Nowadays, it's amazing how generous everybody on places like Twitter and Facebook seems to be. Check the answers to a tweet that generates high participation, and you can certainly see that a giveaway is conducted by one of your favorite crypto companies or influencers. They promise to give you that if you just submit them 1 BNB / BTC / ETH. Equal sum x10 back! It sounds too good to be true, huh? Sadly, that isn't it. For several of these scams, that is the best rule of thumb to apply.
It is highly unlikely that anyone would run a legitimate giveaway that would first require you to submit your own cash. You should be very careful about these types of messages on social media. They can come from accounts that look similar, but that's part of the trick, to those you know and respect. As for the hundreds of replicas, thank you. They are actually fake accounts or bots deployed as part of the giveaway scam-the said to account for its generosity.
And you need to absolutely disregard them. If you really believe they are real, take a closer look at the profiles and the variations will be discovered. The Twitter account or Facebook profile is fake, you will soon know.
The legitimate ones will never ask you to send funds in the first place, even if BINANCE or other individual wishes to run a giveaway.
- Schemes for the Pyramid and Ponzi
Owing to their similarity, the Ponzi and Pyramidal schemes are slightly different but put in the same group. In both cases, on the promise of amazing returns, the fraud relies on a participant recruiting new participants.
Schemes for Ponzi
You might be told about an investment opportunity with guaranteed returns (that's the first red flag!) in a Ponzi scheme. Usually, such a scheme would be provided under the guise of a portfolio management service. In reality, no magic formula is provided-the "returns" received are simply the money of other investors.
The organizer is going to take money from an investor and transfer it to a pool. The only inflow to the fund of new cash would come from new members. Older investors, a loop that will continue as new entrants enter, are paying with the money of younger ones. When new cash stops flowing in-unable to keep making payments to older investors, the scheme fails-the fraud is uncovered.
Let's say, a service that in one month guarantees a return of 10 percent. You may as well contribute $100. Another 'client' will then be hired by the organizer, who will also spend $100. He will pay you $110 at the end of the month with this new money. In order to pay the second, the organizer would then need to entice a new customer to join in. The loop will proceed until the scheme's eventual implosion.
Schemes for pyramids
Pyramid schemes on the part of those concerned need a little more effort. The organizer is at the top of the pyramid. He will hire a certain number of people immediately below to work at the stage, and each of these individuals will hire his own people, and so on. As a result, as new levels are generated (hence the term Pyramid), you end up with a vast structure that grows exponentially and branches out.
So far, we have simply illustrated what a very large company's organizational chart would look like. But the way it offers incentives for the recruitment of new participants varies from a pyramid scheme. Let's assume the organizer gives Alice and Bob the right to hire new members in exchange for $100 each-and he will retain 50 percent of their subsequent return. To those they hire, Alice and Bob will be able to provide the same deal (they will need at least two new recruits to offset their initial investment).
For instance, if Alice sells a membership to both Carol and Dan (at $100 per head), she can retain $100 because half of her income will need to be diverted to the level directly above hers. The incentives will continue to flow upwards if Carol manages to sell memberships-Alice will take half of Carol's profits, and the organizer will take half of Alice's half.
If the pyramid structure rises, older participants get a growing source of revenue if distribution costs move from the lowest to the highest levels. But the model is not going to be viable in the long run as a result of exponential growth.
Participants also pay for the right to advertise a product or service. You may have learned of some MLM businesses accused of this form of introducing pyramid schemes.
Controversial ventures such as OneCoin, Bitconnect, and PlusToken have come under fire in the sense of blockchain and cryptocurrencies, with users taking legal action against them for allegedly operating the pyramid.
READ PART 2 HERE
