In this article, you will get acquainted with the common types of scams in the field of digital currencies and learn how to identify and avoid each one. 

We have looked at the most common forms of fraud in this area, but there may be other specific methods that still have the color and smell of common types.

The growth trend of the Chinese bloc and the digital currency space is very attractive. Technological innovations and new trading patterns that are rapidly evolving and still attract large crowds. 

However, this space has also been abused and scammed a lot. In the last few years, many people have become millionaires through various digital currencies and then created lucrative businesses for other people who plan to invest in the technology in the future.

However, this growth in the value and acceptance of digital currencies by various businesses has also had consequences. While people with good intentions are looking for investment and possibly profitability and want to shape part of the future world of money, people with intent are trying to deceive market investors.

Potential investors often avoid investing in this growing industry due to the ever-increasing number of cases of digital currency theft and fraud. Experienced investors in other markets are also reluctant to invest in the digital currency industry.

Unfortunately, in countries like Iran where the economy is weakened, these scams are much more common. In fact, the promise of astronomical profits from fraudulent schemes and poor economic conditions have gone hand in hand, trapping large numbers of Iranians.

Also, because digital currency transactions are anonymous or semi-anonymous and easy to carry out, it is very difficult to prosecute these crimes, and this has strengthened fraudsters.

Panzi, pyramidal and lattice designs

Plan  (Ponzi) is a type of investment scam that deceives people by promising to pay a certain return to existing investors from new investors.

Without exaggeration, Panzi and pyramid schemes are the largest part of the scams in this area and the main basis of many forms of scams is this Panzi trick.

In this scheme, the scammer encourages ignorant people to give him their money to invest in one or more very profitable projects. The profits of these schemes are so high that many people are deceived.

At the same time, investors’ money is not invested anywhere, and only with a kind of game with money, the interest of the old people is paid from the capital of the old people in order to gain trust in the system and more people to enter. Eventually, when enough money was raised for the scammer and many more people did not enter, the plan fell apart and the scammer escaped.

To better understand the Panzi scheme, consider the following example (names and numbers are hypothetical):

Genghis is a swindler who intends to do a panzi trick. He sets up a fake company or site and promises people that if each of them pays, say, 1 million tomans, he will invest the money in the New York Stock Exchange, digital currencies or anywhere else, and 200,000 a month. Toman (20%) pays guaranteed interest to investors.

But in reality there is no investment and only play with money.

After some time of advertising and attracting initial investors, now Genghis has raised millions of Tomans. In order for the project to continue and attract more money, Genghis will pay the interest of the new investors from the money of the new investors.

This allows old, first-time customers to introduce the scheme to their friends and acquaintances, and newer investors to enter the field.

After good money is raised or when no new investor is found, Genghis runs away with the money and the plan falls apart.

The most famous Panzi scheme in the digital currency industry, Project BitconnectIt was surprisingly able to reach a market value of $ 2 billion and become the largest scam in the world of digital currencies to date. This project was destroyed in 2018.

At the end of its operation, the BitConnect project was valued at $ 2 billion and cost $ 450 per unit. Less than 24 hours after the official announcement of the scam, the price of this coin dropped to $ 6 and its market value reached $ 40 million. Shortly afterwards, the project was removed from all exchanges.

In the Panzi and pyramid scheme, the main profit reaches high levels and a large number of downstream people lose their capital.

BitConnect was very popular and had very regular marketing. These features can be found inPyramid designs (Pyramid) successfully observed.

The basis of a panzi scheme is the same, but they may appear in the guise of a reputable company and an activity other than direct investment.

For example, most cloud mining projects are Panzi, which you will read about below. Also, most of the schemes with the titles of “artificial intelligence”, “smart contract”, “trading on foreign exchanges” and… in which irrational and guaranteed profits are offered, are in fact five.

In general, in multi-level network marketing, you are either on the side of a complete scam (thief) or, at best, you will be the definitive seller of worthless products at many times the actual price.

Scam method through panzi, pyramid and multi-level designs

• False advertisements for an astronomical investment or activity spread quickly.
• Novice investors fall in love with these lies and invest in these fake projects.
• People are told to log in to their friends and relatives for more profit.
• Initially, to gain trust, old people benefit from new people’s capital to attract more people.
• Scammers then disappear to get a large portion of the money and give a small percentage to their accomplices (affiliates).
• There are also one or more low-quality products in pyramid schemes that people have to sell at high prices.
• Such platforms are easily recognizable. They deceive the naive with the offer of a quick return on investment, and these people only realize the reality after being sacrificed.

How to identify and avoid panzi and pyramid schemes

• Always make a rational decision, and if you think the goal and promise of the project is too unrealistic, it probably is.
• First of all, ask yourself why you are going to be paid such a profit, when a smart person you know is building a fire to make money from his company? Why didn’t the others go for it?
• Most Panzi plans do not disclose their owners’ information. They keep information out of the reach of investors. People often blindly get involved and invest, but when things fall apart, no one is held accountable.
• You must have information about the ownership and history of the platform. Find answers to questions such as the identity of the platform manager, the headquarters address or when it started.
• Check the legal status of the platform. Does the construction team have legal authority to manage the platform from the relevant authorities? If something goes wrong, can you complain about them?
• Check out these designs on various forums and websites.

Cloud extraction and Telegram extraction robots

“Extracting digital currencies without a machine”, “Making millions by extracting bitcoins”, “Renting a mining machine” and “Getting free bitcoins in the Telegram robot”; If you see these titles in ads,. Be careful.

The growing popularity of cloud mining has opened the door for fraudsters due to the high cost of electricity and digital currency mining equipment.

Most cloud mining schemes or telegram robots are actually Panzi schemes. Investors think that their money will be spent on buying mining equipment and mining, when in fact there is no mining.

If you have been asked that you do not need to pay for Telegram robots, you should know that in these robots, after your capital reaches the bottom of the withdrawal, you will only be allowed to withdraw if you or your affiliate has made a purchase from the robot. Be.

Anyone who is a little interested in the world of digital currencies has probably heard of “mining”. If you are new to the world of digital currencies, you probably do not know exactly how mining works. Therefore, scammers try to present their mining programs as generous monetization opportunities.

The method of fraud through cloud mining

• Scammers ask users if they know anything about mining.
• Regardless of the user response, scammers claim that there is an opportunity to extract through which a person can earn a large number of bitcoins.
• They put a calculator on their website where people can invest their initial capital and see the profit they make. Many people are tempted when they see that they earn 2 million tomans a month by paying 10 million tomans.
• Through the Panzi method, interest is initially paid, but when a lot of money is collected, deposits are delayed and users’ accounts are blocked under various pretexts.
• Eventually the scammer escapes if he is lucky, leaving only the losers.

How to identify and avoid cloud mining scams

• They usually advertise with the following titles: “cloud mining”, “mining without machine”, “million revenue from bitcoin mining”, “renting mining machine”.
• Mentioning the name of websites in reputable news agencies and sites is not a sign of their health. Anyone can publish advertisements (ad reporting) on ​​the Internet for a small fee.
• Examine the website carefully. Extracting an activity is risky and does not guarantee a profit. Reputable websites (99% of cloud mining websites are not reputable) sell only hash (processing power), not investment panel.
• Ask yourself, is the location of their farm known? Do not forget that most cloud mining scams fake video from their farm. Make sure the video is accurate.

Counterfeit money changers and wallets

The world of digital currencies is full of fraudulent exchanges that come and go overnight. You need to be very careful about using these exchanges, as they may steal your digital currencies or cash.

Sometimes, when you deposit money into your account at an exchange, some of these unreliable exchanges charge you huge fees or make it very difficult to withdraw money.

Some of these exchanges make their platform attractive to novice traders and do not charge any fees as transaction fees.

Instead, they earn money by being charged a fee for listing any tokens (including counterfeit coins) on their platform, without generating the trading liquidity needed for traders to buy and sell tokens freely. These tokens are usually blocked at these exchanges, and traders engage with their “worthless tokens” without being able to sell or cash them.

You may also catch a fake wallet software that uses the name of a valid wallet to store your digital currencies. For example, a counterfeit software called Ledger Live (the official Ledger Hardware Wallet software) was recently found on Google Play. Interestingly, due to the sanctions, many Iranian users could not find the original software after searching for the phrase “Ledger Live” on Google Play, and instead the fake software was displayed.

Scams through fraudulent exchanges and wallets

• Scammers create a website or software called an exchange or wallet and advertise it on social media and chat groups. They mostly use terms like “zero fee” and “no authentication” to persuade people. For Iranian users, the phrase “no sanctions” may also be used.
• When the victim deposits their digital currencies in an exchange office or wallet, it is no longer possible to withdraw it, which means capital theft.
• Sometimes scammers even manage to add their own counterfeit software to software stores like Google Play.

How to identify and avoid counterfeit exchanges and wallets

• Advertising of these exchanges and software is often done falsely (pop-ups, invalid groups and channels).
• Consider things like visits, number of installs, user ratings, and more.
• Consider suspicious and unrealistic changes in trading volume, especially if the exchange has just started.

Fake and phishing pages

This type of scam needs more attention. Identification Phishing attacks (Phishing) or fake pages and messages that impersonate authentic pages and messages is a little more difficult.

Scammers in this type of attack share a website address that is exactly the same as the original website or a new website that seizes your confidential information and then uses it to hack into other accounts.

Websites that have been carefully cloned on legal projects, such as exchanges or QQ initial public offerings, are used to steal assets and personal information. Cloning is the exact copying of a particular website and its application to another website, so that at first glance it is not possible to distinguish between two websites.

Always check the website URL again and bookmark the websites you visit frequently. Cloned websites use letters similar to the original URL to look similar to the original website at first glance. For example, cloned websites may replace English letters such as m with n or 0 with o.

The method of fraud through phishing attacks

• Scammers send you links to a website that is relevant to the topic of the day. For example, one possible trick would be to suggest that you use this link if you have trouble logging in to your Bainance exchange account. The website you are referring to using this link is exactly like the Bainance Exchange website, but it has nothing to do with it.
• At the website in question, the scammer may ask the user to try a new exchange.

In either case, you either enter or register your user information. This user information is later used to access other user accounts when the security of the websites is not very high. In this case, the person’s account will be compromised.

How to detect and avoid phishing

• Digital currency phishing scammers often try to use typos in the address of an exchange or web wallet.
• Sometimes fraudsters promise people “Free Bitcoin They deceive.
• Do not click on links you do not know.
• Do not trust search engine advertising results; The results that are displayed to you as advertisements in search engines such as Google can be distinguished from other results. Advertising results that have the word Ad (meaning advertising) next to them are one of the oldest ways to do phishing. For a fee, Fisher can raise a fake page in search engines.
• At all the websites you visit, check the URL link and make sure you are using the correct link. Beware of possible changes in certain letters of the website address.
• Beware of deceptive emails like winning a lottery or something like that.

Fake Support Teams

Another type of phishing and fraudulent attack occurs when fraudsters claim to be the support team for a particular project and ask you for personal information, a deposit, or a personal password.

When you have a problem with trading platforms, try to get answers to your questions from information groups or their managers. These scammers abuse the trust of such users.

How fraudulent support teams cheat

• The user encounters problems with exchanges such as Bainance, Bitbns, Koinex, WazirX, Coindelta and other platforms.
• Scammers use similar passwords, identical images, and names as the Telegram Group Manager or exchange logo.
• Users confuse these people with the exchange support team and trust them.
• Scammers ask the user to send them bitcoins or Atrium to “fix the problem”.
• Users send the required amount of coins in the hope of solving their problem.
• The scammers run away with this amount and leave no trace of themselves.
• Sometimes scammers try to get a user account password.

How to detect and avoid fraud by fraudulent support teams

• When contacting support, proceed only from within the official website of the exchange or wallet of your choice.
• Calling support via Telegram or WhatsApp is not a good idea.
• Beware of messages that are said to be from the support team.
• The real support team will not ask for your digital currency or account password.

Free donation of digital currencies on Twitter

One common example of scams in this area is Bitcoin Giveaway schemes on social media.

Scammers create pages with the names and images of celebrities such as Vitalik Butrin, the creator of Atrium or Ilan Mask, the legendary entrepreneur, and under the most popular posts of these people, for example, promise to donate free bitcoins and if 0.1 bitcoins to Submit their address, you will receive 0.2 bitcoins (double).

It may sound ridiculous, but millions of dollars have been scammed so far, and even at one point Vitalik Butrin, the creator of Atrium, changed the name of his Twitter page to “non-giver of ETH.”

The method of fraud through free digital currency donation schemes

• A celebrity posts a tweet.
• A fake account with the name and picture of the famous person below his tweet publishes a tweet about “giving free digital currencies to fans”.
• To gain more trust, several other fake accounts write under this tweet that they have succeeded in receiving digital currency.
• The person sends the digital currency to the desired address, but will never receive anything.
• Because digital currency transactions are almost anonymous, it will be very difficult to prosecute.

How to detect and avoid fraudulent schemes of free digital currency donation

• A celebrity never works this way to donate free digital currency.
• The name and image of the celebrity can be copied, but the username is unique. For example, Ilan Mask’s username on Twitter is “elonmusk” and no one else can have it. Even so, owning one is still beyond the reach of the average person.
• Sometimes accounts with a blue tick are activated to deceive more users. Having a blue tick does not mean that a person cannot be a scammer.

Extraction with mobile and home computers

The phrase “simple digital currency extraction with mobile” has become one of the common tricks of fraudsters these days.

The operation of extracting digital currencies with the processing power of the device has always been attractive for beginners in the world of digital currencies, and the fact that they can extract with their own mobile phones and have an income for themselves, doubles this attractiveness. On paper, extraction can be done with any hardware, but is it still economical to extract with a mobile phone or a home computer? By no means!

Waiting to earn money from mobile mining

About Bitcoin and Atrium and other major digital currencies, mobile and home computer mining should be forgotten; At least with the cell phones and computers that exist today. For other small digital currencies, mining with mobile and home computers may be possible, but it is not economical.

Most mobile or home computer extraction software is not really effective and is nothing but an illusion. You ask that we do not pay? You may not pay directly, but by paying attention to or giving your information, you are making a profit for the fraudsters, depending on the software you have installed.

The method of fraud through extraction with mobile and home computer

• Scammers build mobile or computer software and a website to register and make it as valid as possible.
• Your friend will send you a referral link (referral link) and tell you that by registering and installing this software, you can extract digital currency with your regular phone or computer. You may also see such a link on social media.
• In some software, you give your information to fraudsters and they can use this information for future scams or sell it at a high price.
• In some other software you will become the viewer of the ads that these softwares send you.
• It may even install malware on your phone or computer.

How to identify and avoid mobile mining scams

• Be sensitive to terms such as “mobile mining” or “easy bitcoin mining”.
• Advertisements for such designs usually reach you in the form of invitation links from friends or on telegram channels.
• Increase your knowledge of different digital currency extraction and networks.

Sell ​​worthless tokens

The easiest way to defraud, create and market fake projects is to sell a worthless digital currency (token) to ignorant people. Selling these tokens is like taking some soil by the river and telling the people of another city that this soil has anti-cancer properties and will be very valuable in the future.

To this kind of scam, scam Kevin’s initial release(ICO) also say. Quinn public offering is one of the most basic ways to raise the initial capital of a legal business through crowdfunding.

Scammers who take advantage of Kevin’s initial public offering, a project introduction article, or White Paper They write, create marketing campaigns on social media, publish fake information about the project stages after the initial release of Quinn, and sell their worthless tokens.

Many novice investors, meanwhile, are deceived into making 1,000 percent of the profits from these early Quinn offerings and end up losing their capital by buying useless tokens.

In 2017, the results A study He found that more than 80 percent of the tokens on the market are either scams or are not used in any product.

Don’t forget that creating a token is easy to drink and costs very little, but it can not be considered valuable unless a suitable project and platform for a digital currency is defined.

The method of fraud through worthless tokens

• The person is offered a token for investment on social media or he / she sees the token in the market by chance.
• The person is told that the value of this token will increase sharply in the future or that the person himself will be tempted by the temporary increase in the price of a digital currency.
• One invests in that digital currency for profit.
• The project team, after raising a large amount of capital by selling tokens, leaves the project and goes to the Canary Coast!
• The token is slowly losing its value and is being removed from exchange offices.

How to identify and avoid investing in worthless tokens

• Target tokens are usually added to unknown exchanges and do not have much trading volume.
• Given that 80% of the digital currencies on the market are completely useless, the best way to avoid investing in a worthless token is to do a lot of research.
• Carefully review the idea as well as the team of each project. Are you on the side of an anonymous team or a team with a brilliant track record?
• Is the token development roadmap legally justifiable and can the proof of the concept (proof of feasibility) of the project be verified?
• Ask challenging questions about the project and see if the project team answers or ignores these questions.
• Share the idea of ​​the project with your friends or social networks related to the digital currency community, discuss it and ask these people if the project does not seem fake to them?
• Get involved in the project. Are there really products?

Pump and dump

Pump and dump groups manipulate the price and trading volume of a coin (often lesser-known coins). First, they pump up the price in a short period of time by buying large volumes of coins, and then, when the price of digital currency reaches its peak, they dump it (sell) with massive sales.

How pump and dump designs work

• Pump and dump groups manipulate the prices of digital currencies with less market restrictions. This causes the price of a digital token to change falsely, due to an unrealistic increase in value and trading volume, before deceived people can make a good profit from price changes.
• In the pump and dump process, traders who enter the trading stream first benefit, and those who enter the market a little later, suffer from a market downturn that occurs in less than a few minutes.
• Scammers often work in telegram or slack groups. Although this seems like a good opportunity to make big money fast, in most cases, ordinary market traders perform slower than groups that manipulate the market illegally.

How to avoid pump and dump designs

• Do not participate in these groups.
• Beware of tokens whose trading volume increases suddenly and immediately.

Common warning signs

Most digital currency scams have definite and fixed signs that can be easily detected with a little care.

The promise of astronomical profits

In many cases, if the declared profit of the project seems too good, it probably is not good! Simply put, always be suspicious of any project that claims to make a huge profit on your investment.

Invite more users to the project

When you are asked to invite other users, you are probably faced with a panzi scheme. However, keep in mind that each new referral program can have its own characteristics and is of course always voluntary.

Password request

Never share your password, private key or security phrase. Anyone, project or company that asks for your password, private key or security phrase is a scammer.

History of fraud

If a project, startup, or individual has been accused of fraud in the past, be careful, as they may commit fraud again.

Determine the future price

Prices in the market are set on the principle of supply and demand, and it is a scam if a project sets a future price for its digital currency.

Concluding remarks

Overall, despite the multiplicity of scams, schemes, and perpetrators of various fraudulent activities throughout the digital currency space, the best approach is to observe a reasonable degree of pessimism and caution.

Despite the large number of fraudulent projects, many reputable organizations and groups, with their effective management, have made safe investment in digital currencies affordable and feasible.

Hope you are now more aware of potential scammers. prevention is better than cure. If you are deceived, there may be no cure for your money back. So be careful.