In the Era of FTX, a Reminder of How Crypto Scams Work

Today, massive amounts of real money have been stolen from millions of cryptocurrency investors. $1.7 billion in losses resulted from cryptocurrency-related crimes in 2018. In fraud schemes based on digital currencies traded through online databases called blockchains, the criminals employ both traditional and cutting-edge tactics to defraud their targets.

I’ve learned from studying blockchain, cryptocurrencies, and cybercrime that some cryptocurrency scammers use tried-and-true Ponzi schemes, which use money from new investors to reward previous investors.

Others employ highly automated and complex procedures, such as software that communicates with Telegram, a well-liked internet-based instant messaging platform used by cryptocurrency enthusiasts. Fraudsters can still control a cryptocurrency’s market price even if a plan is legitimate.The market price of a cryptocurrency can still be manipulated by scammers even when the plan is legitimate.

However, a more fundamental query emerges: How are unwary investors initially drawn to cryptocurrency frauds?

Fast-talking swindlers

Some cryptocurrency scammers use promises of large returns to prey on people’s greed. As an illustration, an unidentified group of businesspeople operates the scam bot iCenter, a Ponzi scheme for Bitcoin and Litecoin. Although it doesn’t offer advice on how to make investments, it somehow assures investors of daily returns of 1.2 percent.

The iCenter scheme makes use of a Telegram group chat. It all begins with a small band of con artists who are complicit in the scheme. They receive a referral code, which they disseminate to others via blogs and social media in the hopes that they will join the chat. The newcomers discover encouraging and thrilling messages from the original con artists there. When some newcomers choose to invest, they are given a personal bitcoin wallet where they can deposit bitcoins. They consent to waiting for a significant return for a certain amount of time, such as 99 or 120 days.

The newcomers frequently use social media during that time to share their own referral codes with friends and contacts, which attracts more people to the group chat and the investment program. The money isn’t actually invested in any honest business. As a result, the cycle continues, paying out to earlier participants from each round of newer investors. Instead, when new people join, the person who recruited them receives a percentage of the new funds.

Some members put extra effort into recruiting new members by posting tutorial videos and images of themselves holding large sums of money as recruitment incentives.

Lies and more lies

Some con artists use outright deception. OneCoin’s creators defrauded investors of $3.8 billion by making them believe their fictitious cryptocurrency was genuine. Other con games rely on impressing would-be victims with technical terms or assertions of expert knowledge. The Global Trading con artists claimed they profited from arbitrage, which is the practice of buying cheaply and selling at higher prices, by taking advantage of price discrepancies on various cryptocurrency exchanges. They merely stole money from investors.

Investors could send a message asking about their account balance and receive false information in response from Global Trading’s Telegram bot; in some cases, balances even increased by 1% in a single hour. Who could blame people for sharing the scam on social media with their friends and family when the returns looked that good?

Exploiting friends and family

Once a scam has begun, social media helps it continue, at least temporarily. One person spreads the word to friends and family after being duped by the assurance of substantial returns on cryptocurrency investments.

Big names occasionally participate. For instance, the alleged mastermind of GainBitcoin and other scams in India persuaded several Bollywood stars to support the promotion of his book, “Cryptocurrency for Beginners.” In an attempt to gain some notoriety, he even dubbed himself a “cryptocurrency guru” as he oversaw projects that cost investors between $769

Not all famous people are aware of their involvement. In one blog post, iCenter included a video that appeared to be Dwayne “The Rock” Johnson endorsing a product while holding a sign bearing the organization’s logo. Videos of Justin Timberlake and Christopher Walken were deceptively altered to make it seem like they supported iCenter as well. Dwayne “The Rock” Johnson is obviously not supporting this cryptocurrency scam.