So far in 2020, cryptocurrency scams, thefts, hacks, and frauds netted criminals $1.4 billion in just five months.
If you are a Bitcoin investor, blockchain advocate or involved in decentralized finance in some other way, you most likely are aware that many cryptocurrency scams are threatening the community. However, Bitcoin and many other digital assets are a new and unfamiliar concept to many. As digital assets grow in popularity, curious people start to get involved. Unfortunately, there are thousands of sophisticated scammers preying on newcomers who aren’t yet literate in the world of crypto.
In this article, we will explore some of the most prevalent cryptocurrency scams to be on the watch for. At the end of the article, we will offer some advice on how asset recovery companies can help victims of cryptocurrency losses to recover their assets.
How to Avoid Cryptocurrency Scams
Many of us have been brought up with the saying if it’s too good to be true, then it probably is. While this rule generally holds true, it relies on having an understanding of normal is. For someone entirely new to the cryptocurrency ecosystem, they don’t have that baseline. To them, everything seems too good to be true.
The best way to avoid cryptocurrency scams is to be aware of what they look like.
Cloud Mining Scams
Most cryptocurrencies, Bitcoin included, use a process called mining, which is how new coins enter circulation. Miners are computers which run software to process transactions for a blockchain. When a batch of transactions is processed, a miner earns a reward, which is new coins.
Mining Bitcoin has become very resource intensive as more people use the network. The idea of cloud mining is that multiple people contribute their own processing power or contribute financially to rent server space. When a reward is earned, the amount is divided proportionately amongst those who provided the resources to process the block of transactions.
While this all sounds very straightforward, there is a history of bad actors using this nice concept to defraud contributors. Some Cloud Mining scams are just a Ponzi scheme. Others use it as a cover story to charge fees for a service that won’t yield any returns. In other cases, successful cloud mining operators run off with the cash.
An ICO is an Initial Coin Offering. The term is very similar to IPO, which is an Initial Public Offering. From a very high level, an ICO and an IPO look similar. Both approaches are used to raise funds, and they both issue theoretical pieces of ownership. In the case of an IPO, it’s a share of a bonafide company, publicly listed on a Stock Exchange. In the case of an ICO, the investor receives a cryptocurrency or a token. The token relates to the project that money is being raised to fund.
Literally, anyone can launch an ICO and raise funds. Often is the case that projects raise tens of millions of dollars in Bitcoin, Ethereum or other cryptocurrencies. Despite raising such massive amounts of money, there are countless examples of projects never coming to fruition for one reason or another.
Because no regulation or consumer protection is covering ICO’s, there is very little that authorities can do to help victims. The decentralized nature of cryptocurrencies makes it easier for con artists to slip away since their transactions are outside of the banking system. A lack of jurisdiction makes the job law enforcement tougher, which is why asset recovery companies like ours are thriving in this sector.
It’s not just people who are the target of cons. Many sophisticated groups try to target exchanges and wallets which hold the assets of hundreds and thousands of users. Some exchanges hold hundreds of millions of dollars of Bitcoin and other cryptocurrencies. Due to the significant values, these exchanges are a significant target for hackers.
While these companies are ultimately responsible for holding your assets safely, the lack of regulation and accountability in the crypto industry means there is little protection for investors. Those who were negligent usually walk free, while investors are left to deal with the consequences.
How to Recover Cryptocurrency Losses
Whether you have been the victim of a cryptocurrency scam or your assets have been hacked or stolen from a wallet or an exchange, recovering your assets is not impossible. Fraudsters like to think that they are untraceable and out of the reach of the law. However, blockchains are an immutable record of transactions and forensic data investigators, like us, can use this to their advantage. At Spectra Finance Security, we have been incredibly active in recovering significant amounts of stolen cryptocurrency under a variety of circumstances. Anyone who has been deceived by the crypto underworld should contact us for a free consultation.