Welcome to the Ask SCN Community › Forums › Global Forum › FAQs › How to identify scams & Ponzi schemes?
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September 25, 2020 at 8:49 am #46askscnKeymaster
Similar to other new technologies and financial instruments, scams and Ponzi schemes plague the cryptocurrency space. Scammers often lure in unsuspecting investors with high yields and promise guaranteed returns. These are three types of the most common scams you will encounter:
Investment Scam – The cryptocurrency space is vast and highly dynamic, investing in one project requires a lot of due diligence. Perpetrators will convince investors to buy-in to their projects’ tokens while building up hype. Holding a large sum of those tokens themselves, manipulating the price up as investors FOMOing in. Eventually, the scammers will dump their tokens on the open market, cashing out their gains while leaving smaller investors with tokens which are now worthless.
Impersonation Scam – Impersonation of well-known individuals or entities, using their fame to attract attention and funneling soon-to-be victims into the scamming process either by directly sending money or digital assets to a certain address or obtaining credit card information.
Ponzi Schemes – This type of scam is probably the oldest and most well-known scam and is widespread in every business sector. The scammers often try to attract gullible investors by offering a high return on investment (ROIs) while claiming they are taking the funds to invest in some sort of investment program. During the first few months or even years, they continue to pay up the dividends to investors to build up reputation, but when the money pool becomes large enough, they will simply stop paying and disappear.
Exit Scam – Exit Scam is another kind of malicious activity that can often be seen in the forms of fake exchange or wallet providers. This kind of business might look legit at first, but as the user base grows, the project owner might decide to make a quick crash grab and run away. The exchange or wallet providers usually have total control over your deposits and can simply take all the funds from the victims’ accounts and vanish. This type of scam can also be associated with investment scams and the Ponzi scheme as well.
Keep in mind that there are no such things as free lunch and if something sounds too good to be true, it probably is not.
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