How to Defend Against Crypto Frauds and Scam

from Token Party

Although cryptocurrencies are very interesting from a technological and speculative point of view , it must be said that on the web there are also many scams related to investments and often cryptocurrencies represent one of the means exploited by malicious subjects to perform fraudulent activities. Let's make it clear to avoid any possible misunderstanding: in this article the aim is absolutely not to state that everything around is a scam!On the opposite, opportunities for investment and gain exist and can be very interesting if managed wisely. As well as there are serious projects on which it is worth betting. There are people and organizations that work very seriously, without a shadow of a doubt, even in the crypto world, but you have to be very careful and evaluate everything carefully.

Who are Scammers

The so-called "Scammers" are very dedicated to the crypto world, given the attention and involvement that it is getting in recent years and given the arrival, more and more massive, of neophytes and/or more naive people who begin to operate in these contexts without a minimum of study and/or without relying on experts in the business. In this article I want to give you the basic knowledge with which you can recognize in advance a fraudulent activity or service.Scammers use very precise and articulated techniques and methodologies.

What is a Ponzi Scheme

One of the most famous and used techniques is the classic Ponzi Scheme. The Ponzi Scheme is an economic model of fraudulent sales created by Charles Ponzi (1882-1949). Ponzi invited his victims to invest by promising huge gains and encouraging them to recruit new "investors". In turn, the new investors invited friends and relatives, so they could earn through their affiliation. In fact, anyone who managed to attract new individuals was awarded with prize money. The goal of the scammer was to create an ever-expanding and branching pyramid. Initially, Ponzi fulfilled his promises by regularly paying all of his creditors, so that trust and popular interest was created. Ponzi, while not supporting the sale of a real service, was able to meet the expectations of his investors, using the deposit capital of the new followers, to pay the expected interest. In this way the accounting balance was constantly in the red, but the popular mass was confident and willing to invite new victims. When the structure had expanded sufficiently, and the sums of continuous deposits had reached a substantial amount, Ponzi closed all contact with investors, running away with the money.

Ponzi Scheme vs Multi Level Marketing

WARNING: the Ponzi scheme should NOT be confused with Multi Level Marketing or Network Marketing. Often these fraudulent techniques of Ponzi Scheme are mistakenly confused with the Multi Level Marketing or Network Marketing that represent systems of lawful sales and used by many serious companies, in order to promote a product or a service by word of mouth (paid) in order to obtain more visibility and consequently more sales. Multi Level Marketing and Network Marketing are legal and regulated activities and used, although in a reduced way compared to other sales systems, by large companies and multinationals such as Herbalife, Yves Rocher, Amway, Avon. Differences between Ponzi Scheme (ILLEGAL) and Multilevel Marketing (LEGAL): Let's repeat once again to avoid any possible misunderstanding: Ponzi Schemes are illegal. Multilevel Marketing and Network Marketing are LEGAL and REGULATED. Multilevel Marketing and Network Marketing are types of marketing that differ from the Ponzi scheme because there is a concrete and tangible sale by a company, supported by a sustainable budget management over time, while the Ponzi scheme is based on nothing, without the sale of concrete products or services. This point is crucial:

  • in a Multilevel Marketing and Network Marketing activity there is a clear, transparent and sustainable business model
  • In a Ponzi Scheme, on the opposite, the only existing business is the Ponzi Scheme itself, i.e. the recruitment of new "customers" that perpetuate the construction of the pyramid until its final collapse.

In the Ponzi Scheme the first ones at the top of the pyramid gain at the expense of the last ones, those at the base of the pyramid, who are soon left with a fistful of sand in their hands, losing all, or most, of their investment. Economic sustainability is an indispensable condition for the survival of any organization, association or company. EXAMPLE Imagine taking a loan with 4% APR, and paying it back in installments, taking two more loans with 5% APR, and then attempting to pay back both, using 4 new loans, with 6% APR. This is essentially what happens in Ponzi schemes. You understand that this mechanism is doomed to die if there is no alternative income to continuous borrowing and lending. Essentially, to pay back a loan, you need a business that produces profits. BE CAREFUL, therefore, not to label as "Ponzi Scheme" companies that work honestly with Multilevel Marketing and Network Marketing. But how to distinguish in advance a ponzi scheme or any fraudulent activity?How to set off an alarm bell?

How to Defend Against Crypto Scams

Tip #1 IN THIS WORLD, NO ONE GIVES YOU MONEY! Always be wary of those who guarantee you huge gains with low investment and low risk. In Network Marketing, for example, it is possible to earn without necessarily investing personal capital, however, this requires skills, training, commitment, perseverance and dedication to sales. And yet, in the face of a substantial investment, you can make a profit, even substantially operating in the cryptocurrency markets. This is certainly true, but obviously always under the guidance of an expert and not improvising. Investing in crypto does not mean "play with your money" or "try your luck". To play with money there are casinos! Beware of GURUs! When you come across a "guru" who promises you huge gains for a small investment and little or no effort, stay away! The scam is in the air when you hear about guaranteed and stratospheric interest rates, equal to 1% daily or, even worse, 100% monthly. If someone were able to make these numbers then they could easily turn 100 euros into 400 thousand euros, in one year (100% monthly compound interest rate). You can understand well that these "phenomena" (if they really existed), do not need your money! Tip #2 BE CAREFUL WHO CONTACTS YOU, ESPECIALLY ON SOCIAL MEDIA. It happens often in social media to receive messages from strangers. Stay away from those who contact you to offer you fantastic opportunities to earn money in the world of cryptocurrencies (and investments in general!). I suggest you to activate at least a mental alarm when foreign users contact you, or profiles with a profile picture depicting a beautiful girl, or even profiles without photos, or even with few posts, videos and images uploaded on the wall. Tip# 3 DON'T STOP AT APPEARANCES Appearances are deceiving, it's common knowledge. Take a few days of reflection before investing your savings in any kind of business. Time gives advice. Tip #4 RESEARCH, INVESTIGATE, INFORM AND EVALUATE FOR YOURSELF Check the Company Website Research the website of the company that is offering you a product or service. No website? First alarm bell! Check that the site is clearly visible:

  • names of the managers and owners
  • photos of the team leading the project in question
  • contacts
  • a clear and detailed description of the project and business
  • the company VAT number
  • the legal and operative seat of the company.

Then carry out a "web screening" to check if the names and photos have been used for previous scams. Check that the company has all the papers in order to operate legally in this type of business. The supervisory authorities, in these contexts, are very restrictive and strict when it comes to financial markets and digital currencies. Check the latest SEC (USA) statements to see if these authorities have recently alerted investors to possible fraudulent activities. Read reviews from other web users Then type in the search engines: "Name of the company or project", putting together terms like "scam", "scam" or "ponzi". Very often, reviews come in handy in these environments. Be careful, however, to be objective and not to give credit to users who reveal subjective feelings and not factual data. Tip #5 IF YOU ARE A NEWBIE, USE WELL-KNOWN AND RELIABLE SITES AND PLATFORMS Avoid coming across unfamiliar and unreviewed exchanges and sites. If you want to get an idea of which Exchange might be best for you read: "Which Exchanges to Use to Buy Bitcoin and Cryptocurrency?". Tip #6 IF YOU'RE NOT SURE ABOUT TRADING ON YOUR OWN IN THESE ENVIRONMENTS, HIRE A PROFESSIONAL. Seek the advice of professionals in the field, and do not improvise as an expert. The opinion and information of competent individuals never hurts! Tip #7 BUY REAL PRODUCTS OR SERVICES Verify that the service or product being sold is actually tangible and visible. Be wary of those who sell you hot air. Everyone is good at words, but not so good at facts. Tip #8 STUDY AND INFORM YOURSELF AS MUCH AS YOU CAN Knowledge is an individual wealth that knows no limits or boundaries. If you find Cryptocurrencies interesting, study them! Thirst for knowledge will give you added value and very often will allow you to recognize scams in advance.


Tip #9 Last tip, DO A RELIABILITY SEARCH USING SCAMADVISER In order to get additional feedback:

  • consult the website
  • copy the url of the suspected company's website
  • paste it into the "search" function

ScamAdviser will provide you with very useful information allowing you to make a serious and objective assessment. Be careful not to use this site as a voice of truth. Rather, it is recommended to use it to have an additional frame of reference for your research.

Some Confirmed Exit-Scams (Scams)

Below you'll find some examples of fraudulent activities that have left some users holding the bag in the past, disappearing from the radar with loot in their pockets. A common feature of all these scams was the promise of high earnings in a short time, all seasoned with a bit of automation. Unlucky investors were given a dream of becoming rich in a short time and without any effort. What was asked in return? A deposit of a few hundred or thousand euros. The "technology" would do the rest, acting as a money multiplier. B****s! Here is the list of some confirmed FRAUDS:

  • Arbitly
  • BitConnectX
  • Bitcoin Era
  • The news spy
  • OneCoin
  • PlusToken