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3 common scams in Crypto: here’s how to recognize them

#1 Pulled Carpet

Many crypto investors are looking for opportunities to enter promising new projects in order to capitalize on impressive growth. A common crypto scam that can exploit the willingness of some users to bet on new projects is the “pulled carpet”. A carpet is a scam in which the developers of a project abandon a project and withhold user funds.

Carpet pulls are most commonly associated with coins listed on decentralized exchanges where resources do not pass through an intermediary between users.

Coins can be quoted on decentralized exchanges for free and without being controlled. Carpet makers can advertise their new tokens on social media websites like Twitter and Instagram. After raising the price, these fraudulent developers can then withdraw everything from the liquidity pool, causing the price to collapse to zero. They are also very common in the NFT space where NFT project managers will leave their community immediately.

Signs of a possible plot twist include newly listed tokens on decentralized exchanges that have low liquidity and have seen drastic price increases. Pulled carpets are most common when a significant number of tokens are held by the development team itself, before being available to retail investors.

#2 Phishing

Phishing is one of the most common scam tactics used on the internet as a whole, so it’s no surprise that it’s also used to target crypto users. Phishing in cryptocurrency tends to involve gathering information that can be used to access users’ private keys. When scammers have access to a user’s private keys, they may be able to freely access the tokens in their digital wallets.

Phishing is sometimes done through email, as scammers can send users a link that leads to a website that asks users to provide personal information. These websites can be designed to resemble legitimate crypto exchanges that users already trust, with only subtle differences in URLs or design.

Phishing scams can be combated by avoiding clicking links sent via email or social media websites, no matter how legitimate they appear. Instead, users can browse directly to trusted websites and verify that the URL is correct on any site that requires private information.

Using public networks can make users vulnerable to phishing attacks. When wifi signals are intercepted and information is compromised, this tends to be referred to as a “man-in-the-middle” attack. Strategies to mitigate the risk of this type of attack include using VPNs to encrypt the data sent.

#3 Fraudulent investments or business opportunities

Fraudulent investment opportunities may involve ICOs (initial coin offerings). Users can be offered a discount on a newly created cryptographic token and are asked to transfer a legitimate and active cryptocurrency, such as Bitcoin. Tokens received in exchange may not be as described.

Investment scams can also incorporate aspects of Ponzi schemes where existing investors are paid with funds from new investors. Ponzi scheme projects tend not to have the legitimate earnings needed to survive in the long term.

Business opportunities that cater to crypto investors can also come in the form of promised job opportunities. Users can be offered tempting, well-paid work as a result of paid “training” that requires the crypto transaction. However, once the funds are sent, the job opportunity may vanish.

How to identify crypto scam warning signs?

While there are a plethora of different crypto scams, there tend to be some commonalities among them all. Here are some of the typical warning signs of a crypto scam:

High guarantees

Crypto is known to be a volatile landscape and prices can fluctuate wildly from day to day. For this reason, it is a red flag when presented with an opportunity that guarantees drastic positive returns, especially from a well-known and unexpected personality. See the example below:

If something sounds too good to be true, then it probably is.

Private key requests

To send a cryptocurrency, you need the recipient’s public address and have access to your wallet’s private key to send funds from your wallet. While a public address can be shared, sharing your private key can give anyone full control over your funds.

Sharing your private key is also not necessary to receive crypto transactions, and a request for this information should be met with caution. Some scammers have used this fact to make their claims seem legitimate. See the following screenshots for examples.

In such cases, you will be required to deposit the crypto into the recovered wallet first to withdraw the funds or receive the reward. If you need to deposit cryptocurrencies to withdraw cryptocurrencies, this is a red flag.

Avoid crypto scams

There are many interesting investment opportunities in crypto. However, scammers can create misleading posts and websites to promote fraudulent scenarios. For example, investors may be encouraged to invest money based on a false promise of future returns.

When it comes to investments and business opportunities, it is often advisable to familiarize yourself with project members and their history. The lack of transparency may indicate that the project is not legitimate.

There are steps anyone can take to protect themselves from crypto scams. Blockchain technology itself tends to be robust, but the lack of public understanding continues to put enthusiasts at risk. With awareness, you should be protected from the top three ways you can get scammed into cryptocurrency.

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