Tuesday, August 23, 2022

Scams And Cryptocurrency Can Go Hand In Hand

Scams And Cryptocurrency Can Go Hand In Hand


Source: Alessia Kozik / Pexles

When our students tell us they are leaving college in August 2021, it's not the first time we've heard of someone leaving college early.

But what's new is the reason. The student fell victim to a cryptocurrency scam and lost all of his money, including bank loans, leaving him not only bankrupt but also in debt. The experience was financially and psychologically traumatic, to say the least.

Unfortunately, this student is not alone. There are hundreds of millions of cryptocurrency owners predicting faster growth. As the number of people holding cryptocurrencies increases, the number of fraud victims also increases.

We study economics and behavioral psychology and recently published a book on the growing problem of fraud, embezzlement and financial abuse. There is a reason cryptocurrency scams are so common. And there are steps you can take to reduce your chances of becoming a victim.

cryptocurrency will rise

Deception is not a recent phenomenon; The stories about them date back to Biblical times. What has fundamentally changed is that scammers can easily reach millions, if not billions, of people with the click of a button. Internet and other technologies have changed the rules of the game, cryptocurrencies are coming to show the vanguard of new opportunities for this cybercrime.

Cryptocurrency, a decentralized digital currency that uses cryptography to conduct anonymous transactions, was originally started by "Cypherpunks", people concerned about privacy. But they have grown to capture the minds and pockets of ordinary people and criminals, especially during the Covid-19 pandemic, when the prices of various cryptocurrencies soared and cryptocurrencies became more common. Scammers took advantage of its popularity. The outbreak has caused disruptions to traditional businesses, leading to a greater reliance on alternatives such as cryptocurrencies.

In January 2022, a report by ChinaAnalysis showed that blockchain data platforms had defrauded investors of nearly $ 14 billion by 2021 using cryptocurrencies. For example, in 2021, two South African brothers managed to defraud investors worth $ 3.6 billion from a cryptocurrency investment platform. In February 2022, the FBI announced the arrest of a couple who used a fake cryptocurrency platform to defraud investors worth $ 3.6 billion.

You may wonder how they do it.

false investment

There are two main types of cryptocurrency scams that target different populations.

One is aimed at cryptocurrency investors who are active traders who have a risk portfolio. Most investors are young, under 35, high income, well educated and work in engineering, finance or IT. In such scams, the scammers create fake coins or fake exchanges.

A recent example is SQUID, the cryptocurrency named after the TV drama Squid Game. Once the new coins increase in value, the inventors lose their money.

A variant of this scam is to entice investors to be the first to buy a new cryptocurrency, a process called initial coin offering, with the promise of large and quick returns. But unlike the SQUID offering, no coins are ever released, leaving potential investors empty-handed. In fact, many initial coins have turned out to be fake, but due to the complexity and evolution of these new coins and technologies, even educated and experienced investors can be fooled.

As with all risky financial ventures, anyone considering buying cryptocurrencies should follow the age-old advice to research the offer thoroughly. Who is behind the sacrifice? What is known about the company? Is there a white paper, an information document issued by the company, which describes the characteristics of the product?

In the case of SQUID, the warning sign is that investors who buy coins cannot sell. The SQUID website is also full of grammatical errors, typical of many scams.

extortion fee

The second basic type of cryptocurrency fraud uses cryptocurrency as a payment method to simply transfer funds from victims to scammers. All ages and demographics can be targeted. These include cases of ransomware, romantic scams, computer repair scams, sexual dumping cases, Ponzi schemes, etc. Scammers exploit the anonymous nature of cryptocurrencies to hide their identity and avoid the consequences.

In the near future, scammers will ask for money transfers or gift certificates to receive money; they are non-refundable, anonymous and invisible. However, such payment methods require potential victims to leave their homes, where they may encounter a third party who could intervene and possibly arrest them. On the other hand, cryptocurrencies can be bought anywhere and anytime.

In fact, Bitcoin has become the most common currency in ransomware cases, being in demand in nearly 98% of cases. According to the UK's National Cyber ​​Security Center, sextortion scams often require people to pay in Bitcoin and other cryptocurrencies. Dating scams targeting young adults are increasingly using cryptocurrencies as part of the scam.

If someone asks you to transfer money to them via cryptocurrency, you will see a big red flag.

Wild West

In the area of ​​financial exploitation, more work has been done on the study and education of parents who are victims of fraud due to their high level of vulnerability. Research has identified common characteristics that make a person particularly vulnerable to fraudulent claims, including cognitive skills, education, risk-taking and self-control.

Of course, young adults can be vulnerable and in fact victimized. Education campaigns need to be extended to include young people of all ages, educated and wealthy investors. We believe that the authorities need to develop and use new methods of protection. For example, the regulations that currently apply to financial advice and products may extend to the cryptocurrency field. Data scientists need to better monitor and monitor fraudulent activity.

Cryptocurrency scams are very painful because the chances of recovering lost funds are very small. For now, cryptocurrencies are unregulated. I'm just the wild west of the financial world.

Bitcoin Notice on the Cash App: Check before buying Bitcoin on the Cash App

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