{"id":47885,"date":"2019-05-13T12:53:06","date_gmt":"2019-05-13T19:53:06","guid":{"rendered":"http:\/\/world.edu\/?p=47885"},"modified":"2019-05-13T12:53:06","modified_gmt":"2019-05-13T19:53:06","slug":"how-cryptocurrency-scams-work","status":"publish","type":"post","link":"https:\/\/world.edu\/how-cryptocurrency-scams-work\/","title":{"rendered":"How cryptocurrency scams work"},"content":{"rendered":"

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\nMillions of cryptocurrency investors<\/a>\u00a0have been scammed out of massive sums of real money. In 2018, losses from cryptocurrency-related crimes amounted to\u00a0US$1.7 billion<\/a>. The criminals use both old-fashioned and new-technology tactics to swindle their marks in schemes based on digital currencies exchanged through online databases called blockchains.<\/p>\n

From\u00a0researching<\/a>\u00a0blockchain<\/a>,\u00a0cryptocurrency<\/a>\u00a0and\u00a0cybercrime<\/a>, I can see that some cryptocurrency fraudsters rely on\u00a0tried-and-true Ponzi schemes<\/a>\u00a0that use income from new participants to pay out returns to earlier investors.<\/p>\n

Others use\u00a0highly automatized and sophisticated processes<\/a>, including automated software that interacts with Telegram, an internet-based instant-messaging system popular among people interested in cryptocurrencies. Even when a cryptocurrency plan is legitimate, fraudsters can still\u00a0manipulate its price in the marketplace<\/a>.<\/p>\n

An even more basic question arises, though: How are unsuspecting investors attracted to cryptocurrency frauds in the first place?<\/p>\n

Fast-talking swindlers<\/strong><\/h4>\n

Some cryptocurrency fraudsters appeal to people\u2019s greed, promising big returns. For example, an unknown group of entrepreneurs runs the scam bot iCenter, which is a\u00a0Ponzi scheme for Bitcoin and Litecoin<\/a>. It doesn\u2019t provide information on investment strategies, but somehow\u00a0promises investors 1.2% daily returns<\/a>.<\/p>\n

The iCenter scheme operates through a group chat on Telegram. It starts with a small group of scammers who are in on the racket. They get a referral code that they share with others, in blogs and on social media, hoping to get them to join the chat. Once there, the newcomers see encouraging and exciting messages from the original scammers. Some newcomers decide to invest, at which point they are assigned an individual bitcoin wallet, into which they can deposit bitcoins. They agree to wait some period of time \u2013 99 or 120 days \u2013 to receive a significant return.<\/p>\n

During that time, the newcomers often use\u00a0social media to share their own referral codes<\/a>\u00a0with friends and contacts, bringing more people into the group chat and into the investment scheme. There\u2019s no actual investment of the funds in any legitimate business. Instead, when new people join, the person who recruited them gets a percentage of the new funds, and the cycle continues, paying out to earlier participants from each round of newer investors.<\/p>\n

Some members work especially hard to bring in new funds, posting\u00a0tutorial videos and pictures of themselves holding large amounts of money<\/a>\u00a0as enticements to join the scam.<\/p>\n

Lies and more lies<\/strong><\/h4>\n

Some scammers go for straight-up deception. The founders of scam cryptocurrency OneCoin\u00a0defrauded investors of $3.8 billion<\/a>\u00a0by convincing people their\u00a0nonexistent cryptocurrency was real<\/a>.<\/p>\n

Other scams are based on impressing potential victims with jargon or claims of specialized knowledge. The Global Trading scammers claimed they took advantage of\u00a0price differences on various cryptocurrency exchanges<\/a>\u00a0to profit from what is called arbitrage \u2013 simply buying cheaply and selling at higher prices. Really they just took investors\u2019 money.<\/p>\n

Global Trading used a bot on Telegram, too \u2013 investors could send a balance inquiry message and\u00a0get a response with false information<\/a>\u00a0about how much was in their account, sometimes even seeing balances\u00a0climb by 1% in an hour<\/a>. With returns looking like that, who could blame people for\u00a0sharing the scheme<\/a>\u00a0with their friends and family on social media?<\/p>\n

Exploiting friends and family<\/strong><\/h4>\n

Once a scheme has started, it stays alive \u2013 at least for a while \u2013 through social media. One person gets taken in by the promise of big returns on cryptocurrency investments and spreads the word to\u00a0friends and family members<\/a>.<\/p>\n

Sometimes big names get involved. For instance, the kingpin behind\u00a0GainBitcoin<\/a>\u00a0and other alleged scams in India convinced a number of Bollywood celebrities to\u00a0promote his book, \u201cCryptocurrency for Beginners<\/a>.\u201d He even tried to make himself\u00a0a bit of a celebrity<\/a>, proclaiming himself a \u201ccryptocurrency guru<\/a>,\u201d as he\u00a0led<\/a>\u00a0efforts<\/a>\u00a0that<\/a>\u00a0cost<\/a>investors between\u00a0$769 million and $2 billion<\/a>.<\/p>\n

Not all the celebrities know they\u2019re involved. In one blog post, iCenter featured a video that purported to be an\u00a0endorsement by Dwayne \u201cThe Rock\u201d Johnson<\/a>, holding a sign featuring iCenter\u2019s logo. Videos of Justin Timberlake and Christopher Walken were deceptively edited so they appeared to praise iCenter, too.
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