From late March 2020, when the global pandemic Covid-19 paralysed many economies, the appeal of cryptocurrencies has grown. Several statistics show increased interest from downloaded wallet apps to peer-to-peer traded volumes. In many ways, this interest in bitcoin and altcoins is evidence that the policies of central banks are failing. Many professional investors, as well as ordinary people, are losing confidence in fiat currency systems.
However, many that are exploring the idea of investing in crypto alternatives are falling victim to scams. It seems more scam crypto sites are roaming the space than bonafide cryptocurrency businesses.
It turns out that criminals also appreciate the shifting dynamics and are aware that investing in bitcoin is the new in-thing. In fact, the FBI issued an alert in April warning potential investors to be on the lookout for cryptocurrency-related scams.
The start of the severe lockdown measures meant homebound individuals suddenly had more time to explore and experiment with different investment propositions. The challenge now is how to tell if a crypto-related website is genuine or not?
For the most part, it appears bitcoin-related scams employ similar tactics used by organised criminal syndicates to entice victims. There are some tale-tell signs that expose potentially scammy crypto websites which investors need to look out for.
The Lure of Passive Income
Any scam website would not be interesting if it fails to promise a healthy rate of return to investors for doing almost nothing. A typical scam starts by telling an investor that with just a small deposit, they will be guaranteed returns of 10% and above per month. As an extra inducement, the investor is told the interest earned will be compounded on a monthly basis.
Still, the mere mention of guaranteed passive incomes may not be enough to lure many investors. So in order to get even more people interested, the scam website must also promise investors a quick path to becoming the next crypto millionaire. Oftentimes, prominent individuals and businesspeople that became wealthy after investing in bitcoin are displayed on these types of schemes. The chance to become the next millionaire is enough to obscure any concerns about the volatility of the cryptocurrency market that the potential investor might have.
Criminals are also aware that some in their target market might be hesitant to invest with an unknown entity. To get around this problem, criminal websites often display logos of reputable organisations. The objective is to gain the confidence of the more circumspect investors.
Therefore, when a site displays the logo of Visa or Mastercard, gullible investors will believe this to be an endorsement. Such perceptions usually erase any lingering doubts an inexperienced investor might have. The infamous Plustoken crypto scam had pictures of Prince Charles of the U.K. taken together with one of the masterminds displayed. The scam managed to steal billions from thousands of unsuspecting investors.
Next, testimonials by other investors that have already made unrealistic returns are also used to convince gullible investors to part with their funds. Tales of real people that turned a $250 investment to more than $10,000 in less a month helps to convince new investors to come on board. It does not matter that there is no way of verifying this because criminals also know that many people want easy money.