The top Crypto Scams and why they are just Fiat Scams with an SEO target.
Updated: Mar 2, 2022
The impact the Crypto industry had on the modern consumer is no different than what happened in the early days of capitalism and the creation of what I like to call financial toolmanship. Money changed as industries evolved, and what was once a simple transaction with a state guarantor was now a jumble of private banks, loans, debts, vouchers, stocks and bonds. Needless to say, the fundamental element that makes business possible, trust, was in increasing short supply as the financial industry grew into it’s modern forms.
What Cryptocurrency and the blockchain economy are essentially doing is revolutionizing this financial space. The whole must ultimately mimic the existing institutions so that adopters can have a point of reference as to what’s actually going on with their money. DEFI, option trading, smart contracts all of these are mechanics that in one degree or another exist already, but are created in the crypto space as trustless, seamless and decentralized services with a high-tech name. Naturally, if ever anything unruly was to occur, it is much more difficult to complain and get restitution with a decentralized system. But after all, aside from particular fraudulent instances with credit cards, the modern centralized financial system will rarely credit you back for your own shortcoming's, especially if you were fooled by chasing unrealistic, poorly displayed, sad, or dishonest advertising.
Today’s regulators grew out of a fierce competition against every trick in the book…mainly because they evolved with book. In the advent of digital marketing, anyone selling anything, be it essentials or fugazi, can pin point the exact profile type that would ‘fall for the advertising’ and bet big. In the wild west of crypto, Scams are almost synonymous with the spaces advertising, as the entire industry is in an embryonic stage with the entire purpose of keeping regulators out. It would be difficult to associate an exact number but I would argue that only 1% of projects in the cryptoverse have been actually institutionalized into a harmonious network, where as the remaining 99% are fighting to be taken seriously. Or, as many anti-crypto proponents will argue, are simply smoke and mirrors for the soul purpose of generating hype around what is essentially a fraud.
Are these scams any different from the turn of the centuries yellow journalism and railroad bonds, not one bit ! In today’s article I will be going over the most famous crypto scams of the year, and relating them to existing fiat scams that did exactly the same thing. Hopefully after this article, you won’t be as harsh on the crypto world and simply be disappointed in what makes scams possible, human weakness.
Introduction to Scams
Is a poorly run company a scam ? well that depends on what and how they promised you returns. A lot of projects start with good intentions, fantastic ideas and just terrible management. This doesn’t make them a scam until they lie about what they are doing or who is associated with the project. If you as an investor cannot see the red flags or are comfortable taking the risk with unverifiable executive boards and founders, that is your own prerogative. But does the entity itself become a fraudulent entity ? I , and a few lawyers would argue no.
So what makes it a scam?
The criminal gets your financial credentials through a fraudulent mean, pretending to be someone, phishing your passwords, social engineering or simply attacks your hardware with a classical hacking tool kit. Essentially acquiring access to your wallet unlawfully.
A company and project is designed with inherent flaws in it’s infrastructure with the purpose of trapping injected funds. This said company then manipulates media to create a huge hype around their product, that ultimately was never meant to be launched.
What, as a would be investor is the way to avoid both of these? Just pay attention, I follow the golden rule of trusting time more than any other factor. Even if this means missing out a certain altcoins, so be it. Greed is relative risk, risk is relative to knowledge, knowledge is relative to humility, if your a retail investor with three of these characteristics on the wrong side of the fence, your chances of falling for a scam are incredibly high, and unfortunately no one will be there to help once the money goes POOF!
My favorite modern term to describe being hoodwinked! Social engineering is simple; you as a human have been conditioned subconsciously to act a certain way, that is in line with a lawful and trusting society. You give money, you receive a service, you ask a question, you receive an answer, you see authority, you assume purpose.
No matter the environment in which you are working, these preconditions exist for most of us, and many of them are very easily exploited by criminals who are interacting with the gate keeper in a company. Even more so when there is an emotional angle to the ploy, and the only thing standing between the thief and their goal is a relationship status. Social engineering is the fraudsters way of manipulating these basic principles to lure victims into deception and ultimately walk them into their trap.
Romance Scams: 25 mil$ (in Canada)
The most popular scam nobody reports. With Tinder, bumble, grinder and all kinds of dating apps coming out, it is safe to say that the consumer population has taken courting 2.0. But at the end of the day, everyone’s objective on these platforms is the same, get a mate, get laid or just make a friend. The formula is very generic and is pretty much the same its been for Gold-digger or fuck-boy cultures for the last 50 years; except now, they never need to meet. You fall in love over a chat, get a few dirty pictures in the process, and before you know it the person needs financial help and would like to merge your accounts to get their citizenship. Not to say this has never authentically occurred, but 20% of romance scams are in the crypto space and crypto dating is definitely a thing.
Celebrity Giveaways: 2.1 billion
How many times has Elon Musk offered to multiply your bitcoin? Beyond the obvious ridiculous nature of this offering, giant live streams were doctored on YouTube and other platforms to reinforce the idea that x celebrity was giving out free money. A lot of us ask ourselves how and why would anyone believe these ridiculous claims, and the unfortunate answer would probably be a combination of self esteem issues and unfiltered greed. Almost 2 million$ in crypto were lost between March and Juin on fraudulent impersonators, who essentially just ran a social media ad campaign on fans of that celebrity. It is such a rudimentary method of crime, it is almost sad to see how many people lost money in these pitiful attempts. But celebrity giveaways are nothing new, releasing an announcement that a celebrity will be in town to see a show, is how early Hollywood sold big bucks tickets to premiers. Whether the people see the celeb or not is secondary, as the premise of this social engineered scam have to do with confidence by association. Because Elon did it, it MUST be good.
Phishing Scams: 231 million
The general term of phishing is more or less the technique used by any fraudster; that essentially means a person giving up their info. Now, a technical phishing scam usually involves a web link or some form of digital portal that is masked as something lawful. The user clicks on the link thinking it is leading them to pay a ticket, to pay for tuition, to verify account information etc… These types of scams are probably the most common and lucrative, as the criminals will be casting a very wide net via direct communication channels. To be successful they need to be aware, somewhat, of who the person is they are sending the message too. Some of the most important scams occurred in companies that have thousands of employees. The criminal can lawfully find emails from that company and send them all a message that look official enough to be explored. Once clicked it is already to late, the malware begins to spread and the employee has compromised all of their peers. These phishing scams are the ones that usually lead to large scale hacks and ransomware attacks. I find that this tactic is very similar to religious bible scams or the well known Nigerian prince scam, where a person is lead to believe that they are actively participating in a problem solving activity to their own benefit, with a genuine person, who has the authority to and privilege's of bringing them wealth.
ICO’s: 154 million
An Initial Coin Offering is the exact same thing as an IPO, except it has no regulatory oversight as to how, where, or when the coin is being launched... :) . ICO’s were a huge part of the 2017–2019 crypto era, where projects were being launched a dime a dozen, and there was no real way to gage the authenticity or honesty of these projects. Any review site can be manipulated, user reviews couldn't exist because there was no product, and promotion was rampant on social media to create these huge fan bases around the problem that was supposedly being solved by the new coin. Ultimately these projects had no wallet, no servers, and no real team outside the marketing and community managers. What was so heart wrenching about these projects, was that some of the problems they were addressing were very serious issues, and in the eyes of any investor were sound directions to take in the industry with or without the coin that was being released. Unfortunately it was, as it often is, too good to be true. A quick example of this tactic outside of the cryptoverse is found in junior exchanges and penny stocks everywhere. One of my favorite Martin Scorsese films of all time, The Wolf of Wallstreet, is a true story of a multi-billion dollar stock brokerage that was shilling shitcoin’s before Satoshi ever even fathomed BTC. It was simple for the would be investor taking the plunge, buy low when the company starts, listen to the best prepared script in capitalisms history, and sell high when it reaches the shelves, too bad it never did.
Rug pulls in DEFI: 2.8 Billion
Possibly the newest one on the list that has a real life equivalent happening at a state level right now in Lebanon. Rug pulls are a fraudulent DEFI mechanic where users will not have the option to sell early as the coin rapidly grows to it’s all time high. On the flip side the creators /insiders will instead pull the treasury into fiat when it’s value has been multiplied ten fold. The mechanic is in place lawfully, as the creators of the program explain that the project needs the money to prosper, and so limit the profits that can be taken out by the investors early. They follow up with a big chart and a calendar and explain to you when it will be safe to pull without causing a collapse in the system . Low and behold a month goes by, you see your funds increasing as your money is being ‘leant out’ on the chain, and all of a sudden, the coin drops 80% in matter of minutes, the flood gates open for investors to sell, and by the time you reach the send button, you have lost 99% of your value and require to insert more coins to pull out what is left. Rug Pulls are terrifying for an investor, lest we forget the infamous Squid game token live rug pull that drained a Youtubers life savings in a few minutes, thankfully he got a few million views for his stupidity, but Squid Games rug pull cost investors nearly 23 million dollars, and tarnished the DEFI industry for months that followed. The crypto Rug Pull, and fake investment banker scam are pretty much the same. For the fraudulent investment banker, doctored index reports, market strategies and balance sheets are the tools that are sent out to investors to maintain confidence. All the while, the cash being invested is simply moving offshore never to be seen again. When the news comes out, the world collapses, the insurance companies freak out, and everybody loses except the fraudster who usually ends up on the island where the funds are held. we would like to think white collar crime is served swift justice but for the last 30 years, financial crimes have been a slap on the wrist in comparison to drug related crimes. In the case of Lebanon, a topic in my future blog, the state banks had been promising 10–12% return on savings for decades, and now, after defaulting on their loans, have created a maximum cap for withdrawal for users. Your 10million$ account is actually 100 000 transactions of 100$.
Cloud Mining Scams: 18 million
Cloud mining is one of those unverifiable, purely trust oriented risks that cryptonauts have taken time and time again. Spend money now, receives it back piece by piece, and when you cover your investment, don’t worry there is still more coming to finnnaaaalllllly make it worth your while. With ASIC miners quintupling in price, cloud mining became the cryptoverses equivalent to buying time-shares for a luxury property. Send a part of cash, own a piece of the whole, receive a part of the reward, when and only when the system makes its money. Who would fall for that ? Millions of dollars from thousands of people. When someone does not understand the intricacies of mining it is easy to explain to them the dummy proof version of computers going BZZ and Money coming out. It is also VERY VERY easy to make it sound that the more miners one has the more money will come. but this is far from the reality of mining complexes that require huge amounts of technical expertise and industrial experience to properly launch, secure and operate these types of programs. Most of these websites have fake users, fake sponsors and a google maps addressee that points to some industrial building, after all how would you ever know the difference ? Mining also has a very real characteristic wherein it is an expensive venture to begin, so having a high price to jump into a pool of these is ‘easier to believe’ as long as the price is less than an actual miner. These scams are operate much like any Ponzi. if the early adopters don't have a gun to the head of the creators, they will get payed with fractions of the funds that arrive from subscribers after them. The creators than lower this amount gradually until it is time to make their great escape. Some companies like Bitconnect and Muxminer’s are still in court till today, others that were stationed out of North American or European secured states will probably never spend a day in court.
With the price of crypto scams reaching nearly 14 billion in 2021, it is hard to defend the industry by saying it is always and only for the best. It is also ridiculous for proponents of classical finance to accuse the industry of being purely a marketplace for fraud and empty promises. At the end of the day, fraud exists because of the human tendency towards greed and reinforce by the voracious advertising that surrounds wealth culture. Nothing is new, and most fraudsters in crypto prefer outing the funds in fiat rather than keeping it in coin. The techniques and deception used are what capitalism birthed over 100 year period, where the anticipation for a sudden creation of unbelievable wealth outperforms our empirical observations and rational mindset. We have believed much worse, and given up much more. Crypto scams are here to stay, but most of the time these 2 golden rules remains the same.
If it’s too good to be true, it probably is.
if it’s free, your the product.
Thank you all again for your attention, i hope you enjoyed the reading, please don’t hesitate to comment and share