How are people scammed in a crypto world | Hacker Noon

image

Viktor Kochetov Hacker Noon profile picture

@viktorkochetovViktor Kochetov

СEO Kyrrex.
The knowledge in traditional markets is accompanied by crypto experience.

As the Kyrrex CEO, I would like to provide the community with the most influential scam cases in the crypto industry. How to avoid scammers, keep your assets safe on the crypto market, and some extra intel about the importance of regulation – please find the advices below.

More and more investors face scam activities from fraudulent companies
or hackers, losing all hard-earned funds. The Thodex case where a founder
picked $2B of clients assets became a reason to take a closer look at crypto regulation. Many trading and exchanging platforms decided not to be regulated by trustworthy authorities. You can simply avoid scammers by choosing only well-regulated companies to work with.

Ponzi scheme on the cryptomarket

The first and the most common scheme that came to crypto is the Ponzi scheme. It came here from real markets when the company is built around the idea that dividends and profits the earliest investors should be paid from the money of the most recent investors.
It works only when there are upcoming investors. There are several well-known cases in the crypto world.

Thodex

Thodex was a well-known Turkish exchange platform. The company had over 400,000 active clients and 390,000 of them were active. Faruk Faith Ozer has taken approximately $2B of the investors assets and flown them to Albania. As a result, six people involved in the fraudulent activities were jailed.

Bitcoin Savings & Trust

Bitcoin Savings & Trust (BST) was one of the earliest Ponzi schemes on the crypto market that was operated by Trendon Shavers during 2011 and 2012 years. The company offered users to invest their funds in trading and promised to obtain up to 7% weekly profits. Most of these raised funds were invested in the MtGox bitcoin exchange. During its activity, BST could attract 764,000 Bitcoins (approximately 7% of mined coins worldwide) from users around the globe. As a result, from these funds, over 150,649 Bitcoins were transferred to his personal account. The story ended with Trendon Shavers for forty years in jail.

Bitconnect

Bitconnect was an investment platform that was released in 2016. The main statement was that the system allows investors to lend their funds in Bitcoins through the Bitconnect platform. It requires users to lock their funds for a proper period. After it is finished, they are allowed to withdraw funds with profits in Bitconnect Coins. The profits should be obtained by a trading bot. The company wasn’t registered at all that was noted by FCA, North Carolina Secretary of State, and others that the company had no registration approval to make trading activities. Through these events where the company couldn’t prove its trading activities, Bitconnect Coin has lost 92% of its value.

PlusToken

PlusToken was founded in April 2018 and provided investors with stable monthly profits delivered on their crypto-wallets. The company has issued a Plus token in addition. The final scammed crypto assets have amounted from $2 to up to $2.9 billion in prices of 2019. As a result, it triggered the Bitcoin price falling. The story ended with a happy ending where the scheme creators were judged in 2020 in China.

Hacking and exploits

If the system wasn’t coded well, there are high chances that people lose funds. Hackers consistently review code and look for exploit opportunities to steal some money. Their activities focus on various fields such as exchangers, DeFi Rug Pulls, and wallets.

BitGrail

Italian exchange BitGrail was hacked in 2018, but in 2020, Italian police were suspicious that an owner could be behind several hacks that caused to be stolen approximately $147 million in cryptoassets. The person called F.F. from Florence could be behind this hack or be a person who did nothing knowing that a breach exists. This person faced charges of computer fraud, fraudulent bankruptcy, and money laundering.

Coincheck

The Coincheck company was hacked in January 2018, where $533 million, in 500 million NEM tokens, was stolen from hot wallets. The number of stolen tokens equals 7% of all NEM crypto assets. To prevent future losses, the company moved $110 mil in XRP tokens to the unnamed address. The reason could be that Coincheck didn’t have proper multi-signature security that must require to follow all steps to move cryptoassets.

ChainSwap

ChainSwap caused a vulnerability through which hackers exploited over $4 million from DeFi projects. The ChainSwap protocol offers a bridge between the Polygon, Binance Smart Chain, and Ethereum blockchains. Yesterday, the PancakeSwap platform had an issue that was a trigger for an intruder to exploit the Wilder Pancake Liquidity Pool on $ 534,000. He managed to issue 20 million WILD tokens and put them to his address on the Binance Smart Chain. Other projects have suffered similar attacks as well, Wilder World said.

Africrypt

The brother-owner of the South-African trading platform decided to steal $3.6 billion in 69,000 coins in April 2021. Ameer Cajee asked the community not to inform authorities because it can slow the process of inner investigation and returning funds. After information that employees had lost access to the platform seven days before the hack appeared, everything became clear.

How to protect your assets?

All these scam stories forced us to talk about the ways of avoiding them and keeping your assets safe more frequently. There are several simple ways to keep your crypto safe:

● You have to pay maximum attention when you use various exchange services, even if they are familiar one. They can be hacked and redirect you to a fraud site leading you step-by-step to get your funds.

● Always check, the application you may use was downloaded from a relevant publisher, and there are many positive testimonials about people’s user experiences. A company and application should have a proper level of people’s trust to be used.

● You should pay attention to emails,  messages, tweets, and so on. You
have to never click on links if the messages look unfamiliar or fraudulent.
Never hurry up to send your funds to someone if the message calls you to do this ASAP.

● Work only with a trustful trading platform. As an example, Kyrrex is going to be regulated by an EU authority. It significantly increases business processes, sets a high-security level, and provides a positive trading and investment experience.

● DeFi contacts are not only an opportunity to get profits from your crypto but high risks as well. You should pay extra attention and conduct some research before applying.

● A well-regulated trading platform is always better because it has a license that was hard-obtained after finishing a complicated audit process; it follows laws and rules; it passes a daily regulator’s audit; it has a better security level, etc.

● Never trust a company if it claims that it provides you with profits that are several times higher than it’s common on the market. It’s the first and most significant sign of the Ponzi scheme.

● Finally, never share security details to get access to your wallet.

As we can see, it’s simple but requires much attention to keep your crypto assets safe.

Tags

Join Hacker Noon