Staying safe from crypto scammers has never been as critical as in the present time. Why do they keep working against people? If it is human to err, how can people appreciate what drives a successful scam? Here is a breakdown of four reasons why crypto scams persist against new and seasoned investors.
Scammers rely on their ability to convince people with urgency. They go as far as manipulation, using social engineering and twisting whatever they can to perfect their illusion. The infamous Onecoin scam, for instance, made off with $25 billion. As a classical pyramid scheme, new investors’ funds paid old investors. By purporting to sell educational content and token packages, it “worked” well until it collapsed on its own design.
Much to the disappointment of investors who interacted with it, it never had a cryptocurrency. It was a money-minting machine that only worked for the founders, and it came to a halt when legal issues exposed its fraudulent nature. Needless to say, the quick “returns” that they offered their early investors were fundamental to the persuasion that they needed to rope in unsuspecting investors. As an additional note, the concept of “packages” and cryptocurrencies are unrelated.
The BitClub Network scam, in addition to persuasion, showed strong persistence in bringing new users to its ploy. For about five years from 2014 to 2019, BitClub network grew as a global phenomenon. It was even thought to be unstoppable until its founders were arrested. As an insult to injury, the Ponzi scheme rebranded some of its “operations” to “Mining City” later in 2019.
It was difficult, in some regions, to differentiate between BitClub, and Bitcoin
The euphoria surrounding its “superstars” undoubtedly made its mark on unsuspecting investors. Unfortunately, they made off with at least $722 million.
With regard to the rate of return, scams promise ultra-high returns. For comparison, in traditional investments, a conservative estimate of 10 – 20% per annum is reasonable within the calculated risk. Scams, on the other hand, often “eliminate” risk, while offering a high return in a short time. Many unsuspecting investors find such an offer to be the deal of a lifetime, only to lose everything they bring to the platform.
Ironically, crypto scammers begin with a false show of support, understanding, and sharing of their “success” until they brutally dupe investors. They suddenly become unreachable, when their true goal materializes. For example, Plexcoin promised 1,354% in returns. Since it was an unregulated security, the SEC shut it down and ordered them to repay $20 million of stolen funds.
Crypto scams are the least creative plots of financial scams. Many of them copy existing scams, barely changing much about their design. They promise quick returns and make a few people “rich” or opulent enough to sell their lifestyle as the key product of their plot.
These scams also use the same tacts such as convincing family members and friends to participate in the next “biggest” financial decision they’ll make toward their freedom. They sell the idea of high returns with low risk. Furthermore, they capitalize on people’s knowledge gaps and couple it with a fear of missing out. Many of them are similarly predatory, as they tend to target people who have an interest in financial literacy, but they corrupt it with unfounded aspirations. They are indeed masters of illusion. What’s terrible about their illusion is making real people’s money disappear after their tricks take effect.
The only thing that differs from one crypto scam to another is its scale. Although in the early days of crypto scams there was scattered knowledge about them, there are now more resources to help investors identify potential scams before they lose money.
Proverbial Pot of Gold
The fact that early participants in a scam actually benefit from it shows other unsuspecting people that they do work. The unfortunate reality is that crypto scams work until the founders execute a rug pull. By targeting greed and pumping their scheme before they dump it, they do get their illusion to be realistic.
Crypto scams convincingly use influencers, famous people, and other markers of social success to sell their illusions. They throw around words related to (yet have nothing to do with) Bitcoin, success, financial freedom, luxury lifestyle, influence, opulence, and passive income. All these things in their legitimate form have value, but in a crypto scam, the fire is around the corner.
To bring these considerations to a close, think about a scam that almost got you. Why did it appeal to you? If it happened, instead, to someone that you know, what did they miss about the scam that led to the loss of their money?
For crypto adoption to grow to the next million for its legitimate use cases, it will be imperative to identify, understand, and ultimately escape the traps they set up.