Unsuspecting investors have lost $ 16 billion by buying what they believe will be the best crypto projects in the future. It is almost impossible to get your money back. As the cryptocurrency industry proved to be disruptive to the currency and technology, and when Bitcoin (BTC) began to gain ground in 2017, the scammers used naive investors who were interested in getting involved.

Related: Crypto Crimes by Category: From Twitter Hackers to Not Your Key, Not Your Coins

Discover the tricks
The market for crypto startups is growing and expanding every day. New companies are emerging that are creating alternative banking opportunities that raise capital through initial coin offerings, coding assets for ease of use, building stock exchanges, and innovating in decentralized finance. Unfortunately, as is usually the case, many good projects are overshadowed by some bad ones. However, cryptocurrency scams are easy to spot if you know what to look for.

When we examine some of the biggest hoaxes in the crypto space, we see a pattern of how these schemes work. One type attracts investors with the promise of incredibly high returns, and in some cases up to 1% per annum. This Ponzi scheme is commonly used by a person who claims to have created a private trading robot that can generate these profits, but in the end they just pay what other investors have put in, without any valid product.

The second type is a pyramid scheme, in which investments in cryptocurrency attract investors who promise high returns, use tokens on the exchange and participate in the “next big deal.” But an investor can only make money by attracting new investors, and not by a real product. Cryptocurrency scams can be one, the other, or a combination of both.

The scammers have also created tokens that can only be used on the exchange and are essentially useless. Fraud also misleads investors with a lot of hype, flashy campaigns, buzzwords and jargon. Some investors lose money due to project collapses, which leads to a sudden drop in prices, and some lose money due to the fact that the founders suddenly disappeared with them.

132 different cryptocurrency scams have generated over $ 16 billion in investors since 2012, according to a report from Cisco Crypto Investor. Given the unregulated nature of the industry, this money is not protected and it will be very difficult, if not impossible. , Recycled. What were the consequences of these actions? According to the report, although 132 crypto-scam projects have been registered since 2012, only 71 projects have filed any kind of legal action against them.

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What the industry needs to do
While there are many things that an investor can look at when considering crypto projects in terms of reliability and value – for example, evaluating their white paper, evaluating their team, asking for a business model and confidence that they will benefit, not just hype – they shouldn’t. That the cryptocurrency industry leaves this investor with due diligence. There are ways to not only hold crypto projects accountable, but also make it easier for investors to learn more about projects they might want to support.

Openness and disclosure
Right now, if an investor wants to know more about a crypto project, its history, team and business model, he should search the Internet – if the team provides such information. One of the biggest drawbacks to cryptocurrency scams is that investors support projects they don’t know much about.

Rather than leaving it to chance or letting investors ask, the industry should actively encourage new businesses to publish information in a single source or ledger. If it becomes the industry standard, those looking to expose business information will show they have nothing to hide. Those who refuse to disclose their potential fraudulent activity may be flagged.

IR practice
The new cryptocurrency industry does not need to consider creating a set of best practices for investor relations. However, other companies in other industries have created ways to communicate with investors so that they are fully informed about the company’s actions and financing.

By creating a good IR culture in crypto, it lays the foundation for how crypto companies communicate with investors – and those who don’t want to can be called scams. Likewise, it sets up guidelines to encourage investors to ask questions and participate in order to see how their money is being spent.

Education and awareness
As we saw above, large-scale fraud targets the investor’s ignorance of the cryptocurrency field, as ordinary people were drawn to the promise.

Source: CoinTelegraph

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