Since 2011, more than 7 trillion NGN worth of cryptocurrencies such as bitcoin has been stolen or looted in Nigeria, Africa and worldwide in crypto-related scams. This is apparent from analytics of media reports and legal documents about fraud with these digital means.
For example, take OneCoin, a fake cryptocurrency. In March 2019, the US Public Prosecution Service announced that it would prosecute the business owners: they had sold about 1.6 trillion NGN worth of fake cryptos worldwide. Crypto exchange platforms, where traders or people can trade cryptocurrencies such as bitcoin, are also regularly hacked.
In most cases, the people's ignorance is what makes these scammers smile to the bank regularly.
This article will explore everything you need to know about cryptocurrency scams, whether you're in Nigeria, Africa or any part of the world.
Examples of Cryptocurrency Scams
Over the past few years, several popular examples of crypto scams have looted trillions of naira from thousands of crypto scam victims in Nigeria, Africa and worldwide. It is worth looking at some of these examples to help you be on the look for such as you invest in digital currencies.
Reputed to be one of the biggest cryptocurrency scams in history, OneCoin scammed investors out of a large sum of over 1.6 trillion NGN, of which only around 698 million NGN has been recovered. The founders of this fraud lured unsuspecting people into this scam by promising to teach them how to mine the OneCoin cryptocurrency, using what they marketed as "educational packages".
The OneCoin public investors were made to pay amounts ranging from 60,000 NGN to 55 million NGN for the so-called educational packs.
This is another famous cryptocurrency scam that stole trillions of naira from investors. The victims were lured into the scheme by offering them the opportunity to trade Bitconnect coins for the king of cryptocurrencies, bitcoin.
In the beginning, the crypto company proved very successful and had great popularity and a huge public following worldwide. Bitconnect deceived many people, including supposed experts, before going down due to alleged government investigations and desist orders.
Another cryptocurrency Ponzi scheme that carted away trillions of naira from people is the PlusToken. The business or company offered users to pay them monthly simply for trading and holding cryptocurrency wallets with them. Unfortunately for the company, the business met its dead-end when law enforcement authorities arrested its owners and froze its digital assets, allegedly worth about 1.6 trillion NGN.
The worst part of this scam is that many of the people behind it got away with it and successfully fled the country and the Vietnamese government.
What are the Different Types of Cryptocurrency Scams?
Cryptocurrency scams are more dangerous and complex than regular online scams. They have no middlemen, so it's hard to get your money back if you've been scammed; the transaction also tends not to be reversible because there is no central database as with regular currencies, all records of who sent what reside exclusively on the blockchain network. The anonymity of the blockchain network makes tracking criminals an impossible task.
These schemes can be especially dangerous for new investors learning about cryptocurrencies. Here are some popular types of cryptocurrency scams:
Ponzi schemes are among the first types of cryptocurrency scams in this new field. Characterised by their promise of high returns, this kind of business operates by paying older investors with the money paid into the program by newer ones - using it as an incentive to keep them going and making sure they stay afloat.
While Ponzi schemes may seem legitimate at first glance (they usually come with investment plans that sound honest), eventually, when it is no longer sustainable, problems will start to appear one after another until the system shuts down.
Phishing email scams are malware that trick people into giving out sensitive financial data or information. Criminals behind this fraud will send what appears to be an authentic message, usually containing malicious software designed specifically for the target system and links to fake sites where they capture victims' login financial credentials so that they can be used in business against them.
Phishing scams are rampant online, but even more so within crypto spaces. This is because a transaction on the blockchain network cannot be refunded, and the pseudonymous nature of most digital currencies makes it easier for cybercriminals to get away with their crimes.
The scammer will send an email from an address that looks legitimate, usually just changing the letter. This message informs about alleged malicious login attempts and encourages them to change account information on their platform. Once the unsuspecting user enters their login information through a compromised link, hackers will gain access and steal cryptocurrencies from the wallet or exchange accounts of the victim.
Fake Cryptocurrency Exchanges and Wallet Websites
Phishing scams also exist in the form of fake websites. Scammers create web pages that look very similar to digital currency exchange platforms or legitimate wallets for people who have intentions of perhaps buying bitcoins to use login information and steal from users, usually by buying advertisements on Google for their victims in this way making them visible to those looking for legitimate exchange platforms or wallets.
Cybercriminals create fake mobile apps that appear to be the real version of popular wallets and exchange platforms. The apps are on Google Play Store or Apple App Store, so people believe they have been thoroughly vetted before release, leading them to believe these fakes are genuine products, thereby falling victim to some crypto fraud.
These apps often use the logos of the exchange platforms and provide very realistic screens, tricking people into depositing funds to that address. The scammers then replace it with their own, which you may not notice until your cryptocurrencies have been transferred.
Initial coin offerings (ICOs), also known as token sales, are a popular way for startups or a new crypto business to raise capital and issue new digital tokens partly because they can be so poorly regulated, making them attractive targets for cybercriminals looking to steal funds from unsuspecting investors.
The scammers will create an offer that looks legitimate enough to attract funds from investors who believe in the future growth of their fictitious company or business. After sufficient amounts have been raised, they will do what is called an "exit scam" by disappearing with the crypto-funds and leaving little traces behind them for those who cling to the hope of being able to recover the funds.
The world is changing, and as cryptocurrencies become more popular among the normal population, scammers will continue their attempts to scam people. Hence, it's important not only for every Nigerian already involved in cryptocurrencies but also for all those who might be interested later, to learn how to recognise the various scams or fraud, so they can avoid losing thousands or even millions like some unfortunate victims.
How to Avoid Cryptocurrency Scams
As there are many scams, it is necessary to pay extra attention to investments in cryptocurrencies so as not to fall victim to criminals. Check out the main tips:
- Be wary of promises of exorbitant earnings: the purchase of cryptocurrencies has to come from the person himself. No official sales outlet advertises offering cryptocurrencies, nor does it guarantee good returns.
- Care of personal data: never provide your data to digital or exchange platforms that you are not familiar with or are not used to. If you receive any contact or email requesting it, check the case with the company responsible for your portfolio.
- Analyse cryptocurrencies that you don't know about: study, inform yourself and verify if a certain cryptocurrency being offered really exists.
- Use antivirus: protect your cell phone and computer with antivirus, which ends up working as a safety net to protect you from dangerous access online.
- Beware of downloads: make sure the developer is trustworthy, pay attention to the app's recommendations, as well as the requested permissions. Thus, it is possible to avoid the risk of intrusion and data theft.
- Get to know the market: getting informed, exchanging experiences, and studying is essential for anyone interested in investing in cryptocurrencies. Otherwise, the investor may be susceptible to scams.
You can read up our other article to learn more about how to avoid bitcoin scams.
How to Spot Fake Cryptocurrency News
Fake cryptocurrency news is one of the most popular tools scammers use to make profits from unsuspecting crypto investors in Nigeria, Africa, and worldwide. It's quite interesting that new and sometimes expert crypto investors do not know how to spot fake crypto news and still fall for this scam. or fraud.
These fake news, articles, blogpost, and other online content are created to misinform gullible readers and make them part with their money to benefit the scam perpetrator. This content is usually shared on social media platforms like Facebook by scammers.
Sometimes it is hard to distinguish between fake news websites from the legit ones as they're almost a perfect imitation of the real deal. A crypto investor has to be very cautious not to miss the minute details.
Fake news websites usually have slight differences from the original one. It could be a single letter subtly added to the URL to make it different from the original. Also, fake news articles about cryptocurrencies may have many advertisement that may take you to fraudulent websites where your data or information may be requested and possibly a small crypto investment in return for something.
The offer is usually too good to be true. That is the work of a scammer!
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