These days, your bitcoin or cryptocurrency is an incredibly valuable financial asset to scammers. It is a liquid, highly portable asset, and once a transaction is completed, it is virtually impossible to reverse. As a result, a wave of online crypto scams (classics from other decades and those specific to the bitcoin or cryptocurrency industry) has flooded the internet.
Crypto scammers both at home in Nigeria and abroad use various techniques, including the use of phishing URL links in emails and text messages, a false website or mobile app, etc., to lure potential victims into stealing their personal data or even account details and the eventual loss of bitcoin or cryptocurrencies.
This article will discuss the different types of online scams in the Nigerian bitcoin or cryptocurrency industry and around the world.
Promotions/Awards Scams on Social Media
It's amazing how, in this period of time, everyone seems so generous on sites like Twitter and Facebook in Nigeria. Check out the responses to a high-engagement Nigerian tweet, and no doubt you'll see that a crypto company or provider via one of your favourite "influencers" is publicising a donation or promotion.
If you only send them 1 BNB/BTC/ETH, they promise to return you 10x the value! Sounds too good to be true, doesn't it? Unfortunately, this is the case. It's generally a good idea to think this way for many fraud or scams both at home in Nigeria and abroad.
It is extremely unlikely that anyone will offer a legitimate gift/reward when the condition is that you send your own money or some fees first. You should be very careful with these false text messages and proposals on social media.
Scams or fraud like this can arise from seemingly legitimate accounts, identical to user accounts you know and love. But that's part of the trick. As for the dozens of responses thanking the account for its generosity – these are just fake accounts or bots used as part of the scam to give the impression that the offer is legitimate and not a fraud or false.
You should just ignore them. If you're convinced it's a legitimate account or offer, take a look at the profiles, and you'll see the differences. You'll soon notice that the Twitter username (handle) or Facebook profile is fake.
And even if Binance or any other recognised crypto provider decides to run sweepstakes or promotions, the legitimate ones will never ask you to send funds or pay some fees first.
Here are some examples of crypto scams to be aware of.
Pyramid and Ponzi Schemes
Pyramid and Ponzi schemes have some differences, but we're putting them in the same category because of their similarities. In either case, the scam depends on a group member looking for new members, promising incredible returns and financial gains. You would have to be careful not to fall victim to this type of bitcoin or cryptocurrency scam in Nigeria.
Read more on how to avoid bitcoin scams.
Ponzi Scheme
You will receive information about an investment opportunity with guaranteed profits or financial gains (this should be your first warning sign!). Typically, this scheme will be disguised as a portfolio management service or provider. There is no magic formula here – the financial “returns” received are simply other investors' money.
The scheme organiser takes the money from people and adds it to a pool. The only money in the pool comes from new people. Older investors are paid with newer investors’ money, which can continue as new people join. The blow comes when no more money comes in – the scheme collapses when it becomes unable to sustain payments from older investors.
Take, for example, a service or provider that promises a 10% return in one month. Let's assume you contributed 50,000 NGN. Then the organiser looks for another 'customer' who also invests 50,000 NGN.
He can pay you 55,000 NGN at the end of the month using this newly acquired money. Now he needs to entice one more customer to pay the second one. The cycle continues until the inevitable implosion of the scheme.
Pyramid Scheme
A pyramid scheme requires a little more effort from those involved. At the top of the pyramid is the scheme organiser. He will recruit a certain number of people to work at the level below him, and each of those will have to recruit their pay members to work at the level below, and so on.
The result is an enormous structure that grows and branches exponentially as new levels are created (hence the term Pyramid).
So far, we've only described what could be a graph of a very large (legitimate) business or company. The difference is in the way in which the pyramid scheme promises income for recruiting new people, who would eventually become victims of the scam or fraud.
An example: the organiser gives Segun and Emeka the right to enlist new people for 50,000 NGN each and charges 50% of the subsequent amounts earned by Segun and Emeka. Segun and Emeka can offer the same deal to the people they recruit (to recoup the initial amount invested, Segun and Emeka will need at least two new members each).
For example, if Segun sells subscriptions to Musa and Tega (at 50,000 NGN each), he will keep 50,000 NGN because half of his income must be passed up to the level above him.
If Musa continues to sell subscriptions, we will see the rewards increase – Segun takes half of Musa's revenue. The organiser takes half of Segun's revenue (which is 25% of Musa's revenue).
As the pyramid scheme grows, older members receive an increasing stream of income as distribution costs are passed from lower to higher tiers. But because of exponential growth, this model is not sustainable for a long time.
In some cases, participants pay for the right to sell a product or service. You may have heard of certain multi-level marketing (MLM) companies accused of running pyramid schemes in this way.
In the context of the cryptocurrency and bitcoin sector, there are controversial projects like OneCoin, Bitconnect and PlusToken that are under pressure from their users, who have taken legal action alleging that the projects are supposed to operate pyramid schemes.
Fake Mobile Apps
If the user is inattentive, it is quite possible that he will not notice the “warning signs” of fake or false mobile apps. Typically, these scammers trick a prospective victim into downloading malicious apps into his mobile phone– some are imitations of more popular apps.
When the victim installs the malicious app into his phone, everything seems to work as expected. However, there are apps specially designed to steal your cryptocurrencies and personal details or data. In the Nigerian cryptocurrency industry, there are many cases where prospective victims have downloaded malicious apps whose developers wore the guise of a large cryptocurrency company or provider.
In this scenario, when the victim receives a wallet address to send funds or to receive payments, he is actually sending funds to an address owned by the scammer. Once the funds are transferred, there is no way to reverse the process.
Another thing that makes these scams particularly effective is the position of these apps in the rankings. Despite being malicious apps, some may have a good rating on the Apple Store or Google Play Store, which conveys the idea of legitimacy.
To avoid this type of scam or fraud, you should only download from official websites or from the URL links provided by a reputable provider. When using the Apple Store or Google Play Store, you can also verify publisher credentials.
Phishing
Even newcomers to the cryptocurrency industry will no doubt be familiar with the practice of phishing. Generally, this involves a scammer posing as another person or provider to extract personal details or data including sensitive bank details from victims.
Phishing attempts can take many forms – phone, email, fake websites or messaging/communications apps. Messaging app scams are particularly common in the cryptocurrency online environment in Nigeria and worldwide.
Scammers follow no specific rules to obtain personal information or sensitive details from victims. You may receive false emails or text messages notifying you of something wrong with your brokerage account, asking you to click a URL link to fix the problem.
This URL link will redirect you to a fake site - similar to the original - and ask you to log in. This way, the scammer will steal your personal information or details and possibly your cryptocurrencies or even money from your bank account.
A common Telegram scam or fraud happens when scammers join official brokerage or provider groups of cryptocurrencies.
When a user reports a problem in this group, the scammer contacts the user (in private), posing as a customer support team member. From there, they will ask the user to share their personal information or details and the words of their seed phrase.
If someone finds out your seed phrase word combination, that person will have access to your funds. They must not be revealed to anyone under any circumstances. Not even legitimate companies or providers. The seed phrase is not necessary for solving wallet-related problems. Therefore, it is always safer to assume that anyone who asks for your seed phrase is a scammer.
As far as brokerage accounts are concerned, crypto brokers or providers will never ask for your password either. The same goes for the vast majority of services or providers. If you receive such a message, it is wise to ignore it and contact the company using the details posted on its official website.
Here is how to spot cryptocurrency fake news.
Other important safety tips include:
- Check the URL link of any websites you visit. A common tactic involves the scammer's registration of a domain similar to that of a real company or provider (e.g. binnance.com for a popular company like binance.com).
- Bookmark domains/sites you visit frequently. Search engines may end up displaying malicious addresses.
- If you have any questions about a message you received, please ignore it and contact the company or person through the official channels.
- No one should know your private key or your seed phrase combination.
Vested Interests
The acronym DYOR – “Do Your Own Research” – is used a lot in the Nigerian cryptocurrency environment for a good reason.
When it comes to investments, you should never take anyone's word or suggestion about buying cryptocurrencies or tokens for it. You never know the real reasons. It may be a paid person to promote a specific ICO or has a large amount invested in the asset in question.
This applies to strangers and random people as it does to famous personalities and influencers on the internet. No project is guaranteed to succeed. In fact, many will fail.
To be able to evaluate a project objectively, you must consider a set of factors. Each has its methods of approaching and researching possible investments. Here are some basic questions to get you started:
- How were coins/tokens distributed?
- Are most of the supply offerings concentrated in the hands of a few users or entities?
- What is the “Unique Selling Point” of this specific project?
- What are other similar projects, and why does this one stand out?
- Who is working on this project? Does the team have a strong track record in the industry?
- What is the profile of the community involved in the project?
- What is being built?
- Does the world really need that coin/token?
Scammers use various techniques to divert funds from less-informed or inattentive cryptocurrency users. To avoid the most common scams, you should always be aware of the methods used by scammers.
Always make sure you are using official websites/apps, and remember: if an investment sounds too good to be true, it probably is.
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