Fraudsters, from time to time, resort to a slew of means to trick investors. A bunch of tech-savvy fraudsters tend to use blockchain technology to dupe people online. And they have been doing this for quite some time now.
It’s quite unnerving, and surprising at the same time, that an 18-year-old math prodigy recently exploited a loophole in indexed finance's code and stole millions through blockchain, and despite being identified, he refused the $50,000 offer to return the ‘steal’.
Although there are dime a dozen of such examples of ‘Olympic level-fraudsters’. But here we elaborate a few of the recent famous (er. infamous) cases.
Some time ago, a crypto token called ‘Save the kids’ (with its symbol aptly named as ‘KIDS’) was floated to raise money which promoters said would go into the welfare of children.
Even a bunch of influencers also joined the bandwagon, telling buyers to buy these tokens and do their the bit for the ‘future of society’, which will investors to make money through the virtual tokens.
It was seen as a win-win deal for both. The words of social media influencers added fuel to the fire.
A lot of users started buying the tokens only to realise later that the crypto token ‘Save The Kids’ would become worthless after some time.
This episode was seen as a reminder to investors that influencers’ opinions shouldn’t be taken too seriously.
This was just one of the many examples of crypto project in which influencers had a sway over fans to get thousands of dollars for the project to collapse later on.
According to one Time magazine report, scammers around the world conned people for $14 billion in cryptocurrency in 2021 alone.
Squid Game fraud: Last year, a Squid Game fraud took place wherein a new cryptocurrency after the name of popular Netflix drama was floated to woo the investors. The developers disappeared after the currency surged manifold, and took away more than $3 million of the investors’ money in what was then referred to as ‘rug pull’.
William E. Quigley, a prominent investor and co-founder of the WAX blockchain called the developers ‘Olympic level scammers’.
Initial coin offerings: For those who compare crypto tokens to equity investments, ICO is seen as similar to an initial public offer (IPO) in case of equity. In 2017, billions of dollars poured into the ICOs allowing new crypto companies to crowdsource funding.
Although thousands of companies were created during this euphoria, not all were offering real products. One of such projects was Centra Tech that which promised cutting-edge crypto financial tools. It also took help of social media influencers to promote.
It later came to light that its co-founder Sohrab Sharma was responsible for creating “fake executives, fake business partnerships, and fake licenses that he and his co-conspirators touted to trick victims into handing over tens of millions of dollars.” The co-founder was later sentenced for eight years in prison for fraud.
Alt-Coins: There is another type of frauds which is on the lines of ‘pump-and-dump’ where some social media influencers buy a new token and use the social media to jack up the prices only to sell them at a later date.
Spencer Cornelia, a popular You Tuber who makes popular videos on finance, said, “You will see 1,000x or 10,000x price surges. And that allows the developers and creators to sell off their ownership stake to all the people now caught up in the hype, and it allows them to make exorbitant amounts of money in a very short amount of time.”
Non-fungible tokens: NFTs have also been added to the bouquet of assets that fraudsters have started using to trick the crypto enthusiasts.
“NFTs have a more dubious, strange value,” Stephen Findeisen, a popular YouTuber, who exposes crypto scams on video streaming platform. “So that when inevitably, when your NFT crashes to zero after you’ve dumped it on your fans… you can say tell your buyers that they at least got a piece of art.”
So, it is imperative for crypto investors to be careful and wary of the promises made on the social media. Regardless of who is saying it — as even influencers are paid these days — it’s vital to exercise due caution before taking any financial decision.