INTRODUCTION.

What a delight it is to be among the students of week 6 of season 3 of the crypto academy. Even though it is not usually easy for me, I strongly believe that my consistency will definitely lead to an increase of crypto knowledge. In addition to the precious knowledge, I sometime get up votes for my work which adds to my income.
I have gone through this week 6 lecture presented by Professor @yohan2on, the homework task gives me an opportunity to show how much I benefited from the class. Therefore I am presenting my homework task on Crypto Scams and How To Avoid Them.

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What are Crypto scams?

Oxford Dictionary defined scam as;

a dishonest scheme; a fraud

From the above definition, Crypto Scams are those fraudulent activities or dishonest schemes plotted by wicked and greedy individuals against an unwary or inexperienced crypto investors or traders. It can be likened to when a predator lay an ambush for a prey. Most times the prey or victims of crypto scams are unaware that they are getting involved with scammers. They only realize such when they have lost something valuable.
Crypto scam is one of the many cyber scams that are being done today as a result of internet. There are many forms of crypto scams as explained by my professor. I will list and discuss few of them.

• Social Media Scams. Reference
• Social engineering scams.
• Impostors website/phishing site. Reference
• Exchange and wallet hackers.
• ICOs scam.
• Email Scams. Reference
• Business/investment opportunity. Reference
• Fake App. Reference
• Defi Rug Pulls.
• Pump and dump schemes. Reference

Make Your Research on Any Crypto Currency Scam. (Attach a few references to the news surrounding that scam crypto project).
I will like to talk about few of the above mention forms of crypto scam but I will attach a few references to Social Media Scam alone, as required by my Professor.
Social Media Today is a wonderful tool in sharing information that everybody goes there for information. It is because of it’s role in our society that made scammers to bent on using it for selfish purposes.
Scammers create fake social media accounts or they hacked someone’s account and use it to perpetrate their wicked greedy deeds. They may even use a video of someone prominent like in the case of Steve Wozniak. Scammers use his conversation about bitcoin to feature in a scam video that promise cryptocurrency giveaway. His presence and speech in that video made some people to think it’s genuine/legit and they fell victim to the scam.

Video-sharing platform YouTube has suffered a similar problem. In July 2020, Apple co-founder Steve Wozniak filed a lawsuit against Google because his conversations regarding Bitcoin were featured in cryptocurrency giveaway scam videos. Such videos also promised to double crypto amounts for users who promised to send their coins to a blockchain address mentioned in the video. Seventeen other individuals have also filed a lawsuit against YouTube because they were duped by cryptocurrency giveaway videos.

Reference 1 from Investopedia
Reference 2 from news.bitcoin
Reference 3 from the verge
Reference 4 from coindesk
The above references shows that such a scam really occurred that is why many news or sites bears evidence of law suites from Steve Wozniak against YouTube.
There is yet another example in July 2020 when twitter accounts of some prominent individuals were hijacked by scammers. They asked the followers of the hijacked account to send funds to a blockchain account with a promise that their money will be doubled. Within few minutes of the tweet, report had it that more than 300 transactions occurred but unfortunately the followers that send funds didn’t get anything back. It was after a while that they realized what happened, that they have been scammed!
The list of social media platforms that scammers have used is as many as the number of social media platforms that in existence today.

Social Engineering or Email Scams This occur when scammers manipulate patterns or links to get important information about an individuals account. An example of this is an email from a scammer that contains link that will direct the victim to a site that ask for vital information about the person’s account. This form of scam is also called phishing. The scammers look for information that relate to account or wallet. The best way to protect oneself from this kind of scam is not to click any link in a suspicious email from an unknown source.

Initial Coin Offer (ICO) This as we know in cryptocurrency, aims at raising fund for beginners who want to launch a product (App) or service. It’s aim/purpose is good but scammers have been using it as an opportunity to rip investors of their cryptocurrencies. One basic way scammers does this it to create a fake website that appeared exactly as the site running the ICO. From there, the scammers will encourage investors to deposit some coins in a wallet that does not in reality relate to the real ICO runner.

To What Extent Have Crypto Scams Affected the Crypto Space?

Crypto scams have had a great negative impact on the crypto space. Many today do not want to hear about crypto all because of the impact of the scam and it’s volatility.

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14,079 investment scams were reported in the first quarter of 2021, and victims lost $215 million in this quarter alone. The percentage of reports that reported a loss, median losses, and total losses are on pace to exceed those reported in 2020, which significantly surpassed 2019 numbers. Reference Source

From the above screenshot that covered crypto scam from 2017 to the first quarter of 2021 (January to March 2021), it’s clear that in crypto space, crypto scam is gaining momentum as the year goes by despite the collective effort to fight against it. Crypto scam went out of proportion in the year 2020.
The increase in crypto scam has been a great concern to some individuals like Motley Fool who desired to investigate the causes of such rise in crypto scams. The purpose of his investigation is to better understand how crypto scam happen, the targeted audience, and how an investor or trader can avoid being caught in the net of scammers.
More than 20,000 cases of crypto scam were reported to the appropriate authorities in the year 2020 and such cases resulted in the loss of over 400 million dollars. The first quarter of 2021 have seen a great increase too and from the available record within my reach, it’s obvious that 2021 will have the highest record. Therefore I can rightly sat that, the more years passed by, the more crypto scam will eat deep or gain ground into crypto space.

Will Regulations in Crypto Add Value to the Crypto Space?

The idea of digital currency is a very new one, and central banks around the world are still reeling from the implications of such a technology. Blockchain, bitcoin, and new innovations from the fintech sector are showing that they can improve the status quo, but also advance the concept of digital currency, making it a real contender to replace fiat money. This is putting the world’s governments in an awkward position.
On one hand, creating legislation that encourages the adoption of cutting-edge financial infrastructure could be a massive boon to economic competitiveness. On the other hand, giving people too much freedom may risk the integrity of the country’s own paper money. A balance has not yet been struck, but has to be made.
Reference Source

From the above quotation, the simple answer is YES! The second paragraph shows the impact of having or no having such regulations. Regulating crypto space will bring a massive boom while without regulations will pose a risk to the country’s fiat.
With regulations in crypto, more stringent measures will be applied that will guide operation and services of everybody. Such regulations will help to checkmate scammers. As years go by, many more people will find their way into crypto space and without regulations, it might become a play ground or a jungle where people whatever they like just to survive.

CONCLUSION.

From this week’s lecture and the little research I made, crypto scam in its various forms are very popular and takes place on daily basis without many people being aware of it. Some will only get to know about it when they have fallen victim to such dishonest scheme.
Thanks to crypto academy for this class. Novice like me and many others who do not know much about crypto scam have been enlightened. Experience is the best teacher but we must not learn from our own personal experience. We can learn from the experience of others which will protect us from having such negative experience.

Written By: @aizeeck

cc: @yohan2on