Cryptocurrency Scams: How To Avoid And Where To Complaint?
There are already hundreds of millions of bitcoin owners, with predictions anticipating even faster growth. As the number of people who possess cryptocurrencies grows, so does the number of fraud victims.
We research behavioral economics and psychology, and we just released a book on the growing problem of fraud, scams, and financial abuse.
There are several reasons why bitcoin frauds are so common. And there are things you can do to lessen your chances of being a victim.
Cryptocurrency Scams Are On The Rise
Scams are not a new problem. Stories about them may be traced back to ancient times. What has changed is the ease with which fraudsters may reach billions of people with the click of a mouse.
The internet and other technologies have simply altered the rules of the game, with cryptocurrency representing the cutting edge of these new criminal potentials.
Cryptocurrency, which is decentralized digital currencies that utilize cryptography to generate anonymous transactions, were initially pushed by “cypherpunks,” or privacy-conscious individuals.
However, they have spread to capture the minds and pockets of ordinary people as well as criminals, particularly during the Covid-19 outbreak, when the price of several cryptocurrencies skyrocketed and cryptocurrencies became more mainstream.
Scammers took advantage of their popularity. The epidemic also disrupted established business, increasing reliance on alternatives like cryptocurrency.
According to a January 2022 research by Chainanalysis.com, a blockchain analytics platform, in 2021, investors were duped out of about $14 billion in cryptocurrency scams.
For example, in 2021, two South African brothers defrauded $3.6 billion from a bitcoin investing website.
The state agencies reported in February that it had detained a couple who utilised a bogus cryptocurrency website to defraud investors of another $3.6 billion.
Fake Investments
There are two sorts of Cryptocurrency scam, each of which targets a distinct demographic.
One is aimed towards bitcoin investors, who are often aggressive traders with riskier portfolios.
They are usually younger investors under the age of 35 who have high earnings, are well educated, and work in engineering, finance, or information technology. Scammers manufacture fake currencies or false exchanges in these sorts of scams.
SQUID, a cryptocurrency coin named after the TV show Squid Game, is a recent example. After the new coin’s value increased, its inventors simply disappeared with the money.
A version of this fraud involves luring investors to be among the first to buy a new cryptocurrency, a procedure known as an initial coin offering, with promises of high and quick profits.
However, unlike the SQUID offering, no coins are ever created, leaving potential investors empty-handed. In truth, many initial coin offers are fraudulent, but due to the complicated and ever-changing nature of these new currencies and technology, even educated and experienced investors can be duped.
Anyone thinking about investing in cryptocurrencies should conduct extensive due diligence on the offer.
Who is the offer’s sponsor? What is understood about the business? Is a white paper, a document that outlines a company’s product’s features and is distributed as information, available?
One red flag in the SQUID case was that buyers of the coins were unable to sell them. Grammar mistakes abounded on the SQUID website, which is characteristic of many scams.
Shakedown Payments
The second sort of basic cryptocurrency scam simply uses cryptocurrencies as a payment method to move monies from victims to scammers.
Targets of all ages and demographics are possible. Ransomware cases, romance scams, computer repair scams, sextortion cases, Ponzi schemes, and the like are examples.
Scammers are simply taking advantage of cryptocurrency’ anonymity to conceal their identity and avoid prosecution.
Scammers used to request wire transfers or gift cards to receive money because they are irreversible, anonymous, and untraceable.
However, such payment methods force potential victims to leave their houses, where they may come into contact with a third party who can interfere and possibly stop them. Crypto, on the other hand, can be purchased at any time and from any location.
Indeed, Bitcoin has become the most commonly sought money in ransomware attacks, with over 98 percent of cases requesting it.
Sextortion scams sometimes ask for payment in Bitcoin and other cryptocurrencies, according to the agencies. Romance scams aimed at young folks are increasingly incorporating cryptocurrencies into the scheme.
Scammers used to request wire transfers or gift cards to receive money because they are irreversible, anonymous, and untraceable.
However, such payment methods force potential victims to leave their houses, where they may come into contact with a third party who can interfere and possibly stop them. Crypto, on the other hand, can be purchased at any time and from any location.
If someone asks you to send them money in cryptocurrencies, that should raise a big red flag.
Because of the high levels of vulnerability in this demographic, more effort has been done in the field of financial exploitation to study and teach elderly cryptocurrency scam victims.
According to research, certain characteristics make people especially prone to scam solicitations. Differences in cognitive ability, education, risk-taking, and self-control are among them.
Of course, younger adults might be vulnerable and are becoming victims of cryptocurrency scams.
There is an obvious need to widen education initiatives to encompass people of all ages, including young, educated, well-off investors. We feel that authorities must take up and implement new security measures.
Regulations that presently apply to financial advice and products, for example, could be expanded to the bitcoin environment. Data scientists must also improve their ability to detect and track fraudulent activity.
Over 9.6 million Indian individuals accessed cryptocurrency scam websites in 2021 alone.
The most visited scam websites in India, according to Chainalysis (a software platform that detects criminal activities related to cryptocurrency transactions and cryptocurrency scams) are coinpayu.com, and adbtc. top, hackertyper.net, dualmine.com, and contain.app, among others.
These five websites received approximately 4.6 million visits from Indian consumers alone.
Morris Cryptocurrency Scam (Rs 1,200-crore)
The Morris coin fraud, the most recent cryptocurrency scam, was discovered in 2022. A website advertising a bogus cryptocurrency called Morris coin allegedly scammed over 900 investors out of Rs 1,200 crore.
They had invested in the phoney cryptocurrency’s ‘initial offering.’
The fake crypto was said to be listed on the Coimbatore-based cryptocurrency exchange, named Franc Exchange, as an ‘initial coin offering.’
The investors were lured in with a promise of a daily return of Rs 270 for 300 days which was subject to a minimum deposit of Rs 15,000, which was supposed to be invested in Morris coin.
Later it was found that the digital currency was not registered with any exchange, making it impossible to trade.
Nishad, the main suspect in this cryptocurrency scam, was apprehended by Kerala police in 2020. Following many complaints submitted at several police stations in Kerala, the Enforcement Directorate (ED) later joined the inquiry.
After it was established that three Bengaluru-based businesses were behind the entire conspiracy, the ED conducted searches in 11 states, including Delhi, Tamil Nadu, Kerala, and Karnataka. Nishad was also the CEO of one of the businesses.
Karnataka Cryptocurrency Scam 2021
In November 2021, the Central Crime Branch, a specialised investigating department of the Karnataka Police had allegedly seized 31 Bitcoins worth Rs 9 crore from a Bengaluru-based hacker.
Srikrishna Ramesh was the primary suspect in the case. He was accused of hacking websites to obtain Bitcoins, which he then used to purchase drugs from the dark web. Ramesh went into hiding after being released on bail in November of last year.
Cryptocurrency scams are extremely distressing because the possibility of reclaiming lost assets is close to zero. For now, cryptocurrencies have no oversight.
How can customers guard themselves against cryptocurrency scams?
Blockchain Analysis can track the transfer of cryptocurrency through exchanges. However, establishing their link with the bad actors that own these accounts is a complicated matter if the transaction intermediaries (exchanges) do not adhere to KYC rules.
As a result, even countries with crypto-friendly legislation, such as the United States, have some of the most severe AML-KYC requirements on Virtual Asset Service Providers (VASPs).
The court went on to say that KYC is the intermediary’s job and cannot be left to individuals, whether it’s an institutional transfer or a person-to-person exchange.
As a result, intermediaries should not shirk their responsibilities to check the authenticity of the source and destination of money, as well as the true identification of account holders.
Nonetheless, it is critical for traders to select an intermediary that meets the necessary standards outlined in the RBI circular.
To begin, using intermediaries with mandated KYC regulation should be the basic minimum criteria utilised to select an exchange for crypto trading.
Furthermore, litigants should get legal assistance on the case from criminal and cyber law practitioners who are knowledgeable with cryptocurrency trading.
In the future, India will need to devise progressive legislation that will allow its population to engage in a globally thriving market with access to advanced technology characteristics.
Furthermore, it must ensure that the government’s jurisdiction to regulate and guarantee the value of money, as guaranteed in Article 110 of the Indian Constitution, is not jeopardised.
The impact of cryptocurrency scams on national security and criminal activity is too significant to postpone regulation any longer.
All participants in the cryptocurrency industry are anticipating the government’s critical position, which will be India’s contribution to the evolution of the historic notion of money.
What Can One Indian Target of A Cryptocurrency Scam Do?
Here are some procedures to take to seek justice in India if you are a victim of cryptocurrency scams and frauds:
When any suspicious activity is identified in a trader’s exchange wallet, they should call customer care and express their concerns to the personnel. As a precaution, a copy of all correspondence associated with the exchange should be kept.
If the situation escalates, the first step is to file a complaint with the local Cyber-Crime Investigation Cell (in the absence of such a cell, visit the local police station) and provide details about the nature of the crime, the extent of the damage, and attach any relevant documents, data, or other information to the complaint.
A copy of the exchange’s conversation with customer service can be submitted to the complaint. It has been observed that police frequently fail to register such
occurrences.
This is due to the fact that people are frequently unaware of how the law handles bitcoin.
In such instances, or if the police refuse to accept the report, the victims can file a complaint with the Judicial Magistrate and seek justice under Section 200 of the CrPC.
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