The Pump and dump (pumping) is one of the most widespread modalities.  Pexel photo.

Cryptocurrencies, in the eyes of a novice investor, ensure fabulous dividends with just a few chips. However, the path to this golden palace is littered with threats. What are the four most common frauds and how to escape from these traps.

The inclusive norm of the crypto world indicates that anyone can participate in this wheel, from the saver who wants to avoid the clutches of inflation to the fraudster who lurks in the shadows. Not only investing is very simple, but also to be deceived.

In practice, digital currencies do not have an official price or face value. Due to this lack of regulation, investors do not have any legal guarantee of reimbursement in case of loss. Whether for a technical failure, human error or theft.

Finance experts say that speculating with cryptocurrencies is similar to bet in a casino. The risk is high, although the potential return is extraordinary. Therefore, the one who invests cannot avoid the dangers, but can reduce them as much as possible.

Pump and dump

The Pump and dump (pumping) is one of the most widespread modalities. Pexel photo.

Economic influencers have a huge audience and many trust that their recommendations are disinterested. That same credibility drives them, on some occasions, to betray his own followers.

YouTube, TikTok, Instagram, Reddit, Twitter, Telegram, Facebook or any platform serves as a bridge for these gurus to persuade their followers to buy shares of dubious companies.

“They agree to buy cryptocurrencies at a lower price, make them rise rapidly and then agree to sell them together, obtaining high returns in minutes,” explains Pablo Lema, business architect at Ingenia.

From influencers like Dave Portnoy to groups on Reddit like WallStreetBets, an entire culture has been built that promotes investing on a glass pedestal.

“The scammers buy the assets when they are worthless and use the community to increase their value. At their highest point they liquidate the accumulated. This produces an abrupt decline that leaves the rest empty-handed”, describes Lema.

Ponzi schemes

According to Cositorto,

According to Cositorto, “Zoe’s bitcoin” had the great advantage of being backed by gold.

This pyramid-type model is intended to attract savers with the intention of joining them in a program that promises a high financial return with a low investment.

Cryptocurrencies are ideal for embezzlement, as perpetrators are on the lookout for ambitious minds. Also, falsifying the data is very simple. when it comes to virtual money.

One of the challenges for attackers is to appeal to the greed of taxpayers to move them to the next level and thus access higher returns on investment.

The reward for entering new people into the system is always greater than the profit obtained with cryptocurrencies, so the business is always in recruiting not in selling bitcoins.

At the local level, the most emblematic case is that of Generación Zoe, an organization that presented itself in society as a coaching and leadership company, which offered everything from educational packages to cryptocurrencies.

This firm was directed by the coach Leonardo Cositorto, who promoted returns on investment with unprecedented values, several times above any other financial venture.

One of the first calls for attention was from the NGO Argentina Bitcoin, which denounced Generación ZOE before the Office of the Prosecutor for Economic Crime and Money Laundering (Procelac).

ghost membership

The site promised fabulous profits in just a few moves.

The site promised fabulous profits in just a few moves.

Participants in this scheme access a circle of unique benefits based on the promise of a high profitability and immediate profits. The only requirement to enter is through the invitation of a member. Once accepted, a fee will have to be paid.

In return, they guarantee you a phenomenal 25% monthly return and 250% annual return on digital currencies, well above any other investment instrument the stock market can offer.

One of the most notorious cases occurred in Argentina and the protagonist was the Spanish company Ganancias Deportivas, whose scam affected more than 40,000 innocent people in the Mendoza town of San Rafael.

From its official site, this corporation demanded the payment of a 100 euro membership. The package was completed with the purchase of bitcoins for sports betting arranged in advance.

But the curious thing is that the business did not produce something tangible, but was governed by the rules of chance. The earnings were actually the users’ own investments and the flow of money was a closed loop.

And although the results accumulated positively, there was a clause that indicated that the initial amount and the profits could not be withdrawn for 6 months.

celebrity endorsement

Tinelli himself, without knowing the background, promoted the controversial Vayo Coin.

Tinelli himself, without knowing the background, promoted the controversial Vayo Coin.

The scammers, to hide the trick with a cloak of legitimacy, hire some celebrities who recommend said cryptocurrency through their personal accounts. This works as a popular endorsement. Without suspecting that they are part of the deception master plan.

At the local level, the most flagrant case is that of Vayo Coin, which was postulated as a lifeline for Argentina’s inflationary problems by preserve the value of savings obtaining profits of 135% in nine months presenting only the DNI.

Julieta Nair Calvo, Horacio Cabak, José María Listorti, Candelaria Ruggeri, Jimena Barón, Cinthia Fernández and even Marcelo Tinelli participated in the promotion of this digital token, sharing videos on their social networks.

Zaira Nara even pointed out that she operated in the system “with her personal savings” and Pampita announced the draw for an iPhone 11 by the company and invited to follow Vayo’s networks to have chances.

Natalia Oreiro announced a “mega giveaway!” whose prize was a zero kilometer. The only requirement was to be a fan of Vayo on her networks.

They also opened an electronics sales site and announced Universal Exchange, their own exchange site, with a lavish event held at the Hilton hotel.

The Vayo Coin cryptocurrency, as of today, is not listed as an option on the main digital asset buying and selling sites. Its price and traffic volume are also not listed on sites like Coin Market Cap.

How to spot a scam

Every year, people lose millions to cryptocurrency scams.  Photo EFE.

Every year, people lose millions to cryptocurrency scams. Photo EFE.

Losses due to investment fraud linked to cryptocurrencies went from 33 million dollars (mdd) in 2019 to 680 million mdd last year and 329 million mdd were recorded in the first quarter of 2022, reports the Federal Trade Commission (FTC). ).

Social media is cryptocurrency’s worst ally since, according to the FTC, nearly half of those who lost money to a digital ticket scam said it started with an ad, post, or message on Instagram, Twitter, or Facebook.

As indicated by the Kaspersky security specialty firm, there are some signs that are repeated and if they occur, should be alert. These are some:

No financial investment is capable of guaranteeing early success, because these currencies can go up or down. Any cryptocurrency offer that offers it is a red flag.

Every cryptocurrency must have a whitepaper, as it is one of the most important aspects of an initial offering. The document should explain how the coin was designed and how it will work. Be suspicious of vagueness and inconsistencies.

Some scammers lure people in with an aggressive marketing campaign. With many advertisements online and on public roads, paying influencers. This is designed to reach the largest number of people in the shortest possible time, and thus raise money quickly.

In most investment rounds it should be possible to find out who the people behind are. In general, there are biographies of their representatives, in addition to having an active presence of them on social networks. If not everything is anonymous, it is cause for distrust.

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