The fact that crypto transactions are largely decentralized has made it the most vulnerable investment package today. Almost every day new cases of crypto fraud are reported in the industry involving either the individual or centralized cryptocurrency exchange. The greatest crypto fraud involving the centralized exchange ever seen since the history of cryptocurrency has been attributed to the recent FTX exchange crash which saw investors unable to withdraw their funds from the exchange. Over $16 Billion worth of investments made with the exchange remained inaccessible to clients. The exchange was found guilty of loaning investors funds without their consent to its related crypto-trading exchange known as Alameda Research. Following the alarm raised by Coindesk and the other regulatory agencies, investors rushed to withdraw their funds but the exchange was soon declared bankrupt by its founder.
However, this is not the only crypto fraud ever seen in the industry as a lot more had occurred before now. Alarmed by the increasing cases of crypto frauds every day, investors tend to ask if it is ever possible to end the crypto fraud. Can Cryptocurrency investment ever be free from fraud? Is it possible to buy cryptocurrency without being scammed? This work has examined this important question.
What is Crypto Fraud?
A lot of crypto traders have found themselves losing their digital assets mysteriously to scammers. Some have witnessed their wallet hacked and defrauded of all their stored Cryptocurrencies. This is what is designated today as a crypto fraud. A crypto fraud could be therefore defined as corrupt practices designed to dispossess investors of their digital assets.
Most common types of Crypto Fraud
- Phishing:This is one of the most common crypto frauds today. Here, the scammers try to impersonate reputable companies linked to the investors and use their identity to request clients to disclose their details including their passwords and login details. Some go to the extent of sending coded links to the grants which have been designed to grant them access to the client’s wallet address once clicked on.
- Investment Fraud:There have been increasing cases of investment fraud in the crypto industry today. The highest investment fraud in the history of cryptocurrency was the Bitconnect scam that saw investors lose over $3.45 Billion invested in the project. The developers of this project lied to investors that it is an open-source cryptocurrency designed to offer investors 40% returns over their investments. This attracted a whole lot of investors who purchased the coin during the Initial Coin Offering (ICO). However, this project turned out to be a Ponzi scheme which crashed shortly with investors unable to regain their funds.
- False crypto exchange and investment websites: Another common crypto fraud today is the use of false crypto exchanges and investment websites to scam investors. Often the scammers plagiarize the popular crypto exchanges and lure investors to deposit in them which becomes impossible to withdraw afterwards. The same applies to some websites that promise investors monthly returns on their crypto investment to lure them to deposit with them. Only to disappear afterwards.
Will Crypto Fraud End Soon?
Crypto Fraud has been sustained today due to the decentralized nature of crypto transactions. Scammers hide under the umbrella that their identities are hidden to carry out different fraudulent practices. This means it is less likely for crypto fraud to end soon as long as crypto trading remains decentralized.
What is the best way to protect oneself from crypto fraud?
The best way to protect oneself from crypto fraud is by storing one’s digital assets using a cold wallet. This type of wallet does not need the internet to function and makes it difficult for scammers to attack it.