- >Several Key Takeaways From Real-World Crypto Scams
Several Key Takeaways From Real-World Crypto Scams
Getting scammed in crypto is pretty common. Even for those of us who are tech savvy. The truth is that getting scammed has more to do with human psychology than it does our technical know-how.
Unfortunately, being scammed causes most of us to be embarrassed about the event. This only makes things worse. We should be sharing our stories about being scammed so that others can avoid the same mistakes. If the end goal is to have less scams take place, then we all need to put our egos aside. I’ve been heavily involved in cryptocurrencies since 2013, and I have a computer science degree. This didn’t stop me from getting tricked by the scammers of the world.
Here are some stories about what it is like to get scammed in crypto.
Keegan Francis | Mar 16, 2021
Cloud Mining Scams
Making money when you sleep sounds pretty good right? This is one of the more convincing scams out there because it preys upon people’s misunderstanding of cryptocurrency mining.
Furthermore, even if you do understand mining, then the theory of how you’d make money on cloud mining makes sense. In fact, there are legitimate cloud mining operations set up by legitimate crypto companies such as Binance. Cloud mining in a nutshell goes like this. Instead of you having to buy, and set up a mining rig, you can pay money to purchase “hash power”. You get a cut of the mining rewards proportionate to your contributions in dollars. This should work, but there is one surefire way to know whether or not you’re interacting with a scam or not. That is by looking at the returns that the company is promising you.
I fell hook, line, and sinker into a mining scam that was offering me 300% gains over the course of the year. This should have been my red flag to avoid this operation. Cloud mining operations can be quite profitable, but 300% is just straight up unreasonable. So, I invested 2 Bitcoin (when Bitcoin was $500 each) and only received .75 BTC in return. So it wasn’t a complete loss, and in terms of CAD it was profitable. In terms of BTC I got burned pretty good. Ouch.
Initial coin offering (ICO) scams were counted by the hundreds during the 2017 crypto bubble. I fell prey to three of them, which is pretty good considering I invested in more than a dozen different ICOs. There were a couple of ways that I got fooled by the offerings on these projects. Let’s dig in.
Spoofed Address Contributions
Even if you’re on the site of a legitimate ICO, you can still get scammed. If the site you’re on is attacked, the attacker can leave everything in place, and just change the Ethereum contribution address. This happened to me when contributing to the Huobi Exchange ICO.
I had participated in a couple of other ICO’s at this point, and was familiar with the process of sending ETH to a smart contract. The problem with this spoofed address tactic was fairly new at the time. The company didn’t publish their “official” contribution address. So I just assumed that the address on the page was the correct address. I was wrong, and I sent 0.5 ETH into this address, and received nothing in return. I knew as soon as I didn’t receive anything in return that I had just been scammed.
The project that you’re contributing to might have the best of intentions to deliver on their promises. However, some projects had no intention of bringing their project to fruition. These are vaporware scams. You can tell these apart from projects that simply failed because not a single thing was ever built.
For example, I contributed to a project called Sociall, an Ethereum-based social media platform that rewarded users for popular posts. I sent them 1 ETH and received Social tokens. I followed the project for about a year, but failed to ever see anything be built. This tells me that the founders never had any intention of delivering on their original whitepaper.
Failed projects are not technically scams. However, I feel like this set of stories wouldn’t be complete unless I talked about the ICO’s that completely failed.
The only ICO that I invested in that didn’t outright fail was MCO, or Crypto.com. In fact, this is the ICO that has basically made up for all of the losses of the other projects I contributed to. I invested in Change (CAG), DragonGlass (DGS), Envion (ENV), and ALIS. To the best of my knowledge, each of these projects had real teams, backed by real people. They just simply failed due to a variety of reasons I was unable to see at the time.
QuadrigaCX, the Big Scam
This list of scams wouldn’t be complete without us talking about QuadrigaCX. I am actually from Nova Scotia, the home base on the east coast of Canada for the QuadrigaCX incident. I actually did not lose any money on QuadrigaCX.
By mid 2018, I was a veteran at screwing up my investments, and I was on high alert for red flags. I was working at a blockchain company, and being paid in Bitcoin. I was getting my paycheck deposited into QuadrigaCX, so I could sell what I needed into Canadian dollars.
I eventually noticed that my deposits were taking longer to get in my bank account, and they were arriving from accounts that didn’t say QuadrigaCX. This was basically all I needed to know in order to determine my money was in a scam. I quickly removed all of the money off of the platform, and never used QuadrigaCX again.
Sure enough, 6 months later, the founder “died” and the entire platform went bust. Canadians lost over $190 million worth of their savings, and investments from this scam. I cover this story in depth in one of my podcast episodes.
Take It Slow. Ask Questions. Don’t be Embarrassed.
The three pieces of advice I have for everyone if they’re unsure about an investment is as follows:
1) Take it slow. There is no rush, if it truly is a good investment, then it should be around next week for you to capitalize on. Just think of Bitcoin, it was a good investment five years ago, and it’s a good investment today.
2) Ask questions. Chances are you have friends or family in your network that you can get a second opinion on your investment opportunity.
3) Don’t be embarrassed. Talk about your mistakes with others in the hopes that you can learn alongside them. Together, you will make better investment choices by being candid about your decisions. If you want to hear more about the mistakes I’ve made in crypto, check out my podcast episode.