Financial scams such as Ponzi schemes, pyramid schemes, and the likes have been part of human civilization ever since the invention of money. However, these scams have become more prevalent since the emergence of cryptocurrencies, due to their nature – fast and anonymous. These characteristics of cryptocurrencies make them a preferred tool for bad actors in the space. Nevertheless, the modus operandi of scammers remain the same whether using fiat currencies or cryptocurrencies.
Their style is to offer ridiculous returns on investments. Furthermore, they use pressure tactics to make would-be victims think that they have very limited time to take up the offer. This is done so that the would-be victim does not have time to give much consideration to the offer.
Today, we will look at 5 crypto scams you should look out for in Zambia and how you can identify them.
1. THE PONZI SCHEME This is a scheme where the promoters make it seem like the business is making money and actually paying out as promised. They do this by paying out early investors with new money from later investors. They will continue to do this until there is no new money coming in or when they reach critical mass. As in most scams, there is no traceable money making activities. They will say something vague like “we do crypto mining” or crypto trading. Most sophisticated ones will even go as far as hiring actual crypto farms, branding them, and then inviting those members who are already knee deep into the scam so as to paint a picture that they are genuine.
2. THE TRADER SCAM You will see a lot of these on social media. Generally, they usually start with a sob story about how they had previously lost a lot of money trading until they came across a trader named XYZ who has since improved their returns by so much in a short a period of time. They will include that trader’s contact details within the post.
For the first two or three transactions they will actually pay out. This is so as to bait the unwitting victim to go bigger. They will convince the victim to reinvest the pay out with the potential for it to grow bigger. However, soon enough the faucet will dry up to the disappointment of the investor.
When you see these, run for dear life. Yes, some people have actually benefitted from such arrangements, but more often than not, they are scams.
3. PYRAMID SCHEMES These are closely related to Ponzi schemes except that the only way to make money is by referring new users to sign up. This is the only way fast track way to upgrading to a higher tier. The person at the top of the pyramid makes more money the more people he has below him by getting a commission for every new sign up and any future new signups below that person. We wrote about this HERE.
4. THE PHISHING SCAM The phishing scam has been around even before cryptocurrencies. It is designed to collect sensitive data from unsuspecting users. The usual tactic of a phishing scam is to get you to visit a site which is similar in likeness as something official but with subtle differences. The scammers will use a domain name very similar to an official site with minor changes. For example, this is ledger.com with the small letter “L”, and this is Iedger.com with capital letter “I”. When looked at with an unsuspecting eye, the difference is not readily apparent. Others will simply use a different extension such “.info” or “.net” and so on.
5. HIGH-YIELD INVESTMENT PLATFORMS (HYIP) Famous examples for these are bitconnect, usi-tech, and bitclub, to mention but a few. Others include HeritageCoin and FX-trade. We wrote about bitclub HERE and FX-trade HERE. The above mentioned have all since become defunct, but not before they had defrauded billions of U.S dollars combined. These come in many different shapes and sizes; they can be staking platforms – where you buy a coin and it starts generating returns automatically. Again, there are some genuine trustworthy platforms that do this, but the point is that more often than not, they are scams. They can be trading bots, lending platforms or cloud mining platforms.
However, they disguise themselves, they all do not have any underlying income generating activities but yet they offer huge returns on investment.
Read on to find out how to identify these scams.
HOW TO IDENTIFY A SCAM
The general rule of thumb is that if it is too good to be true, then it probably is too good to be true. If it looks like a scam, sounds like a scam, talks like a scam, then it is probably a scam. However, there are a number of things you can do to perform due diligence.
1. CHECK CONTACT DETAILS Most scams will have their business addresses in the United Kingdom, this is because it is easy to get a business licence from there. However, if you have a way of checking in on the physical address you will find that the business does not exist at that address. Similarly, if you try to call the number provided, it is most likely to go unanswered.
2. GUARANTEED RETURNS In addition to the returns being high, they are guaranteed. Any investment advisor will tell you that there is no way to guarantee returns, especially huge ones. A renowned bank or investment management firm may guarantee returns but these will usually be on the lower, safer, end of the spectrum based on historical data.
In some cases, some HYIP promised returns as high as 480% per annum. See examples below.
3. PRESSURE TACTICS The promoter of a scam will always give a short timeframe for responding to the said scam. They may say things like “OFFER VALID FOR 24 HRS ONLY” or something like that. The purpose of this tactic is to pressure the victim into rushing into making a buy decision without carefully thinking about it.
Usually, when you are being recruited you will be invited to a seminar, details of which will be withheld until you arrive at said event.
Below is a more focussed way of identifying scams
1. PONZI SCHEMES
a. There is no actual product for sale.
b. Where there is an actual product for sale, the products capabilities are usually exaggerated.
c. There is a huge incentive for recruiting new members.
d. “Hard working” members are usually rewarded with cars, trips to exotic places, financial rewards, and so on.
e. Pressure tactics.
f. Highly fanatic members, almost idolatry.
g. Promise of financial independence.
2. PYRAMID SCHEMES
a. Incentive to recruit new members.
b. Highly fanatic member, almost idolatry.
c. “Hard working” members are usually rewarded with cars, trips to exotic places, financial rewards, and so on.
d. Your rewards will only be “unlocked” once both legs of the pyramid are filled new members.
e. Promise of financial independence.
3. HIGH-YIELD INVESTMENT PLATFORMS
a. Promise of high return on investment (ROI).
4. PHISHING SCAMS
a. Unsolicited spammy emails with links that will drive traffic to a website that is very similar to an official website.
4. THE TRADER SCAM These scammers have become sophisticated to the point of impersonating well-known brands. NO GENUINE CRYPTO COMPANY WILL EVER CONTACT YOU SO THAT THEY CAN TRADE ON YOUR BEHALF. Crypto companies may offer a platform for trading, but may not be in the business of trading.
a. A sad background story.
b. If you take up the offer, they will return profits as promised but convince you to reinvest the said amount.
c. At some point they may ask you to deposit some amount of money in order to process the withdrawal of your huge profits from “the bank”.
d. Depending on how far you take it, next they will claim that there is a delay in processing funds but they will claim that they will definitely pay as they have done so in the past.
HOW TO AVOID SUCH SCAMS
1. PONZI SCHEMES
a. Do not engage.
b. Check details of said company.
c. Ask within your community.
2. PYRAMID SCHEMES
a. Do not engage.
b. Check details of said company.
c. Ask within your community.
3. HIGH-YIELD INVESTMENT PLATFORMS
a. Do not engage.
9. PHISHING SCAMS
a. Where possible, double check with the purported business.
b. Type the website address straight into the address bar of your computer. DO NOT CLICK ON THE LINK.
4. THE TRADER SCAM
a. Do not engage.
b. Double check with purported business.
c. Ask within your community.
Crypto Tamanga Community is a community of cryptocurrency and Blockchain Technology enthusiasts in Zambia. If you would like to be part of this community, then please send an email to admin@cryptotamanga.com.
Disclaimer: we are not financial advisors. Content in this article and on this blog is meant for educational purposes only. For financial advice, seek the services of a registered financial advisor.
1. THE PONZI SCHEME This is a scheme where the promoters make it seem like the business is making money and actually paying out as promised. They do this by paying out early investors with new money from later investors. They will continue to do this until there is no new money coming in or when they reach critical mass. As in most scams, there is no traceable money making activities. They will say something vague like “we do crypto mining” or crypto trading. Most sophisticated ones will even go as far as hiring actual crypto farms, branding them, and then inviting those members who are already knee deep into the scam so as to paint a picture that they are genuine.
2. THE TRADER SCAM You will see a lot of these on social media. Generally, they usually start with a sob story about how they had previously lost a lot of money trading until they came across a trader named XYZ who has since improved their returns by so much in a short a period of time. They will include that trader’s contact details within the post.
For the first two or three transactions they will actually pay out. This is so as to bait the unwitting victim to go bigger. They will convince the victim to reinvest the pay out with the potential for it to grow bigger. However, soon enough the faucet will dry up to the disappointment of the investor.
When you see these, run for dear life. Yes, some people have actually benefitted from such arrangements, but more often than not, they are scams.
3. PYRAMID SCHEMES These are closely related to Ponzi schemes except that the only way to make money is by referring new users to sign up. This is the only way fast track way to upgrading to a higher tier. The person at the top of the pyramid makes more money the more people he has below him by getting a commission for every new sign up and any future new signups below that person. We wrote about this HERE.
4. THE PHISHING SCAM The phishing scam has been around even before cryptocurrencies. It is designed to collect sensitive data from unsuspecting users. The usual tactic of a phishing scam is to get you to visit a site which is similar in likeness as something official but with subtle differences. The scammers will use a domain name very similar to an official site with minor changes. For example, this is ledger.com with the small letter “L”, and this is Iedger.com with capital letter “I”. When looked at with an unsuspecting eye, the difference is not readily apparent. Others will simply use a different extension such “.info” or “.net” and so on.
5. HIGH-YIELD INVESTMENT PLATFORMS (HYIP) Famous examples for these are bitconnect, usi-tech, and bitclub, to mention but a few. Others include HeritageCoin and FX-trade. We wrote about bitclub HERE and FX-trade HERE. The above mentioned have all since become defunct, but not before they had defrauded billions of U.S dollars combined. These come in many different shapes and sizes; they can be staking platforms – where you buy a coin and it starts generating returns automatically. Again, there are some genuine trustworthy platforms that do this, but the point is that more often than not, they are scams. They can be trading bots, lending platforms or cloud mining platforms.
However, they disguise themselves, they all do not have any underlying income generating activities but yet they offer huge returns on investment.
Read on to find out how to identify these scams.
HOW TO IDENTIFY A SCAM
The general rule of thumb is that if it is too good to be true, then it probably is too good to be true. If it looks like a scam, sounds like a scam, talks like a scam, then it is probably a scam. However, there are a number of things you can do to perform due diligence.
1. CHECK CONTACT DETAILS Most scams will have their business addresses in the United Kingdom, this is because it is easy to get a business licence from there. However, if you have a way of checking in on the physical address you will find that the business does not exist at that address. Similarly, if you try to call the number provided, it is most likely to go unanswered.
2. GUARANTEED RETURNS In addition to the returns being high, they are guaranteed. Any investment advisor will tell you that there is no way to guarantee returns, especially huge ones. A renowned bank or investment management firm may guarantee returns but these will usually be on the lower, safer, end of the spectrum based on historical data.
In some cases, some HYIP promised returns as high as 480% per annum. See examples below.
3. PRESSURE TACTICS The promoter of a scam will always give a short timeframe for responding to the said scam. They may say things like “OFFER VALID FOR 24 HRS ONLY” or something like that. The purpose of this tactic is to pressure the victim into rushing into making a buy decision without carefully thinking about it.
Usually, when you are being recruited you will be invited to a seminar, details of which will be withheld until you arrive at said event.
Below is a more focussed way of identifying scams
1. PONZI SCHEMES
a. There is no actual product for sale.
b. Where there is an actual product for sale, the products capabilities are usually exaggerated.
c. There is a huge incentive for recruiting new members.
d. “Hard working” members are usually rewarded with cars, trips to exotic places, financial rewards, and so on.
e. Pressure tactics.
f. Highly fanatic members, almost idolatry.
g. Promise of financial independence.
2. PYRAMID SCHEMES
a. Incentive to recruit new members.
b. Highly fanatic member, almost idolatry.
c. “Hard working” members are usually rewarded with cars, trips to exotic places, financial rewards, and so on.
d. Your rewards will only be “unlocked” once both legs of the pyramid are filled new members.
e. Promise of financial independence.
3. HIGH-YIELD INVESTMENT PLATFORMS
a. Promise of high return on investment (ROI).
4. PHISHING SCAMS
a. Unsolicited spammy emails with links that will drive traffic to a website that is very similar to an official website.
4. THE TRADER SCAM These scammers have become sophisticated to the point of impersonating well-known brands. NO GENUINE CRYPTO COMPANY WILL EVER CONTACT YOU SO THAT THEY CAN TRADE ON YOUR BEHALF. Crypto companies may offer a platform for trading, but may not be in the business of trading.
a. A sad background story.
b. If you take up the offer, they will return profits as promised but convince you to reinvest the said amount.
c. At some point they may ask you to deposit some amount of money in order to process the withdrawal of your huge profits from “the bank”.
d. Depending on how far you take it, next they will claim that there is a delay in processing funds but they will claim that they will definitely pay as they have done so in the past.
HOW TO AVOID SUCH SCAMS
1. PONZI SCHEMES
a. Do not engage.
b. Check details of said company.
c. Ask within your community.
2. PYRAMID SCHEMES
a. Do not engage.
b. Check details of said company.
c. Ask within your community.
3. HIGH-YIELD INVESTMENT PLATFORMS
a. Do not engage.
9. PHISHING SCAMS
a. Where possible, double check with the purported business.
b. Type the website address straight into the address bar of your computer. DO NOT CLICK ON THE LINK.
4. THE TRADER SCAM
a. Do not engage.
b. Double check with purported business.
c. Ask within your community.
Crypto Tamanga Community is a community of cryptocurrency and Blockchain Technology enthusiasts in Zambia. If you would like to be part of this community, then please send an email to admin@cryptotamanga.com.
Disclaimer: we are not financial advisors. Content in this article and on this blog is meant for educational purposes only. For financial advice, seek the services of a registered financial advisor.
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