Main Reasons Why Crypto Scams Are Rising

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Crypto scams are on the rise, and it is a problem that social media is facing. What happens here is that so-called influencers are telling people to invest in cryptocurrency—many of which are just fraud scams.

According to the Federal Trade Commission, people lost around $770 million in crypto-currency rackets in social media back in 2021. There was a huge jump in the number of reports compared to four years prior to that.

In 2017, there were 5,000 reports of fraud. In 2021, this number rose to 100,000. About 64% of the reported investment scam on social media involved bogus or fake cryptocurrency. The next culprit is instant payment apps that are linked to bank accounts.

How Does the Scam Work? 

Scammers often pose on social media, particularly Instagram and Facebook, and ask friends and celebrities to invest in something. The investment requires a cryptocurrency. So, if you are interested, they would tell you to buy a cryptocurrency and then send it to a particular wallet.

They encourage the investors by promising big returns. Some, however, are more enterprising. They hack someone’s Facebook account and then ask for ransom. The ransom they ask for is bitcoin or their cryptocurrencies.

Back in 2018, there was an 18-year-old hacker who infiltrated the Twitter accounts of Bill Gates and Joe Biden. He sent out Tweets from these accounts and asked their followers to donate via cryptocurrency. The hacker further promised that the investments would be doubled.

This hacker was responsible for $100,000 of losses in this investment scam. There were also similar cases where people impersonated celebrities. These same people defrauded victims to the tune of $2 million.

So, why are these things happening? What are the main reasons why cryptocurrency scams are on the rise?

Reasons for The Rise of the Crypto Scam

Criminals are not always to blame—there are other things that contribute to the root cause of the problem, which we shall explain below.

1. Greed of Victims

Most often, the victims of cryptocurrency scams are gullible and greedy people. All it takes for them to fall for the scam is to show them that they will make a lot of money—easily.

The problem with many people is they want to earn a lot of money, but they do not want to work hard. They do not want to go the hard route—they want something that is easy—and they fall prey to criminals who will take advantage of their vulnerability.

When they hear something as ludicrous as doubling the investment—they jump the gun and go all-in. They do not even bother doing their research.

2. Anonymity of Scammers

Another reason for the rise of cryptocurrency scams is technology. Cryptocurrency uses processes where transactions are difficult to trace, and this is what fraudsters use to cloak themselves.

It is not true that bitcoin and cryptocurrency are anonymous. They can be traced, albeit it is hard to do. Since fraudsters know this, they work on a network of many crypto wallets.

If a victim sends money to a crypto wallet, this money goes into a series of movements until it is almost impossible to trace.

3. Security Vulnerability

Many websites and social media programs are susceptible to hacking. They do not use the same technology as a casino online. Casinos are safe. Social media platforms are much easier to penetrate.

So, what scammers do is hack the social media account of a celebrity. Then, they create posts encouraging their followers to make an investment. They will post the crypto wallet address.

Some people will easily fall for this. they will invest in the cryptocurrency and then send it to the wallet, only to find out later that the celebrity did not really do it.

Now, some scammers are wiser. Instead of asking the followers of the celebrity to invest, they would post a cry for donation. Just the same, these are scams. The celebrity never asked for the donation.

In cases like this, the donations or investments will go straight to the scammer’s digital wallet, and then it will become impossible to trace.

4. Ease of Committing a Crime

Another reason for the rise of cryptocurrency fraud is the ease of execution. Cryptocurrency is decentralized. It is called DeFi or decentralized finance. Because it is decentralized, the transaction between two people no longer involves a middleman.

Here is the problem: the DeFi ecosystem is not invulnerable to hacks. More than 21% of all cryptocurrency scams are attributed to poor security systems in DeFi. They are easy to hack.

Although some groups have a secure DeFi system, the manner by which people can participate in the industry or the community is easy. It is so easy to create a digital wallet and move money to and from various accounts.

Summary

Cryptocurrency scam is on the rise because of people’s greed and gullibility. The technology that we have today is also a contributor—it is easier for scammers to hide and remain unseen.

Scam activities and fraud will not stop. As is always said, there is a sucker every minute. As such, hackers and scammers will only change their methodologies, but the key to their success is the same—the greed of the victims.

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