The phase of investing in ICOs had created a lot of euphoria in the markets. It was a time when individual teams would design their own project on a blockchain and seek investment for it through cryptocurrencies. It was basically an exchange of one cryptocurrency for another.
The investors in the ICO were given equivalent shares for their investment in these newly developed ‘tokens.’ While the idea behind it was good and pure to provide easy crowdfunding opportunities. It exposed the hard truth of the modern economy.
Fraud and competition are essential parts of our economy. Hence, many projects started to fail and the tokens became worthless. Thus, the cryptocurrency bubble came to an end with it.
However, there are many other different kinds of cryptocurrency scams and theft, the most popular is the wallet or Exchange hack. In 2019 itself the market has experienced three Exchange hacks (Binance, Cryptopia, and DragonEX) and one unforeseen situation with the obituary of QuadrigaCX CEO, Gerald Cotten.
Nevertheless, apart from these large-scale losses, there are other various smaller Ponzi schemes and unregulated crypto-investment opportunities being offered on the internet. Social media advertisement, click-bait, and sometimes old school cold calling are efficient ways of luring customers.
According to a recent report by UK’s Financial Conduct Authority, as much as $30 million (27 million euros) was lost to investment-related fraud in cryptocurrencies. According to the press report,
“The number of such scams reported more than tripled last year to 1,834, from 530 in 2017-18.”
The fraudster pries the gullibility of investors looking to ‘get rich quick.’ They are lured in by hopes of hefty gains in a carefully planned business model. However, more often then not the Exchanges or business shut down soon as the gain their target investments.
Do you think better education and widespread knowledge can reduce these kinds of scams? Please share your views with us.
Nivesh from Engineering Background is a full-time Crypto Journalist at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com