The rapid growth of the cryptocurrency industry has led to a plethora of new millionaires, and stories of success however, there are some issues in this marketplace. Cybercriminals have been aware of the “get rich quickly” trend that is prevalent in the cryptocurrency market, and have profited from this trend. This has led to many cybercrime involving crypto, such as fake cryptocurrency token.
A fraudulent token is a type of cryptocurrency created with the goal of stealing money from investors. They are usually created on an existing blockchain like Ethereum because it’s simpler for cybercriminals to use this, rather than developing an entirely new blockchain.
Fake Cryptocurrency Token
Scam tokens are generally used as a means by which the rug pull is executed. The typical scam involves developers cutting off an initiative and then taking to roads with funds the investors invested in an investment that they thought was a promise.
Since cryptocurrency is not regulated It is easy for fraudsters to make and sell an asset without having any type of certification or license. In the world of crypto the token could be extremely successful within days, and be highly profitable over the long term and investors are frequently seeking out assets that are likely to crash.
Imagine a crypto that was worth $1. it is expected that this value will increase exponentially over the coming years. An investor can purchase either a small or large amount of these tokens and will then be able to make an enormous profit selling the token to an exchange, if the value actually increases. Many investors are seeking investments that will last for a long time and are confident that cryptos will build value in time.
Cybercriminals have this hope to are able to exploit through fraudulent tokens. There’s been plenty of fraudulent tokens released in the past, which have succeeded in luring investors professional and casual investors in giving away large amounts of money without knowing that they’ll never be able to see the same thing ever again.
Take OneCoin For instance. It was a massive fraud disguised to be an attractive fake cryptocurrency token investment. The creator of the project, Ruja Ignatova, claimed that OneCoin could be traded, mined, traded or stored just like normal cryptos, but there was a major differentiator that should have been an alert to investors. OneCoin gave incentives to investors who brought new investors to the project. This is what an multi-level marketing program (MLM) works.
At the conclusion, nearly $4 billion was taken from investors after Ignatova removed all of the capital and then disappeared completely. However, her brother and co-founders were both arrested and found guilty in 2019, meaning there was some semblance of justice in the course of this trial.
How to Spot a Scam Token
If scam tokens are able to fool investors into investing thousands of dollars and even steal billions or millions in dollars, do you have a method to detect the scams? There are a few ways to stay clear of investing your money in a fraudulent token.
1. Research the Developers
Many scam token developers are anonymous because they are aware that they will be involved in serious crimes soon. Of of course, a criminal will not openly reveal to who they are prior making a profit from people and this makes it much easier for authorities to catch them. Although some fake cryptocurrency token been founded by non-anonymous people, such as Ruja Ignatova we previously talked about, it’s becoming more typical for these criminals to conceal their identity under an online account. Many legitimate crypto developers use this method, such as Shiba Inu’s Ryoshi.
If you’ve seen an upcoming project come onto the market but the creator or team of developers are all in the dark on social media or other platforms, beware. While this alone cannot determine if a cryptocurrency is illegal, it’s definitely something to be aware of.
2. Check the Crypto’s Price History
In the event of a fake cryptocurrency token-related scam criminals don’t want to sit on their hands more time than they have to. This is why lots of fraudulent tokens see huge rises in value before falling immediately following, as the creators decide to sell their large part of their holdings back on an exchange.
It’s an indication of red flags when an emerging cryptocurrency and has seen a massive price increase in the span of hours or even days. It doesn’t mean the cryptocurrency has any sort of long-term potential, but it could mean that it is simply an unproven pump and dump rug pull scamin which the cryptocurrency’s price is likely to plummet.
3. Consider the Token Distribution
If a cybercriminal creates an untrue token and keeps the majority of those tokens for themselves, so they can then sell an enormous portion of the entire supply and earn a huge profit. Although legitimate crypto developers typically keep a few coins or tokens to them, they don’t typically make up more than half of the supply that is in circulation.
Many people do not realize this warning as it is necessary to be extra careful to verify the distribution of supply. However, this can be accomplished by looking at the ledger of transactions or distributed ledger of the particular token. If you spot anyone who is a whale (or massive holders of crypto) and the token is new, it could indicate that the token is based on criminal underpinnings.
4. Check the Whitepaper
Whitepapers contain the steps to develop, the goals, and projections for the future of the cryptocurrency. A whitepaper can be extremely in-depth and precise, giving prospective investors an understanding of the motivations behind the asset. But, criminals can bypass the whitepaper part of their scam token because they don’t consider it essential or don’t wish to spend time reading it.
This warning could very easily reveal a fraudulent token. If you review the whitepaper and find it to be very sluggish or unclear or is a clear duplicate of any other cryptocurrency’s whitepaper, then you could be dealing with a fraudulent venture. The legitimate crypto developers will invest a lot of effort in their whitepaperbecause they can persuade investors to invest. However, it can be used to cybercriminal’s advantage. If the whitepaper is filled with very high-return claims or forecasts for growth that are not realistic This is also an indicator of danger.
5. Extreme Marketing
In order to raise money for a fake token, cybercriminals typically promote their scam project massively to make a splash fast as they can. This is usually done on social media, specifically Twitter. Before you invest in a cryptocurrency, make sure to check the accounts on social media of its creators to see whether their advertising strategies include false promises, fanciful claims, or ad-hoc data. These could all be indications of fraud.
Scam Tokens Are Rife but Can Be Spotted
With crypto becoming an area of rapid growth hackers are constantly trying to fool investors to give away their money. This is why it’s crucial do your personal thorough research about any particular fake cryptocurrency token, and be on the lookout for any signs that might suggest a scam is taking place.