Although one of the major appeals for some investors about crypto-currency markets is their unregulated nature – they largely operate outside the control of central banks and other government agencies – -is also means that they are particularly vulnerable to fraudsters and cyber criminals.
In fact, the current period in the development of such markets has been compared to what it was like to live during the American Wild West, an ear of lawlessness before authority was restored.
Reports of crypto-related scams continue to sky rocket and the losses incurred run into the hundreds of millions of dollars.
Given this trend, it is important to know what the average consumer or investor can do to protect themselves against the scammers.
The Federal Trade Commission (FTC) has issued a list of “red flags” that may be an indication that some companies or people should be avoided at all cost.
Firstly, a guarantee that an investor will make money. Often backed by a celebrity endorsement or testimonial, these seem too good to be true. The reality is that they are – nobody can provide such guarantees, and the endorsements are often fake, and the celebrity in question knows nothing about the product and has no connection with it.
Anything which offers a big pay-out with a guaranteed return should also be sidestepped. Compare that, for example, to the reputable online casinos and the promotions which they offer. South African casino bonuses come with strict terms and conditions, and they usually have limited periods of eligibility.
Free money promises are always fake. It is almost a contradiction in terms.
Similarly, big claims without details or explanation should always be treated with the utmost scepticism.
In terms of how to protect themselves from such scams, experts recommend there are a number of basic steps that can be taken.
Perhaps the most obvious one is not to put money into a virtual of crypto-currency if they do not really understand how it works. Cryptocurrencies are considerably more volatile than conventional currencies, so whilst the possibility is there to make profits from trading them, by the same token, losses can also be incurred.
The advice is the same as with online gambling – do not speculate with money that somebody cannot afford to lose.
It is highly recommended that if somebody does decide to invest or trade in such currencies, then they should do so only after consulting with a trusted adviser, not somebody they have only met over the internet.
Equally, social media posts offering cryptocurrency giveaways should not be believed. They will have been planted with the express intention of getting the naïve to part with their money, or sensitive and private information.
Above all, people should never share their private keys which enables them to access their virtual currency. These keys should be kept in a secure place and preferably offline where they cannot eb hacked. To behave otherwise is like going out, leaving the front door open, with all the household valuables left lying around for a burglar to steal.
Forearmed is forewarned. By understanding the common ways that scammers operate, it will hopefully enable people to spot them when trading or investing in cryptocurrencies.