The 5 most dangerous crypto scams and how to protect yourself

The world of cryptocurrencies can be exciting and full of potential, but it can also be a minefield of scams and scams. Because not only the extreme price fluctuations are dangerous: The crypto market and the young technology offer numerous possibilities to dupe inexperienced investors. It is all the more important that you learn to protect yourself against it.

It’s a game of cat and mouse: scammers use new and cunning tactics to rake in profits from their scams. This can leave users in dire straits financially and emotionally, and in some cases even lead to complete bankruptcy.

Therefore, always observe the golden rule: There is no secure income in the world of cryptocurrencies. You play with odds. To protect yourself, you must be aware that your investments can lead to total loss and take appropriate safety precautions.

Especially in the field of cryptocurrencies, many fraudsters hide behind their own PC, a pseudonym or a fake account. This makes them difficult to track down and prosecute, and they can continue to steal from people without fear of punishment.

However, with the right knowledge and precautions, you can avoid falling victim to these scams. For this reason, honesto presents the five most dangerous crypto scams and shows you how you can protect yourself against them. Thanks to the legal framework of Switzerland, your digital assets are safe even in the event of honesto’s bankruptcy. In this way, honesto establishes itself as the safe haven in a vast sea of ​​crypto scams.

1. Phishing and fake influencers are among the most dangerous crypto scams

at phishing attacks scammers try to steal sensitive information such as passwords, private information or private keys. In one way or another, they pretend to be a serious project, a confidential private individual or a public figure.

This can come in the form of fake emails or social media messages. But fake websites, apps or influencers are also not uncommon. The area of ​​influencers and crypto celebrities is a particularly critical area. It’s riddled with bad actors who promote fraudulent projects for wages.

Because especially in the world of cryptocurrencies, social media influencers inflate very quickly. Buying fake followers is also part of scammers’ toolbox. Well-known social media scams promoting them are cloud mining and investments like “invest 1 ETH and get 2 back”.

How do you protect yourself against phishing attacks and fake influencers?

That’s why it’s important to always be suspicious of exorbitant promises of profit. Ask yourself: What is really in the interest of the person or influencer? Often these individuals are funded by fraudulent projects.

As soon as you interact with a website, app or social media account, you are at risk of evading a phishing attack. So it should always be of paramount importance to ensure that it is the original source.

Also, scan any software you interact with for viruses. Fake apps in the Google Store or Apple Store are also not uncommon. They spy on your passwords or private keys and rob you of your hard-earned cryptocurrencies.

2. Dubious crypto exchanges are a Trojan horse

Crypto platforms are repeatedly criticized. A large part exists in the Bahamas, Seychelles, Lithuania or Malta. There is hardly any regulation in these countries, but you can still boast of (worthless) licenses. Even one of the largest crypto exchanges (FTX) turned out to be a black sheep. There, the deposits of the users were simply further invested. And this is not an isolated case.

It is also normal for exchanges to take over the other side of trading from their users. Crypto exchanges have insight into users’ positions and can therefore easily exploit inefficiencies in the market and dust off liquidity.

Exchanges that are neither regulated nor have an imprint are another source of financial uncertainty. There, AGBS are often disguised with nested company constructs. Sadly, it doesn’t stop there as exchanges and user accounts are also popular targets for hackers and cyber attacks.

This is how you can protect yourself against questionable crypto exchanges

No matter what platform you sign up on, always enable two-factor authentication. But beware, even that is not always safe. Attackers now even go as far as hacking your SIM card and accessing your SMS or 2FA app.

An exchange that wants to play seriously in the market must be regulated and licensed. It is important to note whether platforms comply with regulatory requirements such as customer identification or anti-money laundering regulations. If that’s not the case, then stay away. Regular audits are also an absolute must.

On new unknown exchanges you should always read the terms and conditions or the imprint. If you find veiled or convoluted formulations here, then keep your hands off. With products from the DeFi area, you always have to reckon with a total failure risk.

3. Accomplices: A lack of regulation allows for a large number of scams

Regulating cryptocurrencies is very difficult not only because of their decentralized nature but also because of their rapid pace of development. They are difficult to regulate in the traditional sense, and regulators around the world are failing to establish a constructive framework for overseeing the market.

There are also major discrepancies between different countries. These gaps lead to crypto projects settling in unregulated economic areas and becoming a danger to investors. They want to get to market as quickly as possible and start making instant profits.

These regulatory loopholes allow crypto projects and exchanges to flout security standards. Without proper regulation, it is very difficult for law enforcement agencies to track down bad actors and take them out of the market.

This helps against missing regulations

Overall, the regulations for cryptocurrencies are still in the development phase. However, healthy regulation of the crypto market is imperative to create a stable market and protect investors.

In many ways, global regulators have failed to regulate cryptocurrencies in a meaningful way. That should change with companies like honesto. The mission there is to establish the Swiss legal, regulatory and security standard in the insecure crypto world.

Additionally, global regulators are working on constructive regulation for the crypto market. The European Union wants to create a uniform regulatory framework for cryptocurrencies with the MiCA regulation.

4. Ponzi schemes and multi-level marketing (MLM)

These investment systems promise high profits that can only be generated on the backs of new investors. They exist in a wide variety of industries and can also be found in the field of cryptocurrencies. These are unsustainable investments that will collapse sooner or later.

The two systems are very similar in that both recruit new members to join the project and make investments. You are promised high returns. The project is funded by these investments rather than sustainable profits.

The difference between the two systems is that in MLM, a real product or service is sold, giving participants a commission. In contrast, a Ponzi scheme doesn’t even offer a sensible product.

This is how you protect yourself from fraudulent investment systems

Ponzi schemes are based on unrealistic promises. High returns and no risk? This is too good to be true! The fraudulent schemes can be difficult to spot, especially for beginners. Therefore, never invest more than you are willing to lose.

Familiarize yourself with the projects you are investing in. Do research on the company, founders, investors and business plan. Even if you think you’re investing in a legitimate company, you can never be sure. So never put everything on one card and diversify your crypto portfolio.

5. The big problem with utility tokens

Many crypto projects make use of cryptocurrencies that they created out of thin air. They want to use this to finance themselves or generate liquidity. But these tokens have no intrinsic value. The only value attributed to them comes from frequent use on a platform or from the sheer belief of users.

The investor therefore has no legal certainty. As soon as the beliefs of market participants are questioned, the true value of these projects emerges: a large part of the crypto tokens are worthless.

It should be explicitly mentioned that not all utility tokens are scams. However, they are so easy and cheap to create that they are great for scams. In this sense, there is a wide range of fake tokens that were generated to take money out of users’ pockets.

Security tokens are backed by real value

Whenever you interact with a crypto token, always verify that it is the real version. This can be seen on any block explorer. In the case of a financing round, you have to be aware of whether the project makes sense and whether it has serious intentions. Security tokens can also help.

Unlike a utility token, which can resemble a coupon or lottery ticket, a security token is a digital representation of real value on the blockchain. This is also the case with honesto. Each token is deposited there with a share of honesto, which in turn is entered in the commercial register.

That entailed a huge amount of extra work because the regulatory framework for such cases had to be created first. The security token from honesto went through the full regulation of the financial market supervisory authority. Every investor therefore knows exactly what rights he is entitled to.

honesto: Swiss-standard crypto trading

honesto wants to tame the wild west of cryptocurrencies by establishing the Swiss legal, regulatory and security standard. This makes honesto the first Swiss trading platform for digital assets that guarantees the full protection of a bank.

The Swiss bank InCore stores the cryptocurrencies in the Swiss Alps. What is needed for trading on the platform is reinsured. The honesto trading app grants you the best possible price from over 20 of the leading online exchanges with just one click.

Thanks to the legal framework of Switzerland, your digital assets are safe even in the event of honesto’s bankruptcy. In this way, honesto establishes itself as the safe haven in a vast sea of ​​crypto scams.