With COVID-19 in the air and heightened anxiety in the world, crypto scams could gain unprecedented power.
Earlier this week, cybersecurity firm Cipher Trace published a report with findings that so far this year, nearly $1.4 billion dollars in cryptocurrency have been stolen by malicious actors.
On the surface of things, it looks as though the crypto space might be cleaning up its act: while the number is sizeable, the figure is considerably less than the amount of cryptocurrency that had been stolen around the same time last year; both 2019 and 2020 are showing exponential increase in thefts over 2018, when $1.7 billion was stolen through the year.
Specifically, CipherTrace’s Q2 report from 2019 revealed that $4.26 billion had been taken in the first six months of the year. The majority of the stolen funds in 2019 were taken in connection with PlusToken, a massive Ponzi scheme based out of China that made off with some $3 billion in crypto coins.
However, while scammers have taken quite a bit less this year than they had in 2019, there are some eerie similarities between this year’s crypto scam landscape and last year’s: specifically, most of this years’ stolen funds can be attributed to Wotoken, which–like PlusToken–is shaping up to be another large-scale Ponzi scheme with more than $1 billion in spoils.
Indeed, “the largest contributor to 2020’s crypto crime total was Wotoken’s billion-dollar Ponzi scheme out of China,” said John Jeffries, Chief Financial Analyst at CipherTrace, to Finance Magnates.
As such, “2020 is on track to be, at minimum, the second-highest year on record for the total amount netted by criminals from cryptocurrency crime,” he said. “However, it’s possible that 2020’s cryptocurrency crime numbers could exceed 2019’s $4.5 billion.”
This may be particularly true if scams like PlusToken and Wotoken continue to permeate the cryptocurrency world. While Plustoken and Wotoken are certainly some of the most prominent examples, there are many others, including the infamous OneCoin scam, which made off with $4 billion over the course of several years.
Why do these scams continue to be so effective? And has the crypto scam landscape changed–or do crypto criminals keep singing the same old song?
Greed and altruism: Ponzi schemes are so successful because the play on peoples’ emotions
Nir Kshetri, Professor in the Bryan School of Business and Economics at UNCG and research fellow at Kobe University, told Finance Magnates that Ponzi schemes continue to proliferate the cryptocurrency space because they are so effective.
Indeed, “the criminals behind crypto frauds are likely to utilize proven techniques that they have been using for quite some time,” Kshetri said. Specifically, “many cryptocurrency fraudsters appeal to people’s greed.”
In other words, these kinds of schemes are so successful because “they promise big returns.”
Indeed, high returns are essential in the crypto Ponzi playbook: they were a feature of Plustoken, Onecoin, and Bitconnect–another scam that was shut down in 2018.
Kshetri pointed to another alleged Ponzi scheme that appears to still be operational as an example: “an unknown group of ‘entrepreneurs’ runs the scam bot iCenter, which is a Ponzi scheme for cryptocurrencies such as Bitcoin and Litecoin,” he said.
“It doesn’t provide information on investment strategies, but somehow promises investors 1.2% daily returns.” Some of iCenter’s Facebook posts promised returns over 2.5% “according to your investment amount.”
At press time, the iCenter website was down, and appeared to have been defunct for quite some; a message on the iCenter Telegram group (which had 4,432 subscribers) dating back to October 2018 said that “Our server provider is currently experiencing a technical issue. They are already aware of it and it should be sorted very soon. We appreciate your understanding, the Bot’s should be working very soon. (sic)”
Unwitting victims of crypto Ponzi schemes can recruit other victims
Another problem with these Ponzi schemes is that they don’t just play on peoples’ greed: they also insidiously play on peoples’ altruism.
After all, if you had just found an amazing, life-changing platform that would quickly multiply your savings, wouldn’t you also send it to your friends? Your neighbors? Your parents? Your grandma?
“Victims may [incidentally]exploit friends and family through social media,” Kshetri explained. “When one person is [taken in]by the promise of big returns on cryptocurrency investments, they may spread the word to friends and family members.”
These schemes also invoke the visages of trusted celebrities in order to reel in unwitting victims: “sometimes big names such as celebrities get involved, [although]not all the celebrities know they’re involved,” Kshetri continued.
For example, “the fraudsters behind iCenter featured a video that purported to be an endorsement by Dwayne’ ‘The Rock’ Johnson, holding a sign featuring iCenter’s logo. Videos of Justin Timberlake and Christopher Walken were deceptively edited so they appeared to praise iCenter, too.”
Coronavirus may have heightened susceptibility to crypto crimes online
While Ponzi schemes may play on peoples’ tendencies for greed and altruism, there’s another kind of cryptocurrency scam that is playing on another human emotion: fear.
Author: Rachel McIntosh
Read more at: https://www.financemagnates.com/cryptocurrency/news/after-covid-19-2020-could-be-the-biggest-year-yet-for-crypto-scams/
