What We Have Covered in This Article
- 1 Crypto Scams on Social Media: A Closer Look
- 2 Why Do These Scams Work?
- 3 What’s the Way Forward?
Last Updated on October 16, 2021 by Editor Futurescope
Social media has become as integral to human society as basic necessities, such as nutrition and shelter. It’s what has helped people stay connected despite pandemic-driven social distancing regulations. It’s your source of inspiration, motivation, entertainment, and information.
But as is the case with anything on the internet, social media platforms have a dark side too. There’s the toxic competitiveness that social media embeds into the minds of young users. Then there’s the addictive aspect of scrolling through memes, GIFs, and videos on your feed until the wee hours of the morning.
But none of these drawbacks of social media are as serious as the recent spurt of cryptocurrency scams booming on these platforms. To say that Twitter, Facebook, and other platforms have become a breeding ground for crypto scams would be an understatement.
In this blog, we’ll take a deep dive into the grim world of cryptocurrency scams floating around on social media. Also, we’ll analyze why these scams work. Let’s get started.
In June 2021, members of FaZe Clan – a popular esports and entertainment group – began endorsing a new cryptocurrency project on social media. Titled Save the Kids, the project encouraged individuals to invest in a charity cryptocurrency token that was supposed to help impoverished children across the world.
But hours after its launch, the cryptocurrency’s value crashed and left several investors with nothing but a few dollars. It’s particularly alarming considering that FaZe Clan has more than 5 million followers on Twitter alone.
The creators of the Save The Kids project would’ve easily raked in a few thousand dollars, if not millions, by duping innocent FaZe Clan followers.
The sad part is that this isn’t the first time that social media influencers have used their clout to promote altcoins – a term used for cryptocurrencies other than bitcoin. From Kim Kardashian to Logan Paul – various celebrities have endorsed new cryptocurrencies in recent years.
The “Save The Kids” scam reeks of what is called a pump-and-dump scheme. In such scams, the fraudsters create a new cryptocurrency and assemble a group of influencers. The creators encourage them to buy and promote an altcoin. The initial sale of the new digital currency is carefully coordinated to prevent any price hikes.
Once the influencers start promoting the altcoin on social media, unassuming fans take the plunge and decide to invest with their hard-earned money. It creates a frenzy and skyrockets the value of the cryptocurrency. That’s when the creators decide to coordinate the sale of their assets, leaving public investors in limbo.
Considering the rampant nature of cryptocurrency scams, it’s easy to wonder why these scams still work.
To begin with, the decentralized and irreversible nature of cryptocurrency transactions makes them difficult to trace. That means once you lost money to a scammer, there aren’t any specific financial institutions you can turn to for support.
The only way of getting your money back is to seek help from fund recovery specialists. These organizations use sophisticated techniques to track lost funds and hold online scammers accountable. For instance, PayBack – a fund recovery specialist – monitors public ledgers and other resources to get recover your lost funds.
In the absence of such specialized services, getting your money back from an online scam involving altcoins is a herculean task.
Apart from the untraceable and irreversible nature of cryptocurrency transactions, there’s the low barrier to entry associated with altcoins. Unlike fiat currencies, digital currencies aren’t regulated by banks or other financial institutions.
It means anyone with top-notch coding skills can do a bit of research and create their own cryptocurrency.
On top of that, Gen Z and millennials tend to put social media influencers on a pedestal. Influencers are trusted public figures who have the power to shape people’s opinions on anything new.
Also, younger generations have a propensity for making impulsive, emotionally-driven decisions. Instead of making strategic decisions about their investments, they often purchase an altcoin because of its novelty. Or it’s because everyone in their social circles is doing it, and they don’t want to feel left out.
All these factors create the perfect cocktail for social media-based crypto scams to work. It isn’t surprising that people aged between 20 to 49 years are five times more vulnerable to cryptocurrency scams than older generations.
As long as cryptocurrencies remain unregulated and people continue to trust social media influencers, online scams will thrive on social media. It’s up to you to keep an eye out for red flags.
If you come across a new cryptocurrency, conduct thorough research to learn more about its origin and trading practices. Also, be wary of influencers who swear allegiance to a new cryptocurrency out of the blue.
Ultimately, the key to steering clear of cryptocurrency scams on social media is to never let your guard down.