By Evan Spicer
Director of Cryptocurrency Investigations
Bitcoin scams and fake coins are more prevalent than ever. Although crypto enthusiasts know that there are plenty of legitimate trading opportunities and reliable coins, the rapid increase of crypto scams are tarnishing the reputation of cryptocurrency.
According to the Rug Pull Report published by Solidus, 117,629 crypto scam coins were created between January and November in 2022. This amounts to 350 a day and is a 41% increase over the number of crypto scam coins issued in 2021.
The report named the bitcoin scam hot spots, with BNB Chain Harbors harboring the greatest number of fake coins. It’s estimated that 12% of all coins on this platform, BEP-20, are used in crypto scams.Second on the list is the Ethereum network – 8% of ERC-20 tokens are fraudulent.
The number of people who lost money in fraudulent coin crypto scams since 2020 is two million. That’s an even larger than the number of investors whose funds evaporated in platform bankruptcies such as FTX, Celsius and Voyager Digital.
How Honeypot Crypto Scam Coins Snare Investors
The Rug Pull Report didn’t only track numbers of crypto scam coins and their victims, but also revealed leading types of coin frauds.
Many crypto coin frauds are referred to as “honeypot” crypto scams. Honeypot, as the name implies, attracts would-be victims with sweet offers and traps them so they can’t get out until their money is gone.
Issuers of honeypot crypto scam coins promise huge returns for a brand new coin and guarantee the investment will be a sure thing.
However, because of information in the fine print, so-called smart contracts or other contrivances, the issuer of the coins can prevent the buyer from selling. This means that even as the price plummets when the criminals behind the deal cash out, their victims are stuck in the virtual honeypot until they see their investment go to zero.
Smart contracts are difficult for even sophisticated crypto enthusiasts to understand. In many cases, these tricky smart contracts can fool even seasoned crypto investors. However, once the victim pays for the coin and approves the contract, they are stuck, no matter what direction the coin goes.
The most famous example in 2022 of a honeypot crypto scam was the Squid Game token fraud. The creators showed a 45,000% increase in the SQUID token in just a few days. However, because buyers were caught in a honey pot crypto scam, they couldn’t sell their holdings and eventually, as the SQUID creators ran off with funds, the investors were left with nothing.
How Investors Lose Their Footing in Rug Pull Crypto Scam Coin Deals
Another common type of bitcoin scam are rug pull coin frauds. As the name implies, the buyer feels like they have had the rug pulled from underneath them. Rug pull schemes are similar to “pump and dump” frauds.
The cyber criminals convince people to buy a new coin and convince them they will double or triple their money. Their intention is to attract a large number of buyers who will drive up the value of the coin.
Once the time is ripe, the people behind this crypto scam will sell their holdings and make off with the money. This will make the value of customer’s assets worthless. They can also sell pre-mined holdings and siphon off funds from their customers.
Scam Detection and Crypto Scam Coins
The best way to avoid all types of bitcoin scams is to take precautions and to know what to watch out for. Beware of people who guarantee a return on your investment. No broker or crypto coin issuer can promise any investor that they will receive a specific return on investment (ROI). Stay away from anyone who tries to lure you with fake guarantees.
Also, be careful about all contracts before you sign. Read them carefully and be careful of ambiguous warnings. Have an expert look over these contracts before you agree.
When it comes to scam detection, you need experts on your side. MyChargeBack has the expertise and will give you the answers you need to avoid losing money to bitcoin scams. If you’ve lost money to any type of crypto scam, we will consult with you and launch a full crypto investigation into your case. We will create crypto reports that you can bring to authorities and will get you started on the road to fund recovery.
Have You Lost Money to Crypto Scam Coins? Talk to MyChargeBack Professionals Today
If you have lost money to financial fraud, talk to the MyChargeBack team. Our investigations will provide evidence to bolster your claim. Our investigation reports are essential for tracking down your funds and getting your started on the road to fund recovery.