Is it cryptocrime or a chance to make a quick buck?

Someone finds an old discarded USB stick and discovers a fortune. Long-forgotten purchases from the introductory phase of the cryptocurrency Bitcoin have made the lucky owner a multimillionaire in his sleep, so to speak. Others forget their passwords and lose their millions without ever seeing a cent of it. Such stories inspire dreaming. Becoming rich with virtual currencies without having to lift a finger. That would be a great alternative to earning money through work. No one thinks about cryptocrime for the time being.

The blockchain promises maximum security

The security of decentralized payment transactions is praised above all. This takes place as a point payment without an intermediary, which in real life would be a bank. Each transaction generates a data record, a copy of which is available to both the buyer and the seller on the network. All further transactions are now appended to the very first original file, so that a chain of ever new data records is formed. The so-called blockchain is created. It maps the history of a transaction in detail for each user. Maximum transparency is intended to prevent manipulation. However, in the event that someone does manage to do so, there are theoretically still many unaffected users whose authentic copies can be used to detect and sort out the manipulation. 

Losing money made easy

But of course, virtual medals also have a downside, and that’s scam. According to the blockchain data platform Chainalysis, more than seven billion US dollars disappeared last year as a result of fraud. According to this, fraud represents the main share of cryptocrime and increased by 81 percent in 2021.

Cryptocrime 4.0 – The “grandson trick” on the Internet 

So are blockchains not as secure as previously claimed? The risk lies less in the blockchain than in the handling of the coins. Just as in real life, where people are tricked into entrusting money to complete strangers or providing accurate information about their circumstances, in the digital world, too, gullible owners leave their virtual money to fraudsters. These unscrupulously collect the associated monetary value and then disappear never to be seen again. In the process, the fraudsters create a token on a decentralized exchange. On such an exchange, anyone can create a token without a KYC (Know Your Customer) check. KYC describes a legitimacy check in which banks and crypto exchanges verify the identity of their customers. Using social media, the scammers then promise big profits and generate interest in their token. People who are not familiar with the world of cryptocurrencies often believe what they are promised on social media and invest. Once the scammer has received enough liquidity, they withdraw it from the liquidity pools and the price of the crypto asset plummets – investors are left looking down the tubes. This nasty scam has a name: Rug Pull. The term is synonymous with the metaphor of pulling the rug out from under someone’s feet. This scam is preferably used in Decentralized Finance (DeFi).

Maximum profit without effort – but in the end, the bank always wins

The principle is simple: By advertisement on the Internet or by means of an unsolicited direct letter by Mail the offerers promise highest net yield with minimum employment. Old hat? Surely no one falls for that nowadays? Wrong. Nowadays, more people than ever are falling for the scam, because fairy tales seem to be coming true on the Internet. The blockchain promises security, and the price of the virtual currency is rising. It’s easy to get the idea of moving your fingers on the keyboard to ride the wave. Now just animate a few friends to join in so that the price is driven even higher, and you’re right in the middle of the legally prohibited Ponzi scheme. And like a gambling addict in a casino, you suppress the old wisdom that the others always win in the end with such stakes.

Cryptocrime – The only thing left for the investor is absolute nothingness

This end looks like this: The crypto developer withdraws all liquidity from the project in one fell swoop. The wave breaks, and all gullible investors without exception perish mercilessly. Cryptocrime has won. Those who bet fully on risk are now rid of their entire savings. 

Dreaming allowed – but only while you sleep

The good news is that everyone can protect themselves. The sober realization is that the biggest enemy in both the virtual and the real world is not the criminal in the first place, but oneself, in that one voluntarily blocks out one’s mind and believes that one’s money can multiply by itself. If you say goodbye to this illusion and pay attention to the following signs of possible cryptocrime, you have a good chance of remaining the owner of your money.

Exposing cryptocrime step by step

In the beginning, there is always a feeling, and a nice one at that: euphoria. Cryptocrime triggers the enthusiasm for moments of happiness, brought on by the almost tangible prospect of unexpected wealth without any work input. Coupled with the euphoria is a sense of superiority. One suddenly seems to be a “sighted man among the blind.” One of the first to recognize a hype and skim off the top before too many people involved cause the value of the object to drop again. The head cinema starts up. It plays the movie about a life without worries. A magnificent villa, a luxurious car, recognition and status in a society in which one feels insignificant and anonymous – the list of desires varies in detail, but in most cases is headed by one strong motive: the desire for independence and recognition. The best prerequisites for becoming a victim of cryptocrime.

Step 1: Switch off the mental cinema

Thinking through a project with a clear mind has nothing in common with head cinema. Scenarios are thought constructs to see possible courses of events, but they have absolutely nothing to do with one’s emotions or desires. Only when the mind examines the whitepaper of a project, it is no longer fooled by eyewash and ambiguous allusions to fabulous profits. If there is no clearly formulated goal and no comprehensible approaches to realization, the project is probably dubious. Even more so if the information is promised only after contact or registration. The simple rule of thumb is: the more secret and opaque a thing is, the more it smells like a scam. 

Step 2: Calling a spade a spade

You research who exactly is behind the project. Is there a person in charge who can be identified by name? If this information is missing, you can’t find out anything about the provider. This probably makes the project dubious, even though many major projects such as the development of Bitcoin took place anonymously. It is precisely such success stories that criminals use to justify their anonymity.

Step 3: Why go far away?

If the provider’s company headquarters is located abroad, it is difficult to enforce one’s rights in court in case of doubt. This makes it easy for scammers to get away with stolen money.

Step 4: Do not trigger an avalanche

Asking your own friends or acquaintances to recruit you for the project is dubious. Even or especially if an enticing reward is advertised, you should definitely resist this temptation. It borders on the legally forbidden snowball principle, which from experience leaves nothing but an avalanche of frustrated and bruised victims. You may lose not only your money, but also your friends and your reputation.

Step 5: Professional website with imprint

Fraudsters hardly make the effort to create a professional website for a lot of money. Rather, they bunglingly put together neon signs without an exact imprint. The message is: Hands off! If you want to advertise a serious product, you have to spend money and identify yourself.

Conclusion Cryptocrime

If you want to make your money work for you, you have to inform yourself carefully. Behind glamorous investment deals with “dream returns” in a short period of time, fraudsters are most likely hiding. At magility, as cyber security experts, we have been following the path of cryptocurrencies, their opportunities and risks, and the associated business models for many years. Feel free to contact us right here.