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breaking news Crypto’s Biggest Weakness • Benzinga

What is it about the human race that some people feel the need to take what is not theirs? Why do some people choose to prey on vulnerable or less experienced people? Many of these people are smart but still decide to take the easy way out and steal other people’s hard earned money.

It is unfortunate that wherever large amounts of money circulate, crooks operate like sharks in blood. Not always, but often the victims of scams are new to the crypto industry. They have not yet educated themselves or gained enough experience to navigate the scam filled waters. The sad part is that many will never return to the crypto business after being scammed.

It’s been just over 14 years since Bitcoin came into existence and led to the formation of the crypto industry. Tens of thousands of cryptocurrencies are vying for attention, and many scammers are continually present. Hopefully, as the crypto industry matures, the number of scams and hacks will decrease, but so far it seems the opposite is true.

One has to ask what effects the possibility of fraud will have on the industry. Will cryptocurrencies forever be relegated to the high-risk part of investors’ portfolios? Should the crypto sector be considered a second-tier investment class? Could the number of hacks and scams continue to rise until they kill the crypto industry?

The 5 worst crypto hacks and scams of all time

Everyone knows the expression “crime doesn’t pay”. In most cases, that’s probably true, but looking at some of these scams, they’ve paid pretty well. Hacks and scams are evil, and the victims of these crimes are innocent people who lose their hard-earned money and sometimes their life savings.

The following examples show some of the most prominent scams and hacks.

  1. The Mount Gox hack

Mount Gox was a cryptocurrency exchange that operated from 2010 to 2014. The Mount Gox exchange at one point processed over 70% of all Bitcoin transactions. At the beginning of February 2014, Mount Gox was hacked for around 650,000 to 850,000 Bitcoin. Shortly after the hack, Mount Gox filed for bankruptcy. Investors are still waiting to see if they will get some of their Bitcoin back.

OneCoin was a crypto Ponzi scheme that raised $4 billion from 2014 to 2016. A Bulgarian national, Ruja Ignatova, founded OneCoin Ltd. and OneLife Network Ltd in 2014. The main business was selling course materials covering various topics including trading and investing.

It all came crashing down in 2017 when founder Ignatova disappeared after a warrant was issued for her arrest. It is estimated that she got away with about $4 billion. She was never arrested and remains on the FBI’s most wanted list.

The BitConnect BCC coin was launched in 2016 under the BitConnect high-yield program. The central theme of the program was a lending platform where investors would deposit Bitcoin and earn daily interest. A trading robot determined the interest payments.

On November 7, 2017, the UK government gave BitConnect two months to prove it was legit. Then, on January 3, 2018, the Texas State Securities Board issued a Cease and Desist for BitConnect. On January 17, 2018, Bitconnect shut down and reportedly cost investors over $2 billion.

AfriCrypt was a South African crypto investment company founded in 2019 by two brothers. The company claimed to have an artificial intelligence trading platform to invest money. The company operated until 2021, when the brothers disappeared with Bitcoin worth an estimated $3.6 billion. According to the brothers, a hack was responsible for the loss of Bitcoin.

The FTX collapse is one of the most high-profile collapses in crypto history. Most people thought that FTX was a top crypto exchange. In November 2017, Sam Bankman-Fried co-founded Alameda Research, a quantitative trading firm. Then in May 2019, Bankman-Fried founded the FTX exchange; FTX is short for futures exchange.

FTX has become the third largest crypto exchange by volume. FTX’s downfall began with a CoinDesk article that claimed that a significant portion of Alameda Research’s assets were held in FTT tokens. The FTT token is the native token of the FTX exchange. After the article was published, Changpeng Zhao, the CEO of Binance, announced that he would sell all of his FTT tokens worth $580 million.

This news led to a wider sell-off of the FTT token, resulting in a significant price drop. This also led to massive withdrawals from FTX and in response, FTX halted all withdrawals. After Binance backed out of a deal to acquire FTX, FTX filed for bankruptcy on November 11, 2022.

On December 12, Bankman-Fried was arrested in the Bahamas after federal prosecutors in New York filed criminal charges. On December 13, Bankman-Fried was charged by the United States Securities and Exchange Commission (SEC) with defrauding more than one million investors.

How to spot a crypto scam

If you are considering investing in cryptocurrencies, you need to learn how to spot crypto scams. It’s unfortunate to have to say that, but it’s true. In some cases, using common sense will help you avoid them, but in other cases, spotting them can be much more difficult. Scammers can be creative in designing their scams, so you need to be vigilant.

Here is a list of things to help you spot a crypto scam.

  • Random unsolicited messages (email or text)
  • Claims that guarantee you’ll make money
  • Promises that the investment is risk free
  • Free cash or crypto offers
  • Big claims with little or no details
  • Grammatical errors in messages, websites or social media profiles
  • Claims you’ve earned crypto, cash, NFTs, or whitelisted spots
  • Anyone who wants to provide you with a wallet
  • Tokens or NFTs appear in your wallet without knowing where they came from
  • Mining pool scams where you have to pay a subscription or use their wallet

Carpet Pulls or Exit Scams: Before investing in any project, research the project thoroughly, including the team behind it. Look for a well-written white paper and a team with social media links such as LinkedIn where you can see their employment history. Examine their social media engagement; how active are they? Anything you can find that allows you to dig deeper into the team or project is a plus.

How can you protect your crypto assets?

Here is a list of ways to protect your crypto assets.

  1. Do not store crypto assets on exchanges.
  2. When possible, use a cold storage hardware wallet like a Ledger or Trezor.
  3. Use strong passwords and change them often.
  4. Write down your passwords and recovery phrases, make duplicate copies, and store a copy offsite.
  5. Self-guard is essential; not your keys = not your crypto.
  6. Use a dedicated laptop for software wallets and browser extensions. Only connect it to the internet when interacting with one of your wallets.
  7. Use only a secure internet connection and a VPN.
  8. Spread your assets across multiple portfolios.
  9. If you use a mobile wallet, contact your mobile service provider to find out if they offer Port Freeze or Number Lock to protect your mobile number from unauthorized transfer.
  10. Always use two-factor authentication, avoid SMS authentication and use Google Authenticator or Authy.
  • securely through the Ledger Hardware Wallet website
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Are scams and hacks a threat to the crypto industry?

Trust is crucial in a system where financial transactions and payments occur. On the other hand, the absence of trust is the cornerstone of blockchain technology, crypto payments, and smart contracts. Trustless means there is no need for a trusted third party or intermediary.

Although blockchain technology enables trustless peer-to-peer transactions, mainstream trust in the crypto industry is essential for widespread adoption. This trust is eroded a bit with every report of hacks and scams that cost innocent investors their hard-earned money.

If too many people get burned when interacting with cryptocurrencies, it could permanently damage public perception of the entire crypto industry. There is no doubt that this is already happening, but if it gets too bad it could take many years to change public opinion.

Graphic credit: Chainalysis

Unfortunately, as cryptocurrencies become more popular, so do the number of scams. Because this could be an existential threat to all cryptos, the crypto community as a whole needs to step up and help fight these scammers.

As bad as the current problem is, it will likely take a mix of solutions to get things under control. This could mean that more regulations are needed and the crypto community should work directly with regulators to find a solution.

Graphic credit: Chainalysis

It would be refreshing to see the crypto community come together with a common goal of ridding the space of scammers. Instead, we now see fights between Bitcoin projects or maximalists and everyone else.

Although 14 years have passed since the launch of Bitcoin, the crypto industry is still in its infancy. As such, now is the time to step up and confront this before scams become so entrenched in the crypto industry that they will be impossible to root out.


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