Bitcoin and the rage over that currency and other cryptocurrencies have served as a breeding ground for many scammers to orchestrate different types of fraud. One of those that has been growing in this context is the pyramid scams, what refers to a business scheme in which the participants have to recommend and attract more users with the objective that these new members produce benefits for the participants who originally recruited them.
“This type of system is only sustained by the income of those who are located further and further down the pyramid. This way, when no more people entered the base of the pyramid due to signs of fraud, it collapsedto. And although there have been reports in the media about it, pyramid schemes, many of which misleadingly use or claim to use cryptocurrency technology, are far from being eradicated,” warns Iñaki Apezteguia, crypto teacher and communicator.
Signs to detect a pyramid scheme:
1. Promise of high and/or fixed returns
Every investment involves risk. If the investment is safe, then the return is low; and the more insecure it is, the greater the return. This is a basic concept of finance, so any business that promises a safe investment with high or fixed returns should raise red flags.
2. That it be a necessary condition to recruit people
This is an ingredient that is not lacking in pyramid schemes. The user is asked to summon new users who must also, for their part, continue to recruit people. Pyramid scams seek to take advantage of the contact networks of the members who are adding. This scheme inevitably collapses when people stop entering.
3. They usually ask for investment in training or products
In some cases, the user is asked to invest in the purchase of products or training in order to better perform their task. This requirement is used in some, but not all, pyramid schemes.
4. The excuse of Bitcoin and the ignorance of users
Sometimes scammers talk about the possibility of earning a large amount of Bitcoins, taking advantage of the popularity of this cryptocurrency. They take advantage of the general ignorance of the public and say that they send or will send this currency and then they don’t. On the other hand, they link it to promises of profits which, as already mentioned, is unfeasible in relation to any risky investment and in particular in relation to these currencies.
“There is no promise of immediate return in Bitcoin. There is a proposal for a decentralized payment system that consists of a new type of virtual money, where people, without even having to know each other, can send money to each other through public addresses. People should know that Bitcoin cannot be issued out of thin airnor do it by an administrative decision of a government of the day or a company”, highlights Apezteguia.
Bitcoins are a virtual currency that has been circulating for several years. There is a protocol and established guidelines that indicate that a maximum of 21 million units will be produced and no more. Its emission is supported by a mining process that requires energy resources, it is not high that arises spontaneously.
The processes are registered in the block chain or blockchain, which generates transparency and privacy in the exchanges; and the movements of this asset take place through digital wallets. The point is that many users are unaware of these details and sometimes fall for the tricks.
“It is key that people understand that not everything digital involves cryptocurrencies and not everything that is cryptocurrency implies quick profit without any kind of effort”, underlines the specialist.
5. The issuance of new cryptocurrencies
Sometimes cybercriminals orchestrate their scams by saying that they will launch a new cryptocurrency and asking users to make an advance purchase. To talk about this topic, an important concept must be mentioned: ICO, which stands for “initial coin offering”.
“Before a cryptocurrency creator makes the new currency available for free trading on an exchange, it releases some tokens, usually to raise funds for the project,” they explain on the official Kaspersky site.
It is a necessary instance for the generation of a new crypto, the problem is that with that excuse, many scammers say that they are going through this process and thus deceive users. To identify if it is a genuine or false ICO, it is necessary to look for information with specialized sources, as well as visiting the website of the site, reading the white paper well (the writing where the operation of crypto is well explained) and observing that it is not something that was copied and pasted from another genuine crypto or that lacks coherent information .
6. Difficulty earning
It is common for users to not have a direct way to withdraw the money they earn. In the framework of pyramid schemes, members are sought to “invest” the proceeds within the system and do not provide a clear option for users to withdraw their money.
7. Dazzle the user
Usually they seek to dazzle the user by inviting them to meetings in hotels, bars or even to spend a weekend in a field where they offer training and incredible stories of overcoming and exorbitant earnings. Here the famous and well-known saying that “all that glitters is not gold” must prevail.
Safety measures
The first step is to take into account the signs mentioned above and at the slightest suspicion avoid investing in potentially fraudulent schemes.
On the other hand, if it is evaluated that the proposal is serious and it is decided to invest in any cryptocurrency, it is necessary to ensure that the platform through which transactions will be made is reliable. In this sense, it is necessary to carry out an exhaustive analysis and consult with specialized sources to prevent any vulnerability from affecting the investment.
It is also important use all authentication protocols. “Once you choose a platform, make sure you employ all the security protocols available to you. Using authentication technology can reduce user friction and ensure smooth transactions, making it more likely that others will continue to do business with you,” said Rafael Costa, director of Fraud and Identity at LexisNexis Risk Solutions.
Finally, you have to stay updated. The world of cryptocurrencies and technology in general is constantly evolving, which is why it is so important to always read and learn about these items. There is no better way to take care of yourself than to be trained.
