So many frauds
There are rampant frauds by phishing websites that disguise as exchanges. What is more, their methods are also becoming increasingly cunning, sometimes leading the victims to enter their own private keys, tricking them into thinking that they are being helped to retrieve cryptocurrencies that have been sent as a mistake. We might even start seeing things like “private key storage services” that eventually demand ransom cryptocurrencies from their users.
It goes without saying that we must be careful not to be tricked by these straightforward frauds. However, we need to be especially alert against more shrewd frauds. I will not name them here, but there are so many of them in the world of cryptocurrency.
The most common form of fraud. Just Google ICO. That is it.
I would not call the entire ICO frauds, but there are many fraudulent schemes under the ICO projects.
Hard fork fraud
Someone from an exchange said this: “from the perspective of an exchange, hard fork is no different than a fraud.”
No wonder taking part in ICO violates regulations. If you create a new coin/token in Japan, you will get scolded by the Financial Services Agency. Meanwhile, forking Bitcoin is seen as relatively permissible by both the regulatory body and users, because Bitcoin is an approved cryptocurrency. The exchange would start receiving questions from the regulators as to what will happen if it forks. Customers will also demand the exchange to give them their share of the new coins created by forking.
This means that miners can mass-produce their own cryptocurrencies as long as they have a certain degree of hash power. The value of Bitcoin rose due to its limited quantity, but now you can create new ones without limit. If hard forking continues, we will keep seeing new “My Bitcoins (altcoins),” without a decrease in Bitcoin quantity. And once the exchange approves a coin, the creator of that coin will become massively rich. That anyone with enough hash power can scam people is a big problem for cryptocurrencies, such as Bitcoin.
Although I have been personally encouraging hard forking, I had also been aware of the possibilities of fraud. Once someone has enough hash power, they will start creating My Bitcoins (altcoins) on their own and keep on hard forking. Moreover, it is also likely that tokens that are approved by the Financial Services Agency become hard forked. Everyone will be happy for a short while, without anybody getting angry. The exchange will be rushed to deal in new coins, and once they approve a new coin, everybody becomes happy. It will profit everybody, including the exchange.
However, this will inevitably introduce a large burden to the exchange, such as security problems, customer service, and regulatory compliance. I realized that I had to be more careful after realizing that easily approving a hard fork, or feeling lucky after receiving a new coin, is no different than tolerating fraud.
There are cases in which famous companies are involved in such a fraud.
In Japan, any cryptocurrency exchange must be approved by the Financial Services Agency. As a result, there is a whitelist of cryptocurrencies that have been approved by the Financial Services Agency.
If you carefully look through the items on that whitelist, you will end up saying this:
“This is just a scam.”
Well, not all of them, of course, although I am not going to name them. There are groups that create cryptocurrencies for the sole purpose of making quick money, without any sense of value, or ideals. They will manipulate their clients by tempting them with “secretive ways to make money,” to quickly hike up their prices.
Well, that is just simple fraud. Not an ICO fraud, or a hard fork fraud. It is the lamest, and simplest form of fraud.
ICO fraud at least has some promise. It at least gives you a sense of hope, whether as a fun new project or as an easy way to make money. Meanwhile, hard fork fraud requires incorporating a certain level of hash power, as well as having some business intuition to manage the whole project.
These simple frauds are typical cases in which swindlers try to profit from the cryptocurrency craze, without giving it much thought. They are neither sexy nor cool. You would wonder how people could possibly fall for these tricks, but they actually work quite well.
Next time you see an inactive company that starts talking about creating a new coin, do not be involved in it so easily. Try not to be scammed by some worthless company. If you do, by some reason, want to get fooled, try to be duped by something more pleasant, like a hard fork fraud.
It is very unfortunate that there are so many bogus companies that want to quickly profit from swindling people with cryptocurrency.