What is digital currency?

Digital currency is a form of currency that exists only in digital or electronic form. At its core, it’s meant to be a secure and decentralized medium of exchange, often using blockchain technology to record transactions. And due to its potential for high returns, it’s gained significant attention as an investment tool in recent years. However, it’s important to remember that digital currency is highly volatile and shredded in anonymity, which makes it a breeding ground for scammers.

Is digital currency a scam?

Digital currencies are not a scam by themselves, but they are something like the Wild West of investing and speculation. That’s why, if you want to invest in digital currencies and trade in them, you need to work with a virtual currency platform that is reputable and – ideally – regulated.

Thankfully, you have a plethora of exchanges to choose from. Perhaps the most well-known, respected and trusted is Coinbase. Other notable and trustworthy crypto exchanges are Bitstamp, Kraken, Binance, and Bittrex. And if you want to use a completely different exchange, make sure to do your due diligence and research before investing any money.

Digital Coins mining scams

Mining is how Digital Currencies like Digital Coins are created, a process known as Proof of Work. Mining requires significant computational power to complete highly sophisticated algorithms to record transactions on the distributed ledger. When ‘blocks’ are mined and added to the ‘chain,’ the miner is rewarded with Digital Coins. Because mining requires time, resources, power, and infrastructure, many scams seek individuals to ‘invest’ in mining projects, a form of passive income. Thankfully, this scam is less common with the advent of 3rd generation blockchains like Cardano that use a staking system versus mining – no massive power or infrastructure requirements and allows individuals the opportunity to make passive income much easier than with the legacy mining processes.

Digital Coins wallet scams

Digital Coins (and all digital currency) is held in digital wallets. Wallets have two keys – a private key and a public key. A public key is basically like aan address to send something to. A private key is what gives permission to spend or send your digital currency. Digital Coins wallet scams are a common scam that targets new entrants to the digital currency space. Because digital currency is held in digital wallets, many digital currency fraud schemes have come into the space encouraging you to utilize their wallets. Some scams involve asking you to send your private key – don’t!

Pump and Dump scams

A scam that is almost endemic in the digital currency space are pump and dump schemes. Similar to what happens to stocks, pump and dump scams involve an individual or entity acquiring a large amount of an alt-coin and then pushing positive news (fake or real) to encourage as many people to buy as possible. Social media platforms are the primary outlet that pump and dump operators utilize. Once the price has moved up, the operators sell at the top and then let everyone else suffer the consequences of rapidly falling prices.

Pyramid Schemes

If you want to learn an excellent example of a pyramid scheme in the digital currency space, look up OneCoin. Pyramid schemes in Digital Currencies are the same as Ponzi schemes in any other market; the only difference here is that the fraudsters are now capitalizing on the growth of Digital Currenciess to target you and make you believe you’ll become wealthy overnight.

ICO Scams/Exit Scams

ICO stands for Initial Coin Offering. This is similar to the IPO (Initial Public Offering) process – but without the traditional regulatory process. Between 2016 and late 2018, the digital currency market was slammed with, literally, tens of thousands of new altcoins entering the market, all promising to be the next Digital Coins or Ethereum. Some of these new altcoins generated millions of initial investment from individuals, and when prices spiked, the owners sold. This is similar to a pump and dump, but it’s an exit scam when it involves an ICO. While the industry is still very new, it has matured some since 2008. It’s crucial that you do your due diligence and investigate, thoroughly, any new digital currency. This is especially true if you came across it on social media.

High-Interest Return Scams

A growing trend in the digital currency space, specifically the decentralized finance (DeFi) space, is high yield interest rates. There are many legitimate platforms that allow you to deposit or ‘stake’ various Digital Currencies and reward you with a high-interest rate. It is not uncommon to see regulated and legitimate projects offer up to 10% interest on stablecoins (essentially cash) or up to 15% for Digital Coins and Ethereum deposits! But be very, very cautious about any promise of return higher than 10% to 15%. And you must read the ‘fine print’ of even legitimate and regulated entities. There are some projects that require you to leave your deposit for up to 90-days in order to earn the highest yield.

Digital Currency Exchange Scams

When Digital Coins and others became a tradable market, there were few exchanges that were available. As time went on, more and more exchanges popped up. But not all of these Digital Currency exchanges were legitimate. Many were fronts that looked and appeared to be a place to buy and sell Digital Currency. The owners of the exchange would wait until a significant amount of people deposited and even began to trade on their platform until the owners would essentially pull the plug and take your Digital Currency investments. Along with Digital Currency exchange scams is the lack of security of some Digital Currency exchanges. The most infamous example of this occurred in 2014 when Mt. Gox (which processed over 70% of all traded Digital Coins) had 850,000 Digital Coins stolen (millions of dollars). Regarding fake Digital Currency exchanges, there are some that use fake volume to artificially inflate the trading volume and liquidity of the exchange. While this activity is still prevalent, a form of self-policing in the industry exists with the website coinmarketcap.com classifying every Digital Currency exchange as those with honest reported volume or dishonest volume.

Fall prey to a Digital Currency scam? how you can get your money back

If you’ve been the victim of Digital Currency or Digital Coins scams, don’t be disheartened. Due to the vast number of scams and the number of people hurt over the past five years, regulators worldwide have set their sights on any hint of impropriety in the crypto space. And take comfort in knowing that many people have recovered Digital Coins and other Digital Currencies – nothing is truly anonymous. A great first step is to utilize our fund recovery company: FairPath Legal Services, by filling out our contact request form. From there, we can start the process of crypto asset recovery, which will help you retrieve your stolen crypto. We will assign someone to your case who will work with you throughout this challenging process and try every possible method to get your money back.

What is Crypto Asset Recovery?

Crypto asset recovery is a specialized field that, as the name suggests, recovers stolen digital currencies with the use of cutting-edge blockchain technology. It involves tracing, identifying, and ultimately retrieving digital assets that have been lost or stolen due to theft, fraud, scams, or other malicious activities.

The Role of Blockchain Technology

Blockchain technology is a bit of a double-edged sword when it comes to recovering assets because of its nature. The good news is that transactions are transparent, which helps us track them. The tricky part is that users can be anonymous on the blockchain, which can complicate the process. But don't worry – our team uses special tools to navigate those issues and find the best way to get your assets back.

Legal Frameworks and Regulations

The legal landscape surrounding crypto asset recovery is always changing but we make sure to stay at the forefront of regulatory developments and only use strategies that are compliant and effective. We work within the existing legal frameworks to pursue every available legal remedy for our clients.

A Tailored Approach

Every digital currency scam is unique, and so is every investigation. That's why we take a personalized approach to every investigation and tailor each Investigation Report and Action plan to the specific case and client. With these two in hand, you’ll be able to go after your scammers and have the tools and evidence you need to retrieve your money.

How to avoid Digital Currency scams

• Verify websites and research the background of people involved in the Digital Currency. Avoid anything that seems vague or is not clear. Don’t be taken in by flashy and sophisticated web sites. Like people, it’s what’s on the inside that counts.

• Use reputable and regulated exchanges.

• Consults experts in the space or speak with your financial advisor before investing any money in Digital Currencies.

• The temptation to become wealthy overnight in this space is big. Don’t fall victim to false promises and flashy sales pitches.

• When looking for a Digital Currency exchange to buy and sell Digital Currency, make sure it is regulated and licensed. Additionally, make sure that your deposits are insured against theft or loss. Any reputable and legitimate exchange will have insurance as well as store their digital wallets in cold storage (off line).

• Be careful about leaving Digital Currency on any exchange for any long period of time. If you have purchased Digital Currency in order to trade it, then leaving it on an exchange is safe. But if you plan on investing and holding certain Digital Currencies over a period of years, consider purchasing a cold-storage hardware wallet.

Crypto Scam FAQ