[ad_1]
On May 22, a crypto-finance project called DeFi100 posted a message on their website that we scammed you guys and there’s nothing you can do with it. HA HA. All of you Moon Bois have been ripped off and there’s nothing you can do about it.
Screenshots of the post immediately went viral on crypto Twitter (still anarchic, easily laughable). A popular anonymous crypto-tracking Twitter account called Mr. Whale estimated that DeFi100 ran away with $ 32 million. Cryptocurrency media, as well as Yahoo Finance, broadcast the issue. The owners of the project denied any foul play, and it soon became clear that the post was a website hack rather than a serious warning, but by then it was too late. Panic had set in and the price of the underlying coin was plummeting.
We never stole funds, a project representative told The Verge. DeFi100 was a very small project, and we didn’t own any investor funds, so there is no question of scamming people or running away with their funds.
There is little recourse when crypto investments turn out to be scams
DeFi100’s problems are only a small part of the picture, but they are a reminder of the dangers of the ongoing crypto boom. Despite billions of dollars poured into space in recent months, there is still little recourse when investments turn out to be scams. More importantly, the radical decentralization of the blockchain means that there is simply no way to get your money back and little assurance that an unproven vendor will keep their promises once the deal is done. The result is a new gold rush in crypto scams, as speculators seek ever more obscure opportunities and riskier bets.
The DeFi100 projects website is now back online, but rumors persist about what really happened. Certik, a popular blockchain security ranking, currently lists DeFi100 as a mat, which is a term for a scam where the founders of a project raise investment funds and execute. (The owners of the project say a raffle would be impossible because they have never held any investor funds.) This is just one of the scams that today’s crypto holders need to watch out for. , as well as sketchy altcoins, Discord pump-and-dumps, Elon Musk impersonators, and more malicious forms of cybercrime.
According to Maren Altman, a TikTok influencer with over a million subscribers who creates cryptocurrency and astrology videos, there are three types of risks that crypto holders should beware of: bad investments, the projects that fall apart and the outright scams.
Subtitles like r / cryptocurrency are inundated with scam accusations
The first and most common type of risk is simple bad investments in dark rooms. Outside of major players like Bitcoin and Ethereum, there are thousands of small coins built on blockchain technology, promising huge rewards if the coin becomes known. Subreddits like r / cryptocurrency are rife with scam accusations.
I mean, I’m in a handful of them myself, where it’s just the investment, it was a promise, the development hasn’t happened, and I’m still waiting, a- she said.
Trying to research obscure altcoins can be confusing for inexperienced traders. Links to cryptocurrency discord servers often appear on Twitter, promising easy pumping and emptying of a smaller crypto coin. Or more confusingly, Twitter bots will accuse non-existent Discord servers of pumping and dumping, hoping to increase the value of a separate coin. But while they promise easy money, the reality is less enticing.
Another risk is the often innocent but unfortunate mismanagement of funds. In a bullish crypto market, everyone thinks they have a revolutionary idea involving cryptocurrency. And, obviously, a lot of them don’t succeed.
Left unclear, mistakes in the contract or just a weak link in the development circle, Altman explained, leading to mismanagement of money and people not seeing their investment go as planned.
The DAO project is an extremely well-known example. It was launched in the spring of 2016 with great fanfare, only to disappear completely in the fall of the same year. The project was created by the decentralized autonomous organization and was an attempt to create a venture capital fund on the Ethereum blockchain. Within a month or two, a hacker discovered a vulnerability in the token code and fled with $ 50 million. Traders started to mass sell DAO tokens and the price never recovered.
Sometimes this chaos can end in outright fraud. According to the Federal Trade Commission, crypto-based financial scams are at an all time high thanks to the growing interest in cryptocurrency. And the line between a well-intentioned mistake and a crypto Ponzi scheme is blurred. Just ask investors for OneCoin or PayCoin.
In 2019, PayCoin founder Homero Joshua Garza was sentenced to 21 months in prison
OneCoin was launched in the mid-2010s and was touted as an educational crypto trading service. It turns out that the OneCoin tokens bought by investors weren’t actually on the blockchain. It was accused of being a Ponzi scheme and its founders fled with nearly $ 4 billion. It has been called one of the biggest financial scams in history. One of its founders, Ruja Ignatova, is still missing.
In 2019, PayCoin founder Homero Joshua Garza was sentenced to 21 months in prison and restitution after he created his own cryptocurrency and offered it to investors with the assurance that he had secured a reserve. of capital of $ 100 million. There was no reserve and the whole project ended up losing $ 9 million.
But even with the dramatic drop in value of May 2021 for big coins like Bitcoin and Ethereum, cryptocurrency is more popular than ever, and legions of inexperienced traders are learning the hard way what peer financial service really means. to-peer.
Neeraj Agrawal, director of communications for Coin Center, one of the largest cryptocurrency advocacy groups in the United States, told The Verge that wildly speculative coins (known colloquially as shitcoins) are now a part. integral to the cryptocurrency space.
Insane speculative coins are not going to go away, Agrawal says. It’s just a part of the world now. And we still have somehow to show that real good projects are worth their existence, that there is real value there.
It’s especially difficult when crypto celebrities like Elon Musk spark interest towards the wackier end of the crypto space. Musk recently fueled the huge spike of interest around Dogecoin, a failed crypto coin coined as a joke named after the famous Shiba Inu meme. Musks’ tweets have also been blamed for the massive market downturn this month. It’s still unclear what effect Musk has in the market, but his recent branding as a main character in crypto has led to a litany of Musk-themed scams. According to the FTC, people pretending to be Musk have managed to defraud at least $ 2 million from traders this year.
A market really only requires two things … a seller and a buyer.
Perhaps this is the biggest risk for crypto users, your own stupidity, joked Meltem Demirors, chief strategy officer at digital asset investment firm CoinShares. I think people are not used to taking responsibility for their financial life.
In fact, a family member and a close friend asked me this month about an obscure cryptocurrency called Dogelon Mars. It is currently worth $ 0.00000016, but the two people close to me were considering buying a bunch of them as they mistakenly believed that due to the name and its downright confusing description it was a coin thrown by Musk himself.
Demirors told The Verge that Dogelon Mars is actually one of his favorite coins. We have to remember, don’t we, that the gist of it all is unlicensed financial innovation, she says. And a market really only requires two things. It takes a seller and a buyer.
She said that was the main explanation behind the recent NFT explosion. People had cryptocurrencies on hand and wanted to see what they could spend them on. Turns out what they wanted to buy was surreal internet art for millions of dollars.
I always think it’s really funny when people focus on crypto and financial innovation without permission, but the minute they lose money they become like the most stateful people imaginable, Demirors said. . You really can’t have both. Like you bought that shitcoin. Now you need to make your bed and lie down in it.
[ad_2]
picture credit