How to recognise and avoid cryptocurrency scams in 2021

Dubai - Investors who lack experience and knowledge about new asset class an easy prey for bad actors

The Dubai Electronic Security Centre officially confirmed on Thursday night that the digital currency known as “Dubai Coin” is not authorised by any administrative body. The site trying to promote the coin is an unlicenced entity aimed at phishing user’s data.

Scammers worldwide are attracted to cryptocurrencies as it is easier for unscrupulous persons to exit with investor’s money due to the immutable and irreversible nature of blockchain-based transactions, which makes it challenging to recover investor’s funds. The cryptocurrency market crossing total capitalisation of $2.2 trillion has further increased the interest among investors for this new class of asset.

As investors are prepared to invest their money into highly speculative assets, the scammer’s appetite for marketing and promoting fraudulent tokens or cryptocurrencies to investors who lack experience and knowledge about this new asset class has increased significantly, also exposing gaps in investor education regarding digital assets.

Perform due diligence as an investor: Scammers often exploit fraudulent investment schemes promising high returns on investment, such as promising investors to double or triple their investments to dupe unsuspecting investors. Therefore, investors should always perform due diligence and check the website for any red flags, read the whitepaper and ask questions regarding the claims being made by the team members. Further, the investor should confirm the company’s legal presence like the registration, office address and people behind the company who are marketing such investments.

In the case of investments schemes like DubaiCoin — where the name of a city, organisation, royal family or nation is being used for marketing the coin to investors — it is critical to cross-check government websites and sources and confirm with regulatory authorities to determine whether the investment scheme or blockchain is legitimate.

Further, it is crucial to cross-check the news sources and confirm their authenticity as often such fraudulent investment schemes are advertised in misleading news pieces that look to be legitimate media outlets.

Impersonation, misrepresentation and social engineering through fake profiles: This next fraud of leveraging social engineering tactics may take many different formats, but the concept is the same: It requires the creation of fake accounts that are tailored to seem like natural persons and provide authenticity and authority to the project.

The writer is founder of Karm Legal Consultants. Views expressed are her own and do not reflect the newspaper’s policy.