Jump ahead to April 22, 2025 and the cryptocurrency train has left the station. As of August 2022, there are more than 14 million different cryptocurrencies listed globally! New coins are released every single day, all attempting to make a name for themselves in an oversaturated ecosystem. This tsunami of new money creates both challenge and opportunity for private investors. The number of choices is a good thing because you can find the best emerging technologies. It also makes people much more susceptible to scams and fraudulent projects.

FakeBollinger.com is here to help get through that noise and get to the signal. This brief piece will explore the trends encouraging the explosive creation of new cryptocurrencies. It will offer wide-reaching, practical guidance for recognizing credible projects and steering clear of possible scams, underscoring due diligence’s life or death importance in the crypto world. Rohan Prasad, known for his engaging, community-driven stories on crypto events, blends firsthand experience with expert commentary to help you navigate this complex world.

The Allure of Quick Profits

Promises of High Returns

The lure of easy and enormous riches is one of the primary motivators for developing and promoting new cryptocurrencies. There is no shortage of coins that promise an exponential increase. They lure investors by promising to help them take a small stake and make them rich. The crypto market is currently a frenzy of speculation and excitement. News about early investors cashing in on millions from cryptocurrencies like Bitcoin and Ethereum are everywhere!

It’s important to understand that these stories are the outlier, not the expectation. Over 95% of new cryptocurrencies fail to return anything to investors. If not, many of them are outright scams designed to fleece unsuspecting investors. Rohan has seen how these promises can cloud judgment. They frequently push practitioners to rush to fund projects before conducting the appropriate studies.

The Appeal of Cryptocurrency

Among the features that make cryptocurrencies attractive are decentralization, transparency, and the potential for increased financial innovation. Using decentralization to cut out intermediaries such as banks from financial transactions allows greater control of assets and access to funds. Additionally, transparency—made possible through blockchain technology—allows anyone to see transaction data, promoting a greater sense of trust and accountability.

Furthermore, cryptocurrencies have opened the door to new financial applications like decentralized finance (DeFi), which aims to replicate traditional financial services like lending and borrowing in a decentralized manner. Those same characteristics make it ripe for scam artists to take advantage of. Because cryptocurrencies allow anonymity, it makes it difficult to apprehend those committing fraud. At the same time, depending on the intricacies of each DeFi protocol, bad actors can easily obfuscate their motives.

Understanding Ponzi Schemes

Definition and Characteristics

A Ponzi scheme is a fraudulent investment operation where returns are paid to earlier investors using money from new investors, rather than from legitimate business activity. Just like Ponzi schemes, these tax credit schemes rely on a constant influx of new cash to stay afloat. Whatever their differences, they always implode when the new investors dry up.

Ponzi schemes have been around for centuries, with some of the most infamous examples including:

  • Promises of high returns with little or no risk: A Ponzi scheme disguised as a crypto investment fund may claim to offer “10% daily profits” or “instant payouts.”
  • Consistent returns regardless of market conditions: This is a major red flag, as legitimate investments are subject to market fluctuations.
  • Lack of transparency: The operators of the scheme may be evasive about how the money is being invested or may provide vague or misleading information.
  • Pressure to recruit new investors: Ponzi schemes rely on new investors to keep the scheme afloat, so operators may offer incentives for recruiting others.

Historical Examples

Rohan points out how critical it is to know the signs of a Ponzi scheme. Understanding how scams operate is crucial for protecting yourself from frauds in the cryptocurrency landscape. If the investment opportunity looks too good to be true, that’s a good indication that it is!

  • Charles Ponzi: The namesake of the scheme, Charles Ponzi, defrauded thousands of investors in the 1920s by promising high returns on international postal reply coupons.
  • Bernie Madoff: Bernie Madoff ran the largest Ponzi scheme in history, defrauding investors of billions of dollars over several decades.
  • BitConnect: In the crypto world, BitConnect was a notorious Ponzi scheme that promised high returns on its native token. The scheme collapsed in 2018, causing significant losses for investors.

Because behind each investment is an American with hopes and dreams. Everyone invests in crypto to reach financial independence. What’s more, they want to have a secure retirement and build a brighter future for their children and grandchildren just as much. Scammers take advantage of these hopes and dreams, making millions while exploiting people’s desire for a better life.

Personal Stories of Victims

Aspirations and Dreams

Rohan has interviewed hundreds of the 40 million victims of crypto scams, listening to their accounts of lost life savings and broken homes. These stories are a sobering reality check to the downstream impacts and tragedy that occurs from these dishonest operations. Further, they stress the need for public education and awareness to prevent future scams.

The effects of crypto scams can be catastrophic—emotionally and financially. In the process, victims lose their life’s savings, their homes, and their sense of security. The emotional impact can be just as profound, as they come to experience shame, guilt, and depression.

Impact on Lives and Finances

Scams, thefts and hacks are still racking up billions of dollars in lost digital tokens each year. In just 2024 so far, hackers have stolen over $2.2 billion worth of cryptocurrency from exchanges. As Rohan tells it, the toll that these scams take is devastating. They can cause permanent fiscal and psychic harm to people and households.

Along with new and emerging technologies, scammers are always modifying their tactics to stay one step ahead. They use new technologies and platforms to find victims and develop more sophisticated scams. Some of the innovative tactics used by scammers include:

Evolving Strategies of Scammers

Innovative Tactics Used

It is crucial to know the warning signs so you can keep yourself safe from crypto scams. Some of the key red flags to watch out for include:

  • Deepfakes: Nearly 3 deepfake videos per day are encountered by the average American, many of them tied to scams, making it increasingly difficult to distinguish between legitimate and fake investment opportunities. Fraudsters frequently impersonate public figures—from Elon Musk to Donald Trump—to promote fake coins or crypto investments.
  • Social Media Scams: Investment scams often promise you can "make lots of money" with "zero risk," and often start on social media or online dating apps or sites. Scammers create fake profiles and engage with potential victims, building trust before promoting their fraudulent schemes.
  • Pump-and-Dump Schemes: Scammers artificially inflate the price of a low-value cryptocurrency and then sell their holdings for a profit, leaving other investors with significant losses.
  • Phishing Attacks: Scammers use fake emails or websites to trick users into revealing their private keys or other sensitive information.

How to Recognize Red Flags

Knowledge is the best protection against crypto scams. Make sure you’re informed on the strategies and dangers scammers pose to take further steps to keep yourself safe. As always, Rohan recommends that investors do their own due diligence. He cautions them to just be on the lookout for any investment opportunity that seems too good to be true.

  • Unrealistic Promises: Be wary of any investment opportunity that promises guaranteed high returns or claims to be risk-free.
  • Lack of Transparency: Avoid projects that are secretive about their operations or that fail to provide clear and concise information about their technology, team, and business model.
  • Pressure to Invest Quickly: Scammers often try to pressure potential victims into investing quickly, before they have time to do their research.
  • Unsolicited Offers: Be cautious of unsolicited investment offers, especially those that come from unknown sources.
  • Poorly Written Materials: Scammers often use poorly written materials with grammatical errors and spelling mistakes.

One of the best protections against crypto scams is knowledge, and being aware of the risks and tactics used by scammers. Rohan advises investors to always do their own research and to be skeptical of any investment opportunity that seems too good to be true.