5 Rules To Identify And Deal With Cryptocurrency Scams So You Don’t End Up Like Steve.
In this article, I want to tell you the story of Steve (name changed for obvious reasons) and how he lost his savings in a Crypto scam. It’s a tragic story. Not only was he ruined financially but there were also serious consequences for his family.
Steve pretty much fell into every trap that Crypto has to offer for inexperienced and careless investors. Everybody knows that scammers are trash. But Steve has also to blame himself for a lot of the things that happened. Read on to learn about how to spot cryptocurrency scams and which mistakes you must avoid.
Why Steve was the Perfect Crypto Scam Victim
Bear with me for a moment. Because to understand why Steve got scammed so badly you need to understand where he came from.
I learned to know Steve because his and my children went to the same school. We weren’t very close but we did occasionally hang out. In many ways, Steve was a typical 20-something-years old. He was an easy-going, friendly guy who liked to meet with friends. He also loved playing on his Xbox with FIFA being one of his favorite games.
However, Steve had a few problems that made him the perfect victim for a cryptocurrency scam.
First, he had no steady job. He mostly worked part-time and he never seemed to be able to hold onto a position for very long. Without a steady stream of income, money was often tight. To make up for this, he lived frugally.
Small apartment, no car, no expensive holidays. This way (and with occasional help from relatives), he managed to feed his family and successfully save up the equivalent of a few thousand USD over the course of several years. Still, the issue of money was almost always on Steve’s mind.
But there was another problem.
Steve had no prior investment experience. We all have to start somewhere. But Steve went from zero to 100 in a matter of a few weeks.
He came into contact with Crypto when he was without a job and had a lot of free time on his hands. At first, he dipped his toes into Bitcoin and a few other large caps.
Until one day he discovered Bitconnect.
Crypto Scam Rule #1: If It’s Too Good To Be True, Then It’s Not True.
In the last months of 2017 Bitconnect was one of the hottest things happening in the space. The concept behind this scam was simple.
The creators of Bitconnect (BCC) promised investors massive returns if they bought their cryptocurrency and invested it on their platform. According to the platform’s operators, these loans would generate returns of 40 percent per month. They also promised daily returns of 0.25 percent on loans worth the equivalent of $10,000 to $ 100,000. All loans were paid in US Dollars but had to be exchanged into the cryptocurrency Bitconnect. It was the same with the returns. Lenders got their interest paid in BCC.
Why did Steve fall into this trap?
For Steve who was hopping from job to job and who was often short on money, this seemed like a dream come true. Putting his savings into this coin would allow him to earn more in less time than with any regular kind of work.
But that was not all.
What poured more gasoline into the fire was that at that time the internet was full of people riding on a wave of UNBRIDLED ENTHUSIASM. Crypto was at the peak of a bull market. Warnings and criticism were mostly ignored. People seemed to make money left and right.
So what could possibly go wrong?
#2. Research A Cryptocurrency Before You Invest In It.
A common mistake made by many new and inexperienced investors in cryptocurrencies is that they have no idea what exactly they are buying. I am saying this as someone who got burnt a few times. I also lost money when I started my Crypto journey. Part of the reason was that I did not take the time to properly research the stuff I bought.
Since then I have gained a lot of experience from researching and investing in over 110 cryptocurrencies. If you want to learn more then check out my article about how to properly research a cryptocurrency:
How To Research Cryptocurrencies? A Step-by-Step Guide
Find crypto gems without having any special skills and prior knowledge
Meanwhile, Steve lacked any kind of financial knowledge or investment skills that would help him spot a potential Crypto scam.
But that was no excuse.
Because with a little bit of time invested and some critical thinking he could have realized that something was off. There were some pretty obvious signs that he was buying into a cryptocurrency scam. For example, on Bitconnect’s website, there was no whitepaper and no substantial information about the team behind the project.
Even for someone with no knowledge about investing this should have raised some red flags.
#3. Never Go All In. Ever.
Whether Steve was unaware or knew about these issues but decided to ignore them, I do not know.
What happened next was that in just a few weeks he put almost all of the money he had saved up into this scam.
This was a big mistake for several reasons:
- As mentioned before, at that time Steve had no job. So there was no stream of income he could fall back on in case he needed money. For such cases, it is vital to always keep a stack of emergency funds.
- Also, he had two children and his wife (who was sick and not working at that time) to take care of. It’s one thing to gamble with your own future. But it’s a totally different thing if your family depends on you.
- Last but not least, it’s also wrong from an investment perspective to bet all your money on one horse. You should always spread out the risk.
This was bad. But for Steve, it looked like things became better every day.
#4: Never Ask Your Family And Friends To Borrow You Money For An Investment.
In December 2017 Bitconnect went parabolic.
It was during this time that I learned that Steve was investing in Crypto. This made me happy as most other people I knew had dismissed blockchain technology and cryptocurrencies as a sham.
I offered him my advice in case he had any questions regarding investment strategies and Crypto in general. But he didn’t take me up on my offer. Maybe he thought he had figured it all out. After all, Bitconnect’s price was soaring to over $400.
With his investment’s worth growing at a double-digit rate every day he must have felt like a boulder had been lifted off his shoulders. But then, wasn’t this the biggest opportunity of his life? Why not make MORE?
Instead of taking out his profit, Steve decided to double down. So he made another bad mistake. He asked some of his relatives for money.
The thing is this.
Conflicts over money destroy families. While everyone likes to pretend that things are different when it comes to family, the truth is that there always will be trouble when you lose your relatives’ money.
The same is true for borrowing money from friends and taking out a loan from a bank to invest it into risky assets. As an inexperienced investor you should also keep your hands off of leveraging. It can work out. But if it doesn’t, you have a big problem.
Crypto Scam Rule #5: Don’t Be Greedy, Know When To Finish.
Bitconnect started to implode in the final days of 2017 as bad news about the project and its creators began to pile up. After reaching an ATH of $458 on the 17th of December it lost almost 50% and crashed down to $230 only to recover and reach a new record price of $471 in about a week’s time.
In the first days of the new year 2018, Bitconnect’s price was very volatile but still managed to hold at a high level. It would have been the perfect time to exit the scam.
However, Steve did not sell.
At that point, he must have been looking at a very nice profit of several $10k. But he became too greedy. Maybe Bitconnect’s flash recovery gave him a false feeling of security. Maybe he believed that if he just kept on hodling he would be able to ride out the storm.
But as more bad news came in, Bitconnect’s price dropped like a stone. In the matter of a few days price fell from over $400 to $20 and then even lower.
Steve was ruined.
It was the holiday season so it didn’t seem unusual that Steve wasn’t available when his friends tried to reach him.
After a few days, though, it became clear that something was off.
He seemed to have dropped off the face of the earth. Some weeks later I learned what had happened because his wife spilled the beans in front of another friend.
Steve was in big trouble.
When Bitconnect crashed, the creators had run off with his investment and the money of thousands of others. Steve had lost the equivalent of $20,000. A big part of the money came from his relatives. That was more than what Steve had made in his last job. His family was furious.
But it wasn’t just that the money was gone.
After realizing that he had been the victim of a cryptocurrency scam, Steve changed. He detached himself from his surroundings and began to spend whole days playing games on his console. He also became quick-tempered and physically threatened his wife.
More problems piled up, as rent for the apartment became due. For some time it looked like Steve and his family would end up on the street. Finally, some people stepped in to cover the most urgent bills. They also successfully forced him to find a job — any kind of job — that would allow him to pay for the most important things.
To this day, Steve has never touched Crypto again.
The 5 rules I listed up in this article are meant as a guide to identify and deal with cryptocurrency scams. They also apply to investment in general.
Crypto is exciting and offers amazing opportunities. But it is important to keep a clear view and minimize risks wherever possible.
Thus, the next time you want to buy a coin do this: Stop for a moment, remember Steve, and take a second to think if what you are planning is really the smartest thing you could do.
It is worth it!
!!!PLEASE BEWARE OF IMPERSONATORS AND SCAM MESSAGES. I WILL NEVER ASK YOU TO SEND ME MONEY OR CONTACT ME BY WHATSAPP!!!