In the world of Defi, scams are unfortunately all too common. This article looks at popular Defi scams, how they operate, and how to protect yourself.
We’ll also provide tips on what to do if somebody scammed you and how to report a scammer. Finally, we’ll discuss the implications of DeFi scamming and present examples of successful prosecutions.
What Are DeFi Scams, and How Do They Work?
Decentralized Finance (DeFi) is a term that has gained enormous popularity over the years. DeFi is the shift from centralized financial systems to peer-to-peer finance enabled by decentralized technologies built on the Ethereum blockchain.
DeFi promises a more equal and accessible financial system, but it’s still largely unregulated. Lack of regulation has made DeFi a haven for fraudsters, who have plundered millions from unwary consumers.
We can summarize a typical scam in three steps:
The scammer creates a fake project or impersonates an existing one.
The scammer promotes the fake project or impersonates the existing one to generate interest and attract users.
The scammer exits the scam, leaving users with worthless tokens or no access to their funds.
The Most Common Types of DeFi Scams
There are many types of scams in the DeFi sector, but some are more common than others. Let us look into a few of this industry’s most frequent criminal schemes.
Phishing scams
DeFi is not immune to phishing scams. Due to the intricacy of several DeFi protocols, fraudsters have managed to successful target newcomers.
The most common type of phishing scam in the DeFi space is impersonation. This is when a scammer creates a fake website or social media account that looks identical to a legitimate one.
They will then use this fake account to try and trick users into sending them money or personal information. Another common type of DeFi scam is the Ponzi scheme. Instead of investing the money, the fraudster pays out previous investors.
This scam is widespread in the DeFi space, as there are often high returns from investing in new protocols.
Scams Involving Fake or Stolen Identities
One of the most common scams in the Defi space is identity theft. Someone uses your personal information to register a new account or access an existing one.
They may also use your information to apply for credit cards or loans or to make purchases in your name.
Another way that identity theft can occur is when someone steals your private key or recovery phrase. This gives them access to your accounts and allows them to make changes or send funds without your permission.
Pump and Dump Schemes
If you are not new to the field of financial investments, then you must have probably heard about pump-and-dump schemes.
A group conspires to acquire a cryptocurrency at the same moment to drive up its price. Afterward, it sells it when at the peak price after promising a group of traders that this would not happen.
Pumpers make a profit, whereas dumpers lose. Sadly, it’s as simple as that. Pump and dump schemes are not new and have been around for quite some time. They are so common that the U.S. Securities and Exchange Commission has issued an investor alert about them.
Forgery and Counterfeiting of Digital Assets
Unfortunately, not every project in the DeFi world is legitimate and original. Forgery and counterfeiting are rampant, with scammers selling digital assets that don’t exist or aim to look like something else.
This scam generally happens when someone creates a website or social media account that looks identical to a legitimate project. However, the page has slight changes that allow the scammer to redirect funds to their wallet.
For example, a scam on Twitter happened when someone created a fake version of the popular Defi project Uniswap. The account looked identical to the official one, except that it had one letter changed in the URL.
This small change allowed the scammer to siphon over $150,000 worth of Ether (ETH) from unsuspecting users.
Fraudulent Activities Associated with Initial Coin Offerings (ICOs)
Last but not least, ICOs tend to have an association with fraudulent activities. In an ICO, a company offers digital tokens for investors’ fiat currency or cryptocurrency. However, many ICOs are scams, with companies using the funds raised to enrich themselves instead of developing the project.
A severe fraud associated with ICOs is when the team behind the project absconds with the funds. This type of fraud is, technically, an “exit scam.”
In an exit scam, the team often creates a fake project website and whitepaper, promising huge returns to investors. They will then raise money from unsuspecting investors and make off the cash, leaving investors high and dry.
How to Protect Yourself from DeFi Scams
At this point, you will probably be wondering how you can protect yourself from falling into one of these scams. Below are a few tips.
Do your research: This is the most important thing you can do. When you are looking at a project, make sure to read up on it as much as possible. Look at the team’s backgrounds and the project’s roadmap, and try to find as much information as possible.
Don’t invest more than you can afford to lose: This general rule applies to all investments, but it is essential in the DeFi space. These projects are still very new, and there is a lot of uncertainty surrounding them. As such, you should only invest an amount you are comfortable losing.
Beware of social media scams: Social media is a great way to stay up-to-date on all the latest news in the crypto world. However, it is also an excellent way for scammers to reach many people. Be careful about the links you click on and the information you trust.
Look for projects with KYC and audit certifications: If a project has undergone a KYC (know-your-customer) or audit process, it passed a vetting procedure. This adds an extra security layer and gives you peace of mind. SolidProof, PeckShield, Hacken, and Solidity Finance are popular companies taking care of this aspect.
What to Do If Somebody Scammed You
If you think someone scammed you, there are a few things you can do:
First, try to resolve the issue with the person or company you believe scammed you. This may be difficult, but it’s always worth a shot.
Contact your local consumer protection agency if you can’t resolve the issue.
You can also file a complaint with the Federal Trade Commission (FTC) or the Better Business Bureau (BBB).
Finally, you can contact a lawyer to discuss your legal options.
How to Report a DeFi Scam
If you think you’ve been the victim of a DeFi scam, consider taking a few actions to report the criminals.
First, report it to the project team or protocol developers if possible. They may help you recover your lost funds or take action to prevent others from being scammed in the future.
You can also report the scam to a crypto exchange or wallet provider. Obviously, this is applicable if you used any of these channels to access the DeFi project. Many of them have fraud departments that can help you get your money back or prevent future scams.
Finally, you can report the scam to law enforcement. This is often a long shot, but it’s worth doing if you’ve lost a significant amount of money.
The Consequences of DeFi Scamming
Besides losing your money, scamming in the DeFi sector has several adverse effects on the industry. For instance, it undermines the trust in decentralized finance protocols and gives scammers free marketing.
When a user falls into a scam, it’s not only the investor who loses money. The whole DeFi industry is negatively affected by it.
Scammed users will likely be more cautious in the future, leading to a decrease in trust in decentralized finance protocols. Using popular DeFi protocols and services, they can reach a larger audience and scam more people. In addition, it gives scammers free marketing.
Examples of Successful DeFi Scam Prosecutions
In recent years, there have been several successful DeFi scam prosecutions. Here are some notable examples:
In 2019, the US Securities and Exchange Commission (SEC) charged a company called EtherDelta with operating an unregistered securities exchange. The Ethereum blockchain-based decentralized exchange EtherDelta enables users to swap ETH and ERC20 tokens.
The SEC alleged that EtherDelta’s founder had illegally profited from the exchange by operating it as an unregistered broker-dealer. Coburn agreed to pay $300,000 in penalties and disgorge nearly $13 million in ill-gotten gains.
In 2020, the CFTC accused My Big Coin Pay, Inc. of running a fraudulent virtual currency operation.
My Big Coin Pay promised investors they could use virtual currency to buy and sell goods and services. However, the CFTC alleged that the company used investor funds to pay for personal expenses, including travel and luxury goods.
The CFTC ordered My Big Coin Pay to pay $6 million and disgorge nearly $360,000 in ill-gotten gains.
These are just a few examples of the many successful DeFi scam prosecutions that have taken place in recent years. These cases show that law enforcement is taking action against DeFi scams. If you have been a victim of a DeFi scam, you should contact a lawyer to discuss your legal options.
The Importance of Verifying Senders and Receivers Before Transferring Funds
One last thing you should consider before transferring funds is verifying both the sender’s and receiver’s addresses. Too many people have fallen victim to scams because they didn’t confirm the address before sending funds.
If you’re not sure how to verify an address, here are a few tips:
Check if the address is valid on Ethereum’s leading network. You can do this by pasting the address into a block explorer like EtherScan.
Make sure the address has a balance. If it doesn’t, that could be a sign that it’s not a valid address.
If you’re sending funds to an exchange, check if the exchange has a page on EtherScan. If it does, compare the addresses to make sure they match.
These are just a few of the many ways you can verify an address. By taking these extra steps, you can help protect yourself from scams.
Bottom Line – Protecting Yourself from DeFi Scams Takes Education and Awareness
The best way to protect yourself from DeFi scams is to educate yourself and stay aware of the latest scams. Understanding how these scams work can help protect yourself and your hard-earned money.
Contact a lawyer to discuss your options if you think you may have been a victim of a DeFi scam. There were case
In an electrifying move in an otherwise quiet crypto market, Limoverse successfully completed its much-anticipated Token Burn Event!
The buzz surrounding this event is palpable, and for good reason. It all starts with Limoverse’s unwavering commitment to transparency and its thriving community. Limoverse places its community at the core of its mission, emphasizing transparency, empowerment, and token appreciation for its dedicated users and token holders.
But what exactly is a token burn, and why is it generating such excitement? The answers to these questions are pivotal to understanding the magnitude of this event. Token burns are akin to enchantments in the realm of cryptocurrency. When tokens are subjected to a burn, they are permanently removed from circulation. This action not only diminishes the overall token supply but also heightens its scarcity, elevating the value of each remaining token.
Limoverse is taking token burns to the next level by introducing a pioneering algorithm that links token burns to real-world achievements. For every kilometer run and every calorie burned within the Limoverse app, an equivalent quantity of Limoverse tokens will be incinerated. Yes, you read that correctly! As users stay active and embrace a healthier lifestyle, the token supply shrinks, thereby augmenting the value of Limoverse tokens. This innovative approach ensures that your journey to improved health and fitness also translates into the growth of your investment. A true win-win!
$LIMO Tokens have a total supply of 10 Billion tokens and the burn event saw 86,494,575 LIMO tokens being burnt and taken out of supply.
Limoverse’s commitment extends even further. “We are delighted to declare that all unredeemed rewards from our HealthFi Rewards Pool have also been subjected to a burn. This strategic move firmly underscores our dedication to forging a sustainable token economy, guaranteeing that each Limoverse token serves its utmost purpose” says Sajeev Nair, founder and chairman of Limoverse.
Talking about what the future holds for Limoverse, he further added. “Shortly, we are set to launch our most awaited projects: ModiFi and CreatFi, which will solidify our position as the most comprehensive health and wellness ecosystem in the web3 world. ModiFi is designed to empower users to flourish in all dimensions of wellness, from physical and mental health to spiritual well-being. The core focus lies in uniting top-tier wellness practitioners with advanced health tracking and AI capabilities, enabling users to take charge of their holistic wellness journey like never before.
Through self-paced courses and personal coaching, CreatFi will offer a gateway to personal growth and holistic well-being, cementing Limoverse’s reputation as a leader in the Health and Wellness space.
About Limoverse
With a vision to become the largest digital health economy in the world, Limoverse’s LIMO tokens are currently trading on Poloniex, Bitmart, and Pancakeswap exchanges. As the token expands its presence, Limoverse continues to break new ground in the health and wellness industry, leveraging Web 3 technology to empower individuals and communities alike.
Currently, the Limoverse ecosystem provides users with the option of earning rewards when they walk, jog or run and also when they burn calories thus keeping them motivated and incentivized to stay healthy through the HealthFi program.
Game NFTs and special NFTs will be available through English Auction on Drops
NFT auctions for new games Melting Earth, Ballies and Yield KingZ, will be held sequentially until Thursday, October 12th
Leading South Korean game developer Wemade today launched the new Drops NFT auction service on its WEMIX PLAY global blockchain gaming platform.
Drops will auction off game NFTs and special NFTs minted by various games available on WEMIX PLAY. Players can use WEMIX$ to participate in the auctions which uses the same English auction method as the WEMIX3.0-based DAO & NFT platform NILE (the highest bid is determined as the final winning price).
To commemorate the launch of Drops, NFT auctions for three new games – Melting Earth, Ballies and Yield KingZ – will be held sequentially until Thursday, October 12th.
Melting Earth is a Metaverse real estate game to restore polluted earth and become the owner of new land; Ballies is an original strategy card game that combines basketball and fantasy elements into a new experience; and Yield KingZ is a Social Casino Game-Fi leveraging benefits of WEB 3.0 based on blockchain.
WEMIX PLAY is the top global blockchain gaming platform with more than 9 million cumulative users. It offers everything from card, puzzle, simulation and strategy games; to first-person shooters, battle royale, multiplayer online battle arena (MOBA), and massively multiplayer online role-playing games (MMORPG); to casual, social networking (SNG) and sports games.
A renowned industry leader in game development with over 20 years of experience, Korea-based WEMADE is leading a once-in-a-generation shift as the gaming industry pivots to blockchain technology. Through its WEMIX subsidiary, WEMADE aims to accelerate the mass adoption of blockchain technology by building an experience-based, platform-driven, and service-oriented mega-ecosystem to offer a wide spectrum of intuitive, convenient, and easy-to-use Web3 services. Visit www.wemix.com/communication for more information.
Chooky, the pioneering cryptocurrency platform, is thrilled to announce a groundbreaking partnership as the Official Racing Sponsor of the Meadowlands Sports Complex. This historic collaboration cements Chooky’s position as the very first cryptocurrency to sponsor this iconic sports and entertainment venue, ushering in a new era of crypto adoption and engagement.
Meadowlands Sports Complex: Nestled in East Rutherford, Bergen County, New Jersey, the Meadowlands Sports Complex is a renowned sports and entertainment destination, overseen by the New Jersey Sports and Exposition Authority (NJSEA). The expansive complex encompasses several world-class facilities, including:
MetLife Stadium: The hallowed ground of the New York Giants and New York Jets of the National Football League (NFL).
Meadowlands Racetrack: A prestigious harness racing circuit renowned for hosting the annual Hambletonian Stakes.
Quest Diagnostics Training Center: The dedicated practice facility for the New York Giants.
American Dream: An innovative retail and entertainment destination, housing the Metropolitan Riveters of the Premier Hockey Federation (PHF).
Meadowlands Arena: A storied venue, once home to the New Jersey Devils of the National Hockey League (NHL), Seton Hall University’s men’s basketball team, and the now-Brooklyn Nets of the National Basketball Association (NBA).
Additionally, the Meadowlands Sports Complex proudly houses the largest sportsbook in the world – FanDuel Sports.
Chooky’s status as the Official Racing Sponsor of the Meadowlands Sports Complex marks a significant milestone in the world of sports sponsorship and cryptocurrency. As part of this historic partnership, Chooky will be prominently featured in commercials during the complex’s live stream, which boasts a daily viewership of millions of users. This presents a unique opportunity to connect with sports enthusiasts and crypto advocates alike. The first commercial of Chooky is set to air on September 30.
But that’s not all. Chooky’s presence will be felt even more tangibly as a full-page advertisement graces all racing forms and Meadowlands media. This means that every visitor to the Meadowlands, whether drawn by the allure of horse racing or other electrifying entertainment, will be greeted by the captivating $CHOO ad. It’s an invitation to explore the world of Chooky, offering an enticing way to invest and be part of this vibrant cryptocurrency community.
In celebration of this monumental partnership, the Meadowlands Racetrack will host the “Chooky Inu – $CHOO” race on September 30, 2023. Following the race, an official presentation honoring Chooky will be held in the winner’s circle, marking the beginning of an exciting journey together.
Papi, CEO of Chooky, enthusiastically remarked, “This sponsorship of the Meadowlands Sports Complex is groundbreaking for the simple fact that we are the first and only crypto sponsor of theirs. We believe in the potential of cryptocurrencies to reshape industries, and this partnership exemplifies our commitment to innovation and community engagement.”
This sponsorship marks the beginning of Chooky’s comprehensive web2 marketing plan, with more exciting initiatives and engagement opportunities on the horizon. Stay tuned as Chooky’s journey with the Meadowlands Sports Complex unfolds, promising a fusion of sports, entertainment, and cryptocurrency like never before.