the insider

Financial Pyramids: How Not To Fall Victim To Scam

The surge in fraud and pyramid schemes in 2021 has to do, oddly enough, with the growth of the cryptocurrency market and people wanting to get sky-high interest rates. A whole lot of people want to take part in this race for riches and get their piece of the pie. That is why everything came together in 2021: the existing trend paired with hype from the media and influencers heating up the market. People want to be a part of the trend and don’t think about reality.

At the end of last year, the whole media environment was very tense, and many negative events transpired. Remember the Squid Game token? Interest and trust in the Squid Game token have been fueled by publications in major media such as the BBC and CNBC. On November 1, the Squid coin grew 77 times to $2,865, and then its value decreased below one dollar. Users lost more than $11 million, and the project was closed. For many, this situation came as a shock. People are always very interested in such offbeat, joke projects. This makes them easy targets for scammers.

When it comes to less-common scamming methods, there are quite a few fascinating examples. One of them is government grant scams. This scheme is especially common in the United States but sometimes occurs in European countries as well. Government grant scammers try to get your money by guaranteeing you a grant for expenses such as studying in a college or house repair. They request information about your current account. Scammers usually say that they will deposit the money into your account or withdraw a one-time processing fee. In reality, government grants are rarely assigned to private individuals. They are usually sent to state and local authorities, universities and other organizations. The money is allocated to pay for research and projects that will benefit society. These cases are rare, but they do happen. Scammers keep coming up with new, original schemes for stealing funds, and that’s the danger: people don’t realize that they’re dealing with con artists, so they trust them.

The core of a fraudulent scheme is always the same: “bring money to get big profits.” People are always chasing easy money, and scammers have been taking advantage of that for ages. Last year’s most vivid example was the Cashbery project, a pyramid scheme that promised people huge returns, up to 6000% annually. Russians lost 1–3 billion rubles on it. Cashbery turned out to be one of the biggest pyramid schemes discovered by the Bank of Russia in the last few years.

What other tricks do scammers use? Beyond dangerous liaisons and the promises of astronomical profits, don’t forget about traditional phishing sites. It is also worth mentioning the frequently-seen ads on social media, posing as exchanges, brokers, or banks and offering victims easy money. For example, scammers pretending to be Binance offered users the opportunity to open a card, even though the exchange itself had nothing to do with them.

It is also important to scrutinize the rhetoric around a company or project. It’s worth noting whether the information is made available about the team or the project itself, what media outlets write about them and in what light, and what the community says about the project on social media. You have to also thoroughly research the team. If the project name-drops famous politicians, musicians, or blockchain gurus, consider whether the company could really be so large-scale, or if it looks more like a scam.

Furthermore, excessively complex terminology and phrasing, vague wordings seeking to attract funds, and phrases like “bring a friend to get more interest” also point to a Ponzi or pyramid scheme.