How To Spot Copycat Cryptocurrencies Used By Scammers

Lost money to a crypto or trading scam? Read this first:

If your losses exceed £3,000 (in the UK) or $10,000 worldwide The Crypto Adviser can offer advice on recovering your funds. 

>> GET IN TOUCH

The cryptosphere can be a daunting place if you’re not familiar with how everything works and what’s a legitimate place to invest or not.

That’s why learning some of the tricks that scammers use to part investors from their funds is vital to staying safe when dipping your toes into the burgeoning asset class.

Crypto scammers employ a wide range of techniques to convince victims to both part with their money and prolong the opportunity they have to make more profit.

Some of the common tactics they use are:

• Emotional blackmail, especially in the case of romance scams.
• Allowing victims to withdraw funds at the start to build confidence.
• Fake crypto exchanges, platforms and DApps designed to mimic the real thing.
• Rip-off logos and platform names to convince investors they’re engaged with a genuine company.
• Calls from ‘investment managers’ giving assurances that the victim’s funds are safe.
• Copycat cryptocurrencies designed to look like another coin deposited in a victim’s crypto wallet.

It’s the latter that I’m going to examine here as it’s an aspect of crypto scams that clients often struggle to understand.

How do scammers create copycat cryptocurrencies?

Creating a cryptocurrency is surprisingly easy if you have a bit of technical know-how and some spare cash.

In fact, there’s nothing stopping anyone from creating their own crypto, especially as there’s a plethora of free online step-by-step guides explaining exactly how to do it.

As a result, scammers are increasingly using copycat cryptocurrencies designed to look like a genuine coin to con victims into thinking their funds are safe.

This can be a valuable tool for the scammers as it can prolong a scam and encourage victims to invest further funds by giving them a false sense of security.

How do scam copycat cryptocurrencies work?

During a scam victims are often directed to set up a crypto wallet, sometimes under the guidance of a scammer who’s logged onto their computer using popular applications such as AnyDesk.

This allows the scammer to have complete control over the wallet as they’ll have seen the password, together with the recovery seed phrase given at set up.

Not only can the scammer now drain the wallet of any crypto it holds but they can also deposit new coins to the wallet by adding what’s called a contract address.

This is a unique identifier given to each and every cryptocurrency when its smart contract is deployed. This facilitates, among other things, managing the balance of tokens people hold.

Once the scammer as created their own cryptocurrencies they can add a contract address belong to a crypto they’ve created to the victim’s wallet and deposit valueless coins designed to look like a genuine token.

Copycat Ethereum and Tether are often used

Two coins which are commonly ‘spoofed’ are Ethereum and USDT (Tether) as they’re frequently used during crypto scams.

The scammer’s copycat token will come with a logo that appears similar to the actual logo it claims to be, but there are usually easy to spot differences if you’re familiar with the genuine coins.

However, the scammers rely on people’s lack of knowledge about crypto to convince them that their wallet holds real tokens proving that their funds are safe and accessible.

The problem is that the token the scammer has now deposited is worthless, something that’s easily demonstrated by checking the individual balance of the token and the overall balance of the wallet, which will show as zero.

The scammers will tell the victim that their money is safe and secure in their wallet, which unfortunately many people will believe, before continuing to extract further money from them.

This may be for:

• More investment in the scheme.
• Various fake fees to release the funds, such as ‘taxes’ or ‘commissions’.
• To realise a bonus tier which will increase their profits.

However, any further money sent by the victim will be lost along with the original deposit amount.

Final word

The use of copycat cryptocurrencies demonstrates a level of sophistication in the scammers’ arsenal that could easily fool would-be crypto investors.

It further shows the need to exercise extreme caution when engaging in any crypto investment, especially if it’s one that’s outside the mainstream ecosphere.

This is why I recommend beginners stick to the large, well-known exchanges rather than attempt to get rich quick through an investment they’ve been told about by a new internet ‘friend’ or seen on social media.

An alarming number of people are losing huge sums of money to the scammers and it’s imperative that people stop and think about the nature of an investment and how realistic the profits are before proceeding.

You should always do your own due diligence, search online for reviews and be extremely wary of unfeasibly high returns when looking at any investment, especially in the largely unregulated world of crypto.

Related post: Crypto scam help and resources