Off-chain Scams

Customer empowerment through education and awareness

Off-chain scams in the cryptocurrency industry refer to fraudulent activities that take place outside of the blockchain network. These scams are becoming increasingly prevalent as this industry grows, and they can take many forms, such as Ponzi schemes - also known as rug pulls, pyramid schemes, and phishing scams. The decentralised and anonymous nature of blockchain technology can make it difficult to detect and prevent off-chain scams.

One of the most common off-chain scams in the blockchain industry is Ponzi schemes, which promise high returns to investors but use the funds of new investors to pay the returns of older investors and the founding team. These schemes were particularly prevalent in the initial coin offering (ICO) market era, where investors were often lured in by the promise of high returns from new projects. Ponzi schemes can be difficult to detect, as they often use sophisticated marketing tactics and create a sense of social proof to lure in new investors. What happens when the rug is pulled is that all the old holders of a specific asset dump all their holdings onto the market, marking a large profit and scamming legit, good-will retail customers who bought into their scheme. Because of lack of transparency of these type of projects and the number of projects being launched every day, it is extremely difficult to catch these scammers with only automated software.

Another form of off-chain scam is phishing, which is a type of scam that aims to steal personal information and financial details of the users. Phishing scams can take the form of fake websites - also called front-ends, emails, or social media accounts that impersonate legitimate companies or projects. These scams can be difficult to detect by the not-so experienced eye, as they often use very similar branding and logos as the legitimate companies they are impersonating, but rather doable with complex automated scanning tools. Therefore, it's important for investors and users to exercise caution and to conduct thorough research and due diligence before investing in any projects or platforms. Furthermore, It's important to be aware of the red flags of off-chain scams, such as unsolicited contact, high returns on investment, and unrealistic promises. All these factors and key points of due dilligence make it almost impossible for a single customer to protect against all these practices, leaving them vulnerable.