How to Spot Pyramid Scams

What are pyramid scams?

Someone selling a pyramid scam said they were a “cryptocurrency investment company” and promised big returns in return for a small initial investment. The scammers asked for payment through Bitcoin and had poor technical skills, so the victims suspected the entire venture was a scam. The imposters often used similar tactics as other P2P scams, like email messages with the same sloppy formatting.

Pyramid scams are most common in Australia and New Zealand, which are home to numerous cryptocurrency exchange and trading platforms.

p2p exchanges

A p2p exchange has a direct connection to each other trader, so if you’re buying crypto from someone who sells it to someone else, that person might have the same account.

The dangers of pyramid scams

Cryptocurrencies can be great for those who are prone to impulsive spending. By using blockchain technology, it’s possible to transfer money without any intermediary or third parties. And with the value of Bitcoin skyrocketing, it’s also easier to participate than ever. But if you do decide to spend cryptocurrency, avoid pyramid scams.

Most cryptocurrency scams involve products that promise huge returns or steep discounts. If you have limited funds, you may be tempted to participate in these schemes, but remember: scams can only keep you out of your money for so long. Even when the true motives behind such companies are revealed, it can take months to return your investments.

How to spot a pyramid scam

While many of the scams are pretty sophisticated, there are a few telltale signs that the person you’re meeting with may be a fraudster.

1. There’s never been any product or service mentioned. No one talks about getting rich or gaining wealth. Many startup founders have a vision of how their company could change the world, but they can’t offer any proof it will succeed. Without any real actionable steps in your meeting, don’t waste time on someone who’s not willing to go further with you.

2. There’s never been any research done on the product you’re told about. Investors and founders often reveal the broad outlines of a new business model to you, based on their experience in the industry. But they aren’t revealing data and research into their idea.

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