The Crypto Scam Reality Report, Edition #2

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It’s clear to anyone with a background in investing that cryptocurrency is a global hysteria where value is driven by crowd emotions, and hyped supply and demand. This makes it an ideal vehicle for crypto scams.

The mass global hysteria has boosted the cryptocurrency market to $US 2.63 trillion, but despite this astronomical amount, no one really can explain what is driving crypto prices, nor is it considered a legitimate investment.

What we do know is that mass hysteria is a human deficiency. It has been around for thousands of years and helped fuel wars, revolutions, riots, and political instability. Mass hysteria moves faster today due to social media, psychological/social stress, and income inequality. Mass hysteria, combined with cryptocurrencies, is also the ideal engine for formenting financial scams.

Combined, these forces offer the very remote hope for uneducated investors to make money, while also enabling criminals new ways to move untraceable money internationally. Here are some recent actual real-world examples.

Australian Scores Big on Crypto, But It Was All Luck

The website, news.com.au, reports that a Perth FIFO miner who lived in his car for a year has made a whopping half a million Australian dollars from investing in cryptocurrency.

The unnamed 40-year-old man was convinced it was a scam and spent another 18 months researching until he was willing to take the plunge and placed his entire savings in cryptocurrency, primarily Bitcoin and Ethereum. Putting all your eggs in one basket is a classic violation of common sense.  The man was making a salary of $85,000 AU annually.

After several years, his investment is worth $465,000. But there is a catch.

“It could easily go to zero or it could double,” the man told news.com.au.

He described his decision to invest in cryptocurrency as “desperate” but that it had ultimately paid off.

“I was saving madly, I was saving for years,” he explained.

“My initial plan was to save up for a house deposit, but I diverted my savings strategy. I thought ‘I will go twofold, [for a] house and crypto’.

“I wanted to change my life so much, I was so desperate.”

“In 2018, he poured $40,000 into bitcoin when a single coin was between US$5,000 and US$12,000. A single bitcoin is now worth US$57,000, at the time of this writing.

“He used a dollar-cost averaging investment strategy, where he put his money into cryptocurrency in dribs and drabs at regular intervals.

“To save money that could go towards his crypto portfolio, Max decided to live in his car for most of 2018 and 2019 rather than rent a place.

“As a FIFO worker, he spent a lot of his time on worksites where accommodation was provided and didn’t want to waste his cash on a rental property when he wouldn’t be there most of the time.

The head of Corporate Partnerships at Aussie crypto exchange platform Swyftx, said the man’s windfall was “virtually impossible” to replicate on the more traditional stock market with such a small starting amount.

“We do very often see people making significant gains within crypto, from smaller initial investments,” he told news.com.au.

“It’s like every other investment, it’s still very market dependent and market-driven, except you’ve obviously you’ve got that increased volatility.”

However, he had a word of warning, saying there was substantial “risk” attached.

“It’s not unusual for them [coins] to move 60% in a day, you don’t get that in equity trading,” he said.

A Word of Rationality

Meanwhile, a representative of The Reserve Bank of Australia (RBA) said crypto speculators faced a big risk with “niche” cryptos that could lose most of their value.

The RBA’s representative said the value of many cryptocurrencies had been driven by “fads and a fear of missing out” and could crash when central banks decide to assert control over their monetary systems.”

“I think there are plausible scenarios where a range of factors could come together to significantly challenge the current fervour for cryptocurrencies so that the current speculative demand could begin to reverse, and much of the price increases of recent years could be unwound,” he told the Australian Corporate Treasury Association in November.”

Vietnam Police Bust $3.8 Billion Cryptocurrency Scam Gambling Ring

Bloomberg reports that police in Viet Nam have busted the nation’s largest crypto gambling ring. Crypto is best suited for tax evasion, money laundering, and gambling.

“Ho Chi Minh City police have detained 59 people tied to the biggest illegal online gambling ring ever uncovered by Vietnamese authorities, according to state-owned broadcaster VTV.

“The cryptocurrency gambling ring had transactions totaling more than $3.8 billion, which includes the amount of money gamblers put in the ring and excludes reciprocal money from the dealer, VTV reported, citing information from the police.

“Gamblers in the ring registered cryptocurrency wallets on a foreign platform called Remitano to buy cryptocurrencies such as Ethereum or USDT, also known as Tether, they then would use the crypto to gamble on websites Swiftonline.live and Nagaclubs.com, according to the report.

“Subjects admitted to authorities that they organized online gambling on those sites, which were intermediaries to international betting platform Evolution.com to earn commissions. When there were a large number of players, they crashed the websites in order to appropriate money from the digital wallets, the report said.

“Ho Chi Minh City Police also detained items including 40 laptops, 79 cellphones, ATM cards, vehicles, and cash worth more than 2.9 billion dong (US$130,000), according to the report.

“Fraudulent activity is one of the main concerns about cryptocurrencies from regulators globally, in particular, because many participants can transact across country borders and act with a relative degree of anonymity. Crypto-linked fraud is costing victims around the globe billions of dollars annually.

…”Fraudulent activity is one of the main concerns about cryptocurrencies from regulators globally, in particular, because many participants can transact across country borders and act with a relative degree of anonymity. Crypto-linked fraud is costing victims around the globe billions of dollars annually.”

Source:  Bloomberg, Dec. 3, 2021

El Salvador Faces Problems As It Becomes First Nation to Adopt Bitcoin

Reuters reports that El Salvador, a politically unstable nation mired in a civil war from 1980 to 1992 that claimed the lives of approximately 75,000 Salvadorans, has become the first nation to adopt bitcoin. The innovation, however, faced problems almost immediately after the crypto’s introduction.

The country’s historic adoption of bitcoin as legal tender quickly hit technical and political problems as cash machines failed, protests erupted and the value of bitcoin fell.

Reuters also reported that “the adoption of bitcoin may fuel illicit transactions and financial instability. It has already muddied the outlook for more than $1 billion in financing that El Salvador is seeking from the International Monetary Fund (IMF).”

But things were not looking up for the nation’s adoption of bitcoin.

“In barely two years in office, Bukele has taken control of almost all levers of power. But although he has promised to clean up graft, the U.S. recently put some of his close allies on a corruption blacklist.

“Analysts fear the adoption of bitcoin, whose transaction records are distributed across the internet, beyond the reach of national jurisdictions, could encourage money laundering.

“After the bitcoin law was approved, the rating agency Moody’s downgraded El Salvador’s creditworthiness, while its dollar-denominated bonds have also come under pressure.

“The World Bank reiterated on Tuesday it could not help El Salvador in adopting bitcoin “given environmental and transparency shortcomings,” a bank spokesperson said.”

Who Is Using Crypto and Why?

Central banks, economists, and some more energetic regulators openly question the need for crypto.  Central banks in many developed nations are considering a digital version of their own currency, which will deflate the crypto bubble overnight.

But as it now stands, crypto has a few major purposes and goals:

  • To destabilize central banks;
  • To launder money;
  • To evade taxes;
  • To scam greedy, naive individual investors;
  • To serve as a placeholder for the expanding world of online sports betting;
  • To make short-term profits via scalping from other naive investors.

 

 

 

 

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Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

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