'Pig Butchering' Hits The Crypto World; All You Need To Know To Protect Yourself From Scammers
With cryptocurrency scams on the rise, it's getting difficult to keep track of all the new ways fraudsters are trying to scam people. About $5.9 billion was lost in 2022 all due to scams in the crypto market, as per Chainanalysis. Now, experts warn that a new kind of scam has hit the market. In "pig butchering", scammers fatten up their victims with promises of too-good-to-be-true returns before attacking them financially. In 2022, a man from the Bay Area lost $1 million to a scammer who was pretending to be his old colleague and texted him on WhatsApp, as per Forbes. So what is pig butchering? How can we protect ourselves?
What is 'pig butchering'?
The pig butchering scam or The Sha Zhu Pan is an investment fraud that lures people into investing in dubious ventures with the promise of lucrative returns within a short period. The scammers rely on fake images and fraudulent investment portfolios to make people buy what they are saying. Once the victims fall for their falsehoods and invest their money, the money disappears.
The scam begins with a seemingly innocent chat with a stranger or a stranger pretending to know the victim. The con artist tries several ways to gain their trust. The scammers also spend a significant amount of time engaging and knowing the individual. In certain cases, the scammers also use images of women to lure victims and have made fake promises of companionship. There are variants of this scam and some scammers are particularly targeting the crypto market. One variant that has been growing alarmingly is Fake Liquidity Mining.
What is Fake Liquidity Mining?
According to Sophos, there has also been a growth in crypto phishing sites that connect to cryptocurrency wallets. The scammer uses these sites to separate the victims from their own money. These scammers are also getting in touch with the victims even after they have scammed them asking them to invest in more crypto in hopes of recovering the already lost ones.
The most dangerous part of the whole process is the fact that the scammers don't need to put in any effort to target the victim. There's no malware involved. All they need is a fraudulent website and social engineering skills. Fraudulent wallets and domains are being identified and blacklisted daily, however, scammers are deploying new websites and wallets continuously and therefore, it's an endless process.
How does Real Liquidity Mining Work?
The scammers take advantage of the complex decentralized finance cryptocurrency trading applications like decentralized exchanges and automated market makers. Pool arrangements essentially allow DEXs and AAMs to handle trades between different kinds of cryptocurrencies from their wallets. The pool is designed to rebalance along with a percentage of the fee charged for the trade to pool members which again depends on the size of the pool. This means that no matter what happens in the crypto trade, pool stakeholders earn a return.
To join a pool, the member needs to link their wallet to the contract using a web URL. The contents of wallets linked to the pool remain available to their owners and can be pulled out whenever they like. For a little bit of stability, the pool operator offers rewards for locking their funds into the pool in exchange for LP tokens, which is a blockchain token that can be added to the wallet representing an investment.
Here's What The Scammers Do...
The Fake Pool used smart contracts that gave them access to the victim's wallets. They sometimes deposit cryptocurrencies into their wallets to make the victim believe that they are gaining something. The scammers sometimes add deceptive coins that have no value and the website that's lined to the wallet shows promising daily payouts.
Eventually, the scammers pull out everything, leaving the target with nothing. They are even told to reach certain targets to get their crypto back which never happens and any additional crypto invested will also be stolen.
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