SFM Labs - Scam Awareness: Origin and Explanation of Scams.
This Twitter Space took place on 28.02.22 - 2 PM EST 7 PM GMT 8 PM CEST
A quick disclaimer upfront: All information given in this presentation is researched and intended to be educational and illustrative to the specific topic as always. Every owner has to do their due diligence, as the owner's decisions and responsibility about any investment lie with themselves.
What is a scam?
According to the dictionary, a scam is an illegal trick to get money from people - simply said. These attempts can range from bumbling attempts and simple messages with wrong grammar to elaborated plans and mechanisms with false business appearances and hidden links. Their goal is to make easy money at the expense of others using these methods to steal from unaware and/or careless people.
Where did the term scam originate?
The word scam (which is shortened for "scandalous misdeeds") was brought up as a term not so long ago. The first reported talks about scams in a newspaper was in 1963 when "Time Magazine" picked up the term to discuss it as a "new slang word." As there is no confirmation of its origin, here are the three most common theories on where it may have originated :
1. The Spanish prisoner scam: In the 18th century, criminals contacted businessmen to lure them into thinking that someone related to them was in a Spanish prison. Trying to get money from the businessmen, they gave false information, altered the truth, and claimed they could "free" their relation from the prison. The modern version of this today will be explained later, the Nigerian 419 fraud.
2. The ABSCAM operation: In the early 1980s, after the operation ABSCAM happened, a term used by the FBI directed at public officials became more common. The operation was originally aimed at trafficking stolen goods, but the FBI soon transformed it into an investigation of public corruption.
3. Originate from the word "scamp": The word scam can also originate from the British slang "scamp," which meant cheater or swindler back in the 19th century. Nowadays, if you call a child a scamp, you mean that they are naughty or disrespectful, but you like them (often also called a rascal).
Why do people fall for scams?
When it comes to scams, there are many reasons why people fall prey to their nature.
People are influenced by various factors - if the scam is not directly recognizable and the act is exposed. Trust, recognizability, and sympathy play a major role here.
For example, if you are offered a brand as an alternative to a top product that you actually wanted to buy, you usually find it very difficult to buy an alternative. There must be good reasons for this, and they're usually aren't if you've already made up your mind in favor of the well-known and established product. So, if the scammer tries to convince someone with his product, which is similar in appearance and presentation to the actual product, this may already be successful with those who pay attention to simple factors such as appearance and basic functions. The allegedly "same product at a significantly lower price" is tempting for some, but the reality may be different: The product works with significantly lower quality or does not work at all. By the time this is usually discovered, the scammer has already escaped.
But then there are the buyers who have read up on the product and then ask technical questions or want to compare the supposedly "equally good but cheaper" product with the main product. The scammer is usually already beaten here, too, because most of them target ordinary people here and try to convince them to make a quick but cheap purchase. However, more sophisticated scammers can present with other factors such as fake "test ratings," fake seals and certificates, or even fake test results/products to mislead the buyer. The more sophisticated the lie, the bigger the construct and the more elaborate the scam. This is very often applied to items that are not to be brought to the buyer in mass, but in the form of a big profit with a few pieces, e.g., electronic copies of larger household products or even vehicles. The buyer, who trusts test results, numbers, and data, in this circumstance feels secure in his choice, even if he mostly has not checked the data in the beginning or can check them at all. The scammer has thus achieved his/her goal.
In all possible cases, however, there are three factors that usually additionally determine the success of a scam and the perception of those and influence them significantly: sympathy, scarcity, and transparency.
Sympathy is better than that knowledge and is something that always comes to bear even if the price or the nature of the product is higher than the original (which fraudsters can also apply). Even if a person who wants to sell something to you does not have a single technical detail, his appearance and manner can entice you to trust him through sympathy. Small talk and conversation help to divert attention from the actual event so that you can distract from the essential - the sale of the product - until you have the feeling that you have convinced the other person and then sell him the supposedly wrong product, even if he does not want to buy it in the first place.
Also, blaspheming or badmouthing other products may elicit sympathy from some, such as when certain phone brands are compared, and the scammer tries to sell their phone instead of the well-known, established phone. Here, he can point out the weaknesses of the leading manufacturers without even stressing whether these are covered by his product at all. But if you address exactly the one annoying point that someone knows and also doesn't like in the well-known product, this arouses sympathy because two equal thoughts testify to the agreement of two opinions for some people.
Scarcity leads to a state of panic in possible, undecided people who might be on the trail of the lie. When something is in short supply and then no longer available for purchase, it triggers a desire in most people to want to have that product so that they have something that someone else doesn't, whether it's for bragging rights or because they get a sense of value from receiving a product that is supposedly in short supply. In this case, the fraudster can rely on fear to sell people something, even if he has already stocked the same product hundreds of times in his warehouse.
Transparency is something that is difficult to fake. If something is transparent, it is open to questions, and - as far as the state allows - most of the information is presented. Of course, there are then the scammers who try to sell obvious information or data as transparency so that the buyer sees the actual, superficial reasons here as a "proof of trust" and thus then more dedicated to the idea of buying the fake product.
What kinds of scams exist?
Here I want to give you a list of seven existing and common scams which happen every day:
1. Email- or Phone- Phishing
Email or telephone phishing attacks are attempts to obtain information in the form of direct, personal information or login data via the respective medium. In this case, a well-known brand or service is reflected in emails, which lead to fake pages with false links, which copy and secure data using keyloggers and similar mechanisms, and possibly also manipulate them in order to carry out transactions using accounts for purchases or to sell data. In the case of calls, this happens with the same effect but disguised or hidden phone numbers in order not to be noticed directly.
2. Donation fraud
Donation fraud is about using the feeling of sympathy, guilt, responsibility, and compassion to get people to transfer money for a non-existent fundraiser to which they have no claim since they are giving it a way of their own free will. Fundraising campaigns of large companies, current world events, or self-invented events can be taken, which are then used by the fraudsters and with mostly hidden accounts (or cryptocurrencies in the background) disguise and launder the money after receipt via ways so that the trace cannot be traced back.
3. Auctions fraud
Auctions can result in fraudulent fakes or even products in the original, which are offered for sale, but never arrive. In the past, it has been seen that bids have been placed on, for example, rare collectibles but were never shipped to the buyer because they did not even exist. The buyer has then, in some cases, even received a box with contents that do not correspond to the auction and shows that he has been cheated out of his money. The presentation of auctions - even when items are offered and shipped - can also be fraudulent. For example, some scammers offer products that do not correspond to the original, e.g., collectible figures that are many times smaller or of inferior quality and do not resemble the original.
4. Threat scam
With threat, scammers try to force the buyer to make a purchase through fear. This is done by contacting them by mail, email, or phone, in which they try to create pressure through false facts such as closed bank accounts or insolvency proceedings. The buyer, not looking closely or not recognizing the scam, sends a letter back with money or clicks on the given link and transfers the money or dials the given phone number to pass credit card information to reopen the supposedly closed account.
This also happens very often with computer viruses that lock the computer and demand money to release the data (so-called ransomware, also lulled in by Trojans in mail attachments).
5. Catfish scam
A Catfish scam is a scam in which the scammer uses a false personality to try to gain the sympathy of the other person. Mostly seen on social media, it has happened more often than the shape of pretty stars or personalities are taken over, a false profile is created, and then people are fooled into a false interest.
This is supposed to give the affected people a feeling of sympathy, acceptance, and desire, which they can pay for and prove with gifts or money, because the other person has fallen in love with the person, for example. Here, the scammer tries to exploit the weakness of people's emotional state and then anonymously get away with the stolen money.
6. 419 or the Nigerian Scam
419 or the Nigerian scam (as explained before with the predecessor version called Spanish Prisoner) gives the affected the impression that someone with a very large amount of money wants to make a larger transfer to the victim's bank account, as they may have inherited this money, received it from a lottery win, or received it through similar winning situations in which they did not participate. The crux of this scam is that for the transaction of the huge amount of money, either the account and login details are needed or a smaller transfer, which here is titled by the scammers with a value that looks very small compared to the amount to be received, but means a lot of money for the victim.
This scam mostly happens via email or fax; if someone falls for it, the only thing he gains is his account emptied by the scammers.
7. Online Survey
With online surveys, information and data are offered in exchange for free gifts and products. After receiving the information, however, the gifts or products are usually not sent; in the highest case, inferior products are sent here in order to be able to resell the acquired data in exchange, which brings more money than the alleged product that is given away.
How does this translate to cryptocurrencies in terms of scam attempts?
All the above scams can be applied to cryptocurrencies as well. Since crypto is a virtual and mostly online space, this provides the best opportunity for scammers to gain an anonymous foothold. The scammers have several methods to do this in the crypto scene:
With emails, scammers try to elicit their information, data, or access from the victims, just like for other products. In the field of cryptocurrencies, they try to obtain access data, e.g., to exchanges, in order to transfer the amount of currency contained there. Since crypto is about anonymity, sending cryptocurrencies via decentralized exchanges is a matter of simplicity, which makes it very difficult to track them.
2. Contracts and dApps
In contracts and dApps, there are those scammers who create certain tokens with the simple intention of taking as much money from the holders as possible. With no great concept, no security, and no information about any token operators, this inevitably leads to danger, as many tokens sprout up every day, which the scammers use to get people to invest with false hype and misconceptions. Honey traps, rug pulls, and the like often take place here.
Some obscure dApps have the same principle, as they also intend to empty all currencies by directly accessing the wallet with transactions in order to enrich themselves.
3. Social Media support
Some scammers try to gain the trust of holders with so-called "customer support" and "token support" accounts. These are then supposed to verify or prove their wallets - without any reason - in the current situation so that they do not lose their investments. The feeling of helpfulness and driving fear are the two most important points that the scammers use to keep the ear of potential victims as long as possible. Asking for the seed phrase is not uncommon here, as they promise to help directly when they have it but only use this to rob the investors.
Products can also be a playing field for fraudsters. They use, for example, advertised products with pre-orders that are never delivered. There is also the possibility of acquiring various hard wallets in the crypto scene, which can also be manipulated by fraudsters in "used condition" and can cause damage with keyloggers or similar modifications of the software on them. The secondary market is for this product line, the very risky level for holders.
FUD is also used by scammers to enrich themselves. This is mostly used in a combination, such as badmouthing a project without any proof or presenting false facts just to push and strengthen their own project, so that the holders should invest their money in the supposedly better project, which will eventually only deprive them of their money.
How can you spot a scam and harm regarding SafeMoon?
SafeMoon is a very popular and interesting project in the crypto scene. There are many people who try to present a "better" alternative with copies of the old contract, just to lure money there. FUD is omnipresent; where there is news, there are also people who do not want to accept this, be it scammers or competitors who do not want to believe it.
Here it is important not to be guided by emotions. The crypto market goes up and down; that has always been the case. Sometimes there are world events, changes in the planning of the project, delays in innovations, or even bear markets. But all these facts are no proof that something is in a bad state or means problems. Rather, it shows that despite the existence of these conditions, SafeMoon is still here and still following its path as planned.
It is also important to note that SafeMoon does not offer "token support" on Twitter or in DMs. SafeMoon will never ask for your private information, to validate your wallet, or to name your seed phrase. If you ever have any questions about SafeMoon itself or the wallet, of a technical nature or similar, you can ask the numerous moderators or me on Discord, Twitter, Facebook, Reddit, and the like. We are happy to help, but sensitive data is not needed for that, e.g., if you have a transaction, you don't understand, or you want terms explained. In addition, there are also SafeMoon.net and Safemoon.Education sites where you can read and research information. Because knowledge is power, and only in this way you can be sure that you know enough not to fall victim to scammers.
Additionally, there is more information on wallet security (one of my previous spaces) and the like on our education page, which additionally reinforces the actions of any holders and shows what care can be taken to avoid what problems.
Advice on how to deal with scams
The simple three questions you should ask yourself if you suspect that scammers don't want you well:
1. If someone wants to give you a gift or a prize that you don't know or whose sweepstakes you haven't entered, be critical and question whether it can't be a trap. Do not blindly accept any "gestures of kindness."
2. If someone offers you help without you having questioned it and explicitly points out that you have to do it because otherwise, you will get problems because you will miss something, think about whether there is actually a reason to consider the situation. Is there an event like migration from V1 to V2 on SafeMoon that you should do but haven't done yet? Can I also do this on SafeMoon.net or read about it on Safemoon.Education?
3. Should I really connect to a specific token or dApp service that seems to be close to a breakthrough? What is this about? Is the project really legitimate? Are the signs all such that it can be trusted unconscionably?
If something feels bad or you have a queasy feeling, you should always think about it two or even three times and, if necessary, ask someone if this is something you can enter into without any problems. Because the care to preserve our investment is up to each holder, it is important to learn over time - even if you are new to crypto investing - and draw the right conclusions.
Will there ever be an end to scams?
Where there is money, there are also people who try to make life easier for themselves and deceive others. This has been the case since the beginning of time and will always be the case. The scams will become more sophisticated, and there will be new opportunities for the free development of these scammers.
The only thing we can do is to take care of each other, to stand by others and help them when they have questions, and to solve these problems before they arise.
Because knowledge is power, and we are all only strong together. And if we all work together to expand our knowledge and take care of reporting fake accounts, not believing false information, avoiding false contracts, and always telling people what's important, we can all enjoy our investment for a long time to come.
Credit: Gandalf - SafeMoon Educator