How to avoid falling for cryptocurrency scams

Cryptocurrency scams like Squid provide an easy revenue stream for criminals, but it’s easy to avoid falling for these online schemes

Monday, 15 November, 2021

Every now and then, a film or TV series captures the zeitgeist and becomes influential beyond its running time.

The most recent example of this phenomenon is Squid Game – a South Korean dystopian drama which could give Charlie Brooker nightmares.

And while the series has been mesmerising audiences around the world, its popularity has been seized upon by online scammers, who are never slow to spot a trend.

The collapse of the Squid cryptocurrency has once again highlighted the risks of investing in an unregulated digital currency.

But what actually happened, and how should consumers protect themselves against such schemes?

Rocket from the crypto

To understand Squid’s rocketing fortunes and overnight collapse, we need to consider what cryptocurrencies are.

They’re effectively digital tokens, which can either be traded online for goods and services, or exchanged into other currencies.

The best-known cryptocurrency is Bitcoin, whose every transaction is recorded in a digital ledger known as the blockchain.

You can read more about bitcoin and blockchain, but for now, we’ll stay away from the complexities of mining and decentralised ledgers.

The pound in your pocket is underwritten by the Bank of England. If stock market investors try to reduce its worth, the BoE can intervene, propping it up to preserve its real-world value.

By contrast, cryptocurrencies are completely unregulated. There’s no due diligence, investor oversight or industry regulation. The market is left to its own devices.

You could create your own crypto tomorrow – and many people have, often for frivolous or malicious reasons.

If investors buy the coins, prices rise. If they sell, prices drop. If there’s corruption, prices collapse. And that’s what happened to Squid.

Sick squid

Squid was promoted as a play-to-earn currency, used in an online game based on the TV show.

Gamers had to pay Squid to access each new level – a game of Red Light Green Light would set you back 456 Squid.

To acquire these funds, buyers exchanged a traditional currency like Sterling or dollars for Squid. Old money was of no use in the game, which is always a warning sign.

However, many people were caught up in the excitement of a new game, or the thrill of discovering a new investment vehicle. Envy of early Bitcoin adopters runs deep.

The results were spectacular:

Overnight, the anonymous game developers vanished with an estimated $3.4 million, and every investor learned some harsh lessons about cryptocurrency scams.

Sadly, there are plenty of other gullible victims waiting to be fleeced when the next scam emerges.

Squid Inc.

In the unregulated world of digital currencies, cryptocurrency scams appear suddenly, which means there are rarely Wikipedia pages or BBC News articles investors can reference.

They’re often promoted by word-of-mouth on social media, or by association with a popular phenomenon. This viral promotion imbues the scheme with an air of authenticity.

Investors are told the only way to participate/succeed/get rich quick is to invest today, creating the sort of act-before-thinking urgency synonymous with telephone and email scams.

As such, you should investigate certain attributes of any new token or currency before investing, to ensure it’s not among the numerous cryptocurrency scams in circulation.

Most importantly, can you actually trade your tokens? Squid couldn’t be resold, so user investments were pocketed by the scammers, and no subsequent intervention was possible.

(As a stalling tactic, laughable excuses were made about why gamers couldn’t resell their Squid.)

Check if the token is listed on legitimate crypto exchanges. This is no guarantee of authenticity, but it does reduce the risk of someone running a private scam.

Does the currency’s main website seem legitimate? The Squid site was full of typos, which naïve victims chose to blame on its Oriental origins rather than evidence of unprofessionalism.

Most importantly, don’t invest in new cryptos. For all its many faults, Bitcoin is established. So are Ethereum and Litecoin.

Pump-and-dump schemes are here today and gone tomorrow – usually taking victims’ cash with them.

Neil Cumins author picture


Neil is our resident tech expert. He's written guides on loads of broadband head-scratchers and is determined to solve all your technology problems!