Are you curious about crypto? These are the scams you should watch out for…


By Hannah Jo Uy


“If I just inquire about a project or join a Telegram group for information, every day, around 20-25 crypto scammers would start messaging me with identical scripts encouraging me to click on the same links,” says Ayisha Mohammad Sidheek. As a civil engineer by trade who has pivoted into becoming a full-time crypto trader and research analyst, Ayisha has seen first-hand how the earnest interest and curiosity of newcomers in blockchain technology can be exploited by shady characters and con artists eager to cash in. “This is a major problem because, remember, when money is transferred through the blockchain, there is practically zero chance you can recover it.”


Dubai is considered by many a land of opportunity. With the entrepreneurial spirit riding high in a country that has championed digital processes, it is no surprise that the city has seen more people making their fortune from cryptocurrency. Bitcoin, launched in 2009, is still considered the most successful blockchain-based cryptocurrency, with its value swinging from under USD10 in 2010 to USD 40,323 on April 12, 2022.


The volatility of Bitcoin and the hundreds of other crypto coins created newly minted millionaires. Digital accessibility made people feel such a level of success was within their reach. While this might be the case, it also makes the general public vulnerable to unethical and malicious practices. “I have seen people make AED 2 million in 2 years and lose it in one crypto project,” says Ayisha. “The news tends to focus on people that make a profit, but millions more are lost on scams.”


With increasing prices of commodities, job insecurity, and a lot of unchecked marketing surrounding cryptocurrency, many scams have emerged in the crypto sphere across the UAE. Tarek Mohammed, Head of the Digital Assets Crime Section at the Dubai Police, announced that in the first half of 2021, there were hundreds of cases of crypto scams in Dubai, with victims losing up to AED 80 million in total.


Don’t fall for the flex.

Michael Kortbawi, Partner, BSA, a law firm experienced in representing victims of crypto scams, says that the rise has been triggered by two factors: The first is the significant price spikes of crypto attracting newcomers with no experience in the market. He says that these newcomers are typically overly eager, easily swayed, and not familiar enough with how crypto trading works. The second is the lack of regulation.


Social media has also been an aggravating factor as it serves as a preferred vehicle for scammers and fake crypto gurus to reach out to their audiences or, in this case, their victims. “With these influencers, when people see them flashing their Lamborghini and luxury lifestyle, they believe it, and they feel that they are entitled to it and that it is easy to obtain, so they get dragged into schemes.”


Ayisha says research and knowledge are critical for anyone entering the crypto space because “in the crypto world, the chances of you making money is less than the chances of you getting scammed”.


Copycats and worthless tokens

Crypto scams have taken on many creative forms, and lines are constantly blurred between legitimate earning opportunities and shady get-rich-quick schemes designed to get people to part with their hard-earned money. Michael says: “Crypto has created a space where technical elements are so complicated, and people don’t know what they deal with, so they can’t tell right from wrong.”


It doesn’t help that many interactions exist in digital communities on Telegram, Twitter, and Discord. These are breeding grounds for direct and targeted or indirect and large-scale fraudulent activities.

One example is the “copycat administrator”. Ayisha explains how the scam works: “Interested parties get to know about crypto projects and join a Telegram group to get more information. When a scammer sees a new person has joined the group, they would change their chat name to something like ‘community manager’ and reach out to the newcomer directly, saying there is an ongoing campaign where they are giving away money to five random winners.


It’s easy to fall for this if you are not aware because they won’t ask you for anything. They will ask for your full name and email address and send a link, and with that link, they can access your digital wallet and loot your money. Never click on any random link from an unknown guy.”


Another common one is referred to as “pump and dump schemes”. This is where a scammer uses Telegram groups and forums to coordinate price manipulation on crypto coins of no value. These coins, often made by the scammer themselves or with their knowledge, are pushed as “the next big thing” by the scammer, who will only sell their tokens during the short-lived exponential rise in price on crypto exchanges, leaving the second wave of investors holding useless and worthless tokens.

An example is the Dubai Coin controversy which was outed as an elaborate phishing scam with no official backing from the government by Dubai authorities. (To get a more comprehensive overview of other scams, we recommend reading The rise of crypto scams in the UAE )


For Michael, due diligence coupled with common sense is critical, underscoring the adage that if something is too good to be true, it probably is. “For example, the Terra coin was promising 20% return and that it will maintain a value stable to the dollar. Any person with basic investment experience would know that a 20% return in a short period is impossible,” he stresses.


Ayisha says anyone operating in these spaces should be vigilant to ensure they are double-checking links. “Go to the website or the official Twitter pages; never share your passwords or keep them on your phone or laptop. Always write it in a notebook and have multiple hard copies if needed. People think it’s hard to access, but you would be surprised how easy it is -- I’ve seen people lose millions of dollars in a single click.”


I fell victim to a crypto scammer – now what?

If one does happen to fall victim to a crypto scam, Michael suggests immediately going to the authorities. Dubai, he says, has gone to great lengths to regulate the crypto space while still being crypto-friendly. There have been a lot of big crypto exchange houses moving to Dubai and getting licenses, and Dubai will continue to regulate, he says, which will make it safer for everyone involved.

Secondly, Michael recommends that victims seek out legal advice. Shame plays a significant factor in people not reporting themselves as victims of a scam. Additionally, it can be expensive, and people feel there is no recourse because the perpetrators are often not in the same city or country. All the same, Michael believes there is added value in obtaining legal counsel as victims need a new perspective to see every possible pathway for resolution.


At the end of the day, Ayisha says anyone looking to enter the crypto world must arm themselves with proper research and guidance. “Always learn before entering”, she says. “Technology can be good and bad at the end of the day. I prefer to see it in a good way, and I think blockchain and crypto will change the world in the next 5-10 years, but we have to safeguard ourselves; we have to do the proper amount of research before putting money into anything.”