In the digital age, cashless transactions are very much practiced by the majority of people. And here comes cryptocurrency that changes everything. A virtual or digital currency in which a decentralized system records transactions like a ledger. With the booming trend of these digital currencies, it is not surprising to see some people exploit this, especially since the world of crypto is something not the majority know of. This results in opportunities for scams. In this episode, host Halle Eavelyn talks about the various cryptocurrency scams and her experience with them. Learn how to be more cautious and protect yourself from falling trapped into these rug pulls.
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Crypto Scams And Rug Pulls Part I
Welcome to another episode of the show. I am so excited because I’m finally starting to hear from some of you that you are getting wonderful experiences out of these episodes. You’re learning and excited about your crypto journey and your own experience, and you’re getting educated. That is so powerful and important.
I’m proud of you for sticking in there and making sure that you come back week after week to get all of the information that’s there. As we know from one of the crypto vocabulary episodes, DYOR or Do Your Own Research means getting that core education as well as researching projects that you are especially interested in.
I’m excited about this episode and about the next one that I’ll be doing on my own with you. They’re all about some of the seedy underbellies of crypto. I’ve thought hard about this because when it comes to different types of crypto scams, I’ve already seen them all. I don’t want to say that I was a victim of anything because for me, whenever something happens where I lose money, I consider that a learning experience. It’s a mistake I’m not going to make again.
I’m going to take my time with this material because I want you to understand what’s going on. The first thing that I want to share with you is counterintuitive. I think most people are good. That is my base expectation and my base understanding. I admit that I have been called a Pollyanna my entire life because I come from that place where I believe that most people are good.
I just have noticed that when it comes to crypto scams, there are some big things like hacks where, for example, a particular project or a particular fund gets hacked and crypto gets stolen. While that’s a big deal, it doesn’t tend to affect us moment to moment or day by day. If you’re not involved in that particular hack and they are few and far between, relatively speaking, you are not affected in any way. Usually, it’s a finite experience and the project founders will say, “We’re going to find a way to get that money back to people.”
There have been a lot of what they call bad actors. That’s another crypto word for you, although it applies to pretty much everything. A bad actor is somebody who is deliberately trying to win your trust so that they can scam you, and I have seen a lot of that. Let me back my way up to some of my own experiences. We’ll get started at the beginning and go through the different types of crypto scams. Some of these are maybe ones that you have experienced. If you’re brand new to this, my objective is to have you avoid experiencing them. I want you to look at this and think, “Halle learned this lesson so I don’t have to,” because it’s not necessary for you to go through it.
A lot of times, when you come into the crypto space or any space and you’re new, people will try to take advantage of that. Most people are good, but I have seen some people in this space who are not. It’s very easy to be taken advantage of, but it’s also very easy to protect yourself. For the most part, if you are a victim of anything, you are going to become a part of what’s called a social scam. A social scam is not a hack. It is about human-to-human interaction. It is about humans saying to you, “You can trust me,” and you’re saying to them, “You know more than I do, therefore, I can trust you.” That is not always true.
I want to get into the specifics of this as well as structurally what you need to do to protect yourself. Let’s start with the structure piece of this. When you’re new to crypto or if this is a situation that you haven’t encountered before and something that you are not familiar with and comfortable with already, you need to take precautions. I can’t tell you how many people come into the crypto groups that I’m part of and say, “Somebody reached out to me and offered to help me.” That’s a big red flag already.Most people are good, but you have seen some people in this space who are not, and it's very easy to be taken advantage of. Click To Tweet
When you have strangers connecting with you and offering to help with a problem that you have, you want to make sure that you vet them. In order to vet them, you want to find them and be able to see them online or everywhere. However, that also can lead to its own issues. Let’s take the example of me on Instagram. This profile says I am a full-time Forex trader. I want to point out that it looks like my profile. My social media manager said, “I don’t think this is you.”
By the time she found it, there were already 500 followers of this profile. The person used my profile photo and my name exactly as it is except my Instagram profile has a dot on it. I am @Halle.Eavelyn on Instagram and they ran it all together as @HalleEavelyn. That is a way to do my name. It’s just not how I had set it up. That was the only difference.
They took my profile photo. They took pictures from my Instagram friends. Those were pictures that I had with people already in them so that it looks exactly like my profile. Their account was posting different things than I would post as well as reposting posts that I had posted. There were audio clips from these episodes of the show. There were posts that I had made on Instagram, which they had copied and pasted, and then there were new posts driving traffic to a separate group.
When I found out about it, I reported it immediately. I also did a search for my name. My last name is ridiculously unusual. It was my middle name. It was a misspelling because of the mistake made in the hospital. I’m probably the only Eavelyn in the world with the way my last name is spelled. I’m certainly the only Halle Eavelyn that I know of. I’m so lucky in that regard because if I were in crypto and my name was Jane Smith, this would be a much more complicated process.
This brings me to a guy named Mark. He was a trader. I watched this whole thing happen. Mark was a full-time Forex trader that moved into the crypto space. He had an enormous group on a separate site called Telegram that is very popular with crypto people. You may find yourself getting invited to join Telegram so that you can participate in legit crypto groups. If you do that, you need to make sure that you set your settings so that only contacts can add you to new groups. Otherwise, you will get added to groups that look identical to the real group and are fake. What we’re trying to avoid here is getting added to the fake groups.
However, in the case of this trader, Mark, I got invited to a group by somebody on Facebook. This was before I understood that this kind of thing was 99% a scam. The guy said, “I’ve been making a lot of money. Do you want to check us out and maybe follow the group?” I checked it out. You can lurk. You can observe on one of these platforms like Telegram without joining the group. I decided to go ahead and join. I had no obligation. It’s a free group. I was just watching every day.
What I was watching was the trades that Mark was doing where he was making between 3% and 5% a day on people’s money. That’s pretty great. I don’t have my calculator with me but trust me, you would be looking at doubling or quadrupling your money pretty quickly if that’s the daily return that you’re getting. Remember, if I have $100 and I’m getting 5% on that, I have $105 the next day. I’m then getting my 5% on the $105 and it begins to compound. Both Warren Buffett and Albert Einstein have talked about the powers of compound interest in very simple ways. Compound interest is incredibly powerful. It’s the way to make the most money the fastest.
To see those kinds of returns was very powerful. However, I have already been through a couple of crypto scams, which I will share with you. My objective in these episodes is to share all the different types of crypto scams that I’m aware of. In case somebody approaches you in one of these manners, you’ll be able to say, “I heard about this. I remember this. Let me check this out and make sure that it’s safe,” before you participate.
I joined this group and I began to watch. The way it was set up was you could get in for certain tiers. Let’s say it started at $5,000. You could get in up to $100,000 and then you could stay on 30, 60 or 90 days. The objective at the end of that time is to get your money back. They give you back the money that you have given to them.
I’m going to take an aside here to say there is no reason in crypto to ever give anyone else the codes to your wallet or to give anyone else your crypto to give it back to you when there’s more. It doesn’t work like that. It could, but the people who do that kind of work are scamming you 100% of the time. I don’t know anyone who does it legitimately, and I’ve been looking for a long time. You need to be aware of that when you are thinking in terms of your own investment in crypto.
After the first 30 days that I was in the group, I shared this with a friend of mine. He decided to start watching. Unbeknownst to me, he also decided to invest with trader Mark. After the first 30 days, people who had doubled their money in that time were saying, “Trader Mark is so amazing. This is such an incredible experience. I’m giving him back my money to turn it and do this again. I’m going to do more money this time.” The guy would come in every morning and say, “Let’s make it a great day.” At the end of the day, he would say, “This return was this percentage. We pulled it out at the last minute.” Once in a blue moon, he would say, “We didn’t manage to get there today. We were down 2%.”
At the time, crypto was in a fairly decent upmarket. It was back and forth a lot, but it was a fairly decent upmarket. I sat there for more than 60 days. By this time, my friend had told me he had invested. I said, “My goodness, I thought you would just watch.” This is somebody much more experienced than I was with investing. I said, “I don’t know that I feel comfortable. I’ve gotten ripped off in the past.” He didn’t risk a huge amount of money, but it was in the thousands of dollars. He said, “I felt like this was safe to do. It felt okay to me.” He then got to a point where he said he was going to invest more money again because he had been able to turn the money. He now decided to make an additional investment.A social scam is not a hack. It is about human-to-human interaction. Click To Tweet
One day, he contacted me and said, “It’s gone.” I said, “What’s gone? Your money?” He said, “The entire group is gone.” I had this horrible sinking feeling in the pit of my stomach not for him, but for the people in the group who had said, “I have given my life savings to this group because it’s making me so much money.” My heart was so broken by this. It still bothers me. It has been months since this happened. People risked everything and then lost everything because they trusted a stranger on the internet.
I’m a stranger on the internet but I show you my face. You can see all of my profiles. Here was the problem, however. The profile that this guy was using was a duplicate. It was the same situation as when Instagram spoofed me. When that happened, nobody could tell the difference because the person was showing up as legit. I tracked down trader Mark. He was French-Canadian and spoke almost exclusively French. Had someone looked a little bit deeper as I did once I realized that it was a scam, you would have been able to see that these two things don’t jive.
For example, if you were to look at my Twitter profile, I will say to you that I am here to educate you and I am not a trader. If you look at my Facebook profile, you will see that I am a transformational wealth coach. I don’t do crypto trading. I’m not going to charge people for crypto trading. I might charge for crypto education because I do much deeper work when you work with me as a coach, but I am not going to charge you to teach you about how to trade. I’m also not going to trade for you. It’s something I don’t feel I understand. I can research a project and invest in it, but I can’t figure out the nuances of charting to the point where I would ever consider myself a trader, and I would be sitting at my desk eight hours a day to do it.
The guy who was doing the work of fake Mark was a legitimate person. I don’t know whether he work, but you could tell from the way that he wrote every single day. People would say, “I wish I were you.” He would say, “You don’t. This is a 12 to 16-hour-a-day job. I never leave my desk. I’m on seven days a week. My brain never turns off.” Honestly, he didn’t make it sound very much fun at all. I don’t know whether he was part of the scam or he was simply hired by the person who was doing the scam. I don’t know whether he knew that the Telegram group would be turned off and that everyone would disappear from it. I don’t know any of that. Ultimately, I suppose it doesn’t matter.
The truth is that you got to do your research to the point where you vet anybody to who you would be planning on giving any of your money. That’s another thing. You could pay me in crypto for coaching services, but I would never say to you, “Give me this money and I will give you back more money.” I will teach you how to make more money, but I would not take your money to turn it into more money. That is what a traditional stock broker model is.
The beautiful thing about crypto is that you do not need a gatekeeper. You do not need an intermediary. When you learn even the basics about it, you can get onto an exchange like Coinbase or onto places that aren’t crypto-centric like PayPal, Venmo or Cash App. That may be safer. When PayPal first started allowing you to buy Bitcoin through them, you couldn’t also transfer the Bitcoin out. You would have to transfer it back to cash in order to transfer it out. The truth is that if PayPal isn’t in the Bitcoin business, they’re more diversified
This is neither a scam nor a rug pull but is very applicable, but we have seen entire exchanges get brought down. For example, Voyager, where I had a small crypto investment, is in bankruptcy. The Winklevoss brothers did not pull it out in this case because they were so highly leveraged with people buying on margin. That’s a cashflow money issue that has to do with people’s greed, but it is not specifically a scam. It simply tells me that when you’re going to invest your money, it is better to keep it in cold storage inside of a wallet.
A wallet is a drive that has your information on it, and those long complicated sets of numbers to get in and out of it. Keeping it cold means keeping it detached from your computer. My cold wallet lives in a drawer inside of a special safe. That’s the way that I keep it protected and safe. My crypto lives on there. If you do keep crypto on an exchange, make sure that you are keeping it on a wallet exchange. Check into it and see whether they’re trading on margin. Those are some basic safety precautions.
The Social Scam Of Being Spoofed
Let’s go back to the social scam of being spoofed. I’m public enough to be spoofed. I had two profiles, not just one. When my social manager found that one, I went ahead and looked to see whether there were any others. The answer was yes. There was another one, and this one only have twelve followers. It was obviously new. I reported them both to Instagram.
I’ve seen this on Twitter. I’ll get direct messages from several people that I follow. I’ll look because I’m like, “This is a pretty well-known crypto person. Why are they connecting with me personally and asking me stupid questions?” For example, there was one girl that I followed who I really like. She goes by Lady of Crypto. She’s English. She lives out loud. She has a girlfriend. She lives in England. She works out. She goes to Amsterdam for vacation. I’ve seen all of her pictures.
She reached out to me and said, “Where are you from?” It was in the middle of a bunch of different things. I was like, “Miami. How’s London.” She wrote back and said, “It’s great. It’s nice to meet you. What are you doing with your crypto journey so far?” The phrase, “How is your crypto journey going so far?” is a phrase that I’ve seen multiple times in social scams.
I thought to myself, “When I asked about London knowing she’s in London, why didn’t she address that? I talked about her hometown that she talks about all the time.” I looked more closely and there was one digit different in her Twitter handle. Instead of @LadyOfCrypto, it was @LadyOfCryppto or something like that. That’s the kind of thing where one letter will change or there will be an underscore in the middle or after.The beautiful thing about crypto is that you do not need a gatekeeper. You do not need an intermediary. Click To Tweet
When I first got my Twitter handle, Goddess Of Crypto spelled straight out was already taken. Since it’s the podcast, I was like, “This is going to be my Twitter handle.” I chose a zero at the end instead of an O, @GoddessOfCrypt0 is my Twitter handle. Let’s say I changed something else where I did an underscore in the middle, that would be something where somebody would be able to spoof that account or I would be able to use it as a second account because there’s no two-factor authentication or KYC, Know Your Customer, with Twitter. If Elon Musk ever buys Twitter officially, that is one of the first things he’s going to change.
There’s none of that with Facebook. Facebook supposedly has all these billions of users. I think about 1/3 of them are scam accounts. Let’s not even get into all the Facebook scam accounts. That’s true probably of all social media. In order to protect yourself, you have to pay attention. Melinda Gates, Bill Gates’s wife at the time, befriended me on Facebook one day. I was super flattered for about five minutes until I checked out the profile, how long she had been online, and her friend connections. I realized that it was a spoofed account so I blocked it.
Blocking and reporting the accounts when you find them is very important because it prevents them from doing this to everybody on your friends’ list. You also have to keep your friends list protected. For example, on Telegram, you can set, “Only my connections can add me to groups.” Those privacy settings also exist on WhatsApp, Twitter, Discord, Instagram, Facebook, and LinkedIn. Do those things because you are protecting your circle, not just yourself.
My First Crypto Scam
I want to tell you before I close out this episode about my first experience with a crypto scam. Back in 2017, I had my first crypto portfolio. I owned a decent amount of Bitcoin. I was a wholecoiner, which is something that people in Bitcoin these days strive to be because Bitcoin costs $20,000 a coin. There has been a time when it costs almost $70,000 a coin. The multi-millionaire people that I follow and believe in believe that Bitcoin is going to go to at least $500,000. Most of them say it is going to be $1 million a coin, and I think that’s legit. That is my opinion. Do your own research and form your own opinion. Tune in to this show because I have all the Bitcoin people on who have their opinions.
What I want you to know though is that at the time, I had enough Bitcoin where it would have been a beautiful thing if I had hung onto it. Instead, I became the victim of a social scam. I knew someone who was in Bitcoin. He was doing mining, so he was creating Bitcoin. He was doing very well. He had given out his Bitcoin to someone else, and that someone had doubled his Bitcoin in 30 days and had given it back to him. That’s the key. They send it back to you the first time. This isn’t always true because, in the trader Mark scam that I was telling you about earlier, nobody got their money back. They were simply told that if they continue to hold it, they could see on paper that they would be able to double it again.
This particular guy was very smart. It was a very big scam. It was one of the biggest social scams at the time. He gave everybody back their money and then he got them to get their friends involved. I was a friend. This guy got all of his people together and they invested $10 million. Bitcoin was going for around $8,000 or $9,000 at the time. Do the math. It was a lot of Bitcoin.
The guy took off with it and never even pretended that he was building or growing the second round. I know about Bitcoin enough now to understand that you can’t do anything other than trade it or buy and sell it at certain times. Timing the market would be what would cause you to get more. At the time, what I was told was that Bitcoin was being used in mining operations to create more Bitcoin. If you put two rabbits together, you get four rabbits. It was along those lines. It was super dumb.
I admit freely that I deserved to lose my Bitcoin because I not only didn’t research the guy. I just trusted my friend, but I didn’t research the way Bitcoin worked enough to understand that mining didn’t work like that. I understand now. As I’m sharing this with you, I’m feeling idiotic because I’m realizing how naive I was. I want to be completely transparent with you so that you understand and you will avoid happening to you what happened to me.
I gave the guy my Bitcoin and never saw it again. After about three months, he said to me, “The guy has not given me my money back when I was expecting it, but we think that’s going to change in 30 days.” The guy got strung out for a year and I got strung out with him. I was a small fish in this $10 million pond. Eventually, the guy explained what had happened and told me what had happened.
Even though the guy was visible, he was a shadowy figure. Eventually, he got caught by the FBI. He destroyed the computers where the Bitcoin was being stored, and when you destroy a cold wallet like that, there’s not any way to get it back. There can be, but it depends. If you have a Trezor or a Ledger, which are two cold wallet storage companies that are considered the state-of-the-art ones, you can store in them your wallet. You can connect it to the network for Trezor or Ledger.
If you lose your wallet but you have your seed phrase or your 12-word or 24-word phrases that are the keys to your wallet, you can tell them you lost your wallet. As long as you have your seed phrases, you can get whatever you have stored on it back by putting it on a new Trezor or Ledger wallet. That’s something I hope never has to happen, but it at least protects you in case some emergency happens.
In the case of this scammer, the computer itself was being used as the storage device. When he destroyed the computer, he destroyed the Bitcoin. For me, there was a little bit of a silver lining. I eventually ran into a guy who used to do all the black hats. In other words, the hacking stuff behind the scenes. He had turned into what’s called a white hat, which meant he stayed compliant and was helpful. He did all of his stuff open source so that other people could see what he was doing. He would also assist instead of being in the shadows. That’s the difference between black magic and white magic supposedly. I think that’s where the black hat and white hat came from.Reporting the accounts when you find them is very important because it prevents them from doing this to everybody. Click To Tweet
He was a little bit of a superhero in the crypto space. When he found out about this guy, he had sent some of his goons after him and they had beaten the Christmas out of this guy. After that, he turned him over to the FBI. I felt sorry for him by the end. I was like, “I don’t think this be worth $10 million to me, especially since he never got to keep any of it.”
Bitcoin is very traceable, but when somebody has given their money away, it’s not as easy to get to it. They can trade different wallets out. A wallet connects to an ID. It’s the ID itself that you can trace online. We can see when Bitcoin is moving from one whale’s wallet into another whale’s wallet. That is completely transparent and visible on the blockchain. It’s one of the beauties of the blockchain. When somebody is a scammer, you should be able to find their wallet and see, but they could be using multiple wallets.
When the hub disappears, there’s no way to find the people who were involved. The people who were involved that were scammed are usually so ashamed that they’re not talking about it. They’re certainly not out there hunting down the person who scammed them by looking for the wallet. If that happens to you or if that has happened to you, you’re out of luck. If that is the case, I hope that you will see it as a lesson to make sure that this never happens to you again and to say, “This was the cost of my education. This was the cost of me learning how not to get scammed and how to take those precautions next time.”
I encourage you to learn the lessons that I have learned, take these on as your own, and make sure that this never happens to you. If this episode has resonated with you, please like it, comment on it, and review it on your favorite platform. Please review the show so that we can share it with other women all over the world. Also, please share it with the other women in your life. Until next time.
- episodes – Advance Crypto Vocabulary: Knowing Crypto Lingo
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