Everybody knows what a scam is. But very few can recognize one when is directed at them. Why is that? The Internet has made it more difficult to understand what’s real and what’s fake. Knowing the mechanisms behind a swindle can greatly help not to fall victim of a fraudulent scheme. In this article, we’ll explore the different types of virtual scams.
What are virtual scams?
- Virtual scams are fraudulent activities conducted online that exploit digital tools and platforms to deceive individuals or organizations. These scams often involve impersonation, fake offers, or the misuse of digital assets like virtual credit cards, virtual phone numbers, or virtual machines to steal money, personal information, or intellectual property.
Virtual scams focus on individual users. They are enabled online, but they usually take place offline. They bait victims with attractive hooks such as price cuts on goods or services far below the market value, better-than-normal ROI, alternative cures to illnesses, or rare drugs not available in a jurisdiction. Due to the techniques used, it’s often hard to distinguish aggressive marketing techniques from actual scams.
Scareware scams
Scareware is an aggressive sales technique through which the scare software inundates computer users with misleading messages that emulate Windows security messages. These messages are designed to convince recipients through scare or shock tactics that their PC has been infected and requires fixing through their brand’s solutions.
A variant of this scam involves a fake message or phone call from the police or other law enforcement agency saying that the recipient has been found guilty of committing a crime (could be anything from downloading pornography to speeding or parking) and they have been fined, and are told to pay the fine immediately or else.
Arbitrage and grey market exploitation
- Arbitrage is an investment strategy that involves taking advantage of price discrepancies for the same asset across different markets to generate a profit with minimal risk. Legitimate arbitrage exploits genuine inefficiencies, such as differences in exchange rates, pricing between markets, or temporary mispricings in financial instruments like stocks, futures, or cryptocurrencies.
However, arbitrage can be exploited in fraudulent schemes. Arbitrage scams are deceptive practices that use the guise of legitimate arbitrage to defraud investors. These scams often promise high returns with little risk, but no actual arbitrage is taking place.
- A grey market refers to the trade of goods or securities through distribution or trading channels that are not authorized by the original manufacturer or trademark owner, but are still legal.
Grey market exploitation refers to the unauthorized trading of genuine, authentic products through distribution channels not sanctioned by the original manufacturer, often leveraging regional price differences or supply imbalances for profit. This practice, also known as parallel importing, involves acquiring products legally from one market, such as a country with lower prices, lower taxes, or excess inventory, and reselling them in another market where the official price is higher, frequently at a discount that undercuts authorized dealers.
Pyramid selling scams online
Pyramid selling is an elaborate confidence trick which recruits victims with the promise of good return on investment. The success of these schemes lays in the fact that early investors are paid from money invested by later investors and confidence builds quickly to encourage further investors.
New recruits are encouraged by the genuine claims of previous investors that they can recoup their initial investment by introducing new recruits to the scheme.
- In a Ponzi scheme, the operator promises high returns on investments and uses money from new investors to pay returns to earlier investors, creating the illusion of a profitable business, while the operator pockets the majority of the funds. The scheme collapses when new investments slow down, and the promised returns can no longer be sustained.
- In contrast, a pyramid scheme requires participants to pay a fee or purchase products to join and earn income primarily by recruiting new members into the scheme, with profits flowing upward through the recruitment hierarchy. The income in a pyramid scheme is derived from recruitment fees rather than investment returns, and the structure is inherently unsustainable due to the exponential growth required to keep it functioning.
The Internet amplifies the recruitment mechanism, giving fraudsters access to a larger number of potential victims.
Direct investment scams
Direct investment scams offer enticing opportunities without receiving any services or gains in return. A common type is the work-from-home scheme, targeting the less mobile or unemployed to invest into a business. More harmful scams are perpetrated by fake brokers tricking their victims into investing in dubious stocks and shares.
Loans, credit options, or credit-rating repair
These scams prey on the poor and financially excluded individuals with promises to repair their credit ratings or providing alternative services. Such offers, if followed up at all, come at a high cost to the victims in terms of inflated interest rates or contracts that are hard to break.
Website domain name scams
Website domain name scams cluster a range of activities, but mainly comes in two forms. The first is where a business is sent a letter that appears to be a renewal notice for a domain name; the second is where the scammer gives a refusal for a domain name stating that another party wants to purchase it.
Deceptive advertisement for products and services
Deceptive advertisement sell goods at greatly reduced prices to hook victims. Some simply fail to deliver, others sell substandard goods, and other exploit grey markets. Other deceptive advertisement online fake credentials (for example, misrepresenting themselves as fake charities or religious groups) to exploit public sympathy and extort money to their victims.
Entrapment marketing scams
Entrapment is the stage beyond deception because it locks the victim into a situation from which they cannot easily extricate themselves and may become repeat victims. Entrapment can occur when participating in any of the above-mentioned online scams, but more often it happens through marketing emails.
One of the most common hooks for entrapment is signing up for a free trial subscription to a service that requires payment details upfront and then can’t cancel the payments to the subsequent subscription.
Online ticket scams
Events and the entertainment industry have massively moved their ticket sales online. The typical ticket sale scam offers victims the chance to buy tickets to a popular event from a website that if often promoted on social media platforms. The hook to the victim is that the event is almost sold out, and the remaining tickets must be sold fast before the event. Once the victim pays for the ticket, the tickets might be fake or never be delivered.
Drug sales, health cures, and snake-oil remedies
Drugs, including narcotics and prescription drugs, are increasingly being sold online. Even local street dealers are moving the business on social media platforms or dark markets. Alongside these drugs, there’s also a huge market for alternative cures and snake-oil remedies playing on the victim’s gullability. From rejuvenating creams to beauty concoctions, cancer miracle remedies and therapies to serious illnesses, these scams prey on people’s obsessions and desperation.
Cryptocurrency scams
Cryptocurrency has itself become a popular target for scammers, especially because it is stored in digital wallets rather than a bank account. Scammers use tried and tested methods to scam users. Of these cryptocurrency pyramid scheme scams are the most frequent. Fake initial coin offerings are a common hook for victims.
Next, we’ll dive into virtual theft.