Legitimate liquidity mining exists to make it possible for decentralized finance (DeFi) networks to automatically process digital currency trades. DeFi is an emerging financial technology that uses a blockchain-based distributed ledger similar to that used by cryptocurrencies to adjudicate trades between different types of crypto—governed by trading protocols built into the ledger itself.

Centralized cryptocurrency exchanges act as “market makers” for trades out of their deposits. Coinbase and other exchanges often reward larger investors (with reduced trading fees and other benefits) for allowing portions of their deposits to be used to guarantee the exchange has enough of popularly-traded pairs of cryptocurrency to assure trades can be handled. For example, if someone wants to cash out of Ethereum and exchange it for a “stablecoin” such as Tether (USDT), the exchange needs to have enough USDT available in reserves to make that trade and fulfill the transaction. The same is true in the other direction.

DeFi exchanges do trades differently—they’re executed by a protocol built into their networks known as Automated Market Makers (AMMs). Smart contracts built into the DeFi network have to rapidly determine the relative value of the currencies being exchanged and execute the trade. Since there is no centralized pool of crypto for these distributed exchanges to pull from to complete trades, they rely on crowdsourcing to provide the pool of cryptocurrency capital required to complete a trade—a liquidity pool.

To create the liquidity pool—which usually handles transactions between a single pair of cryptocurrencies—investors commit equal values of both cryptocurrencies to the pool, tying them on the blockchain to the smart contract. In exchange for lending that crypto to the pool, the contributors get a reward based on a percentage of the trading fees associated with the DeFi protocol. The “mining” part comes from liquidity pool tokens (LP tokens)—a representation of the share of the liquidity pool contributed by the investor.

The LP tokens themselves are in essence another cryptocurrency, pegged to the value of the percentage of the pool they’re associated with.

Holding the tokens usually comes with benefits: a percentage of trading fees, and other rewards. There is also risk of loss—for example, the value of the pool of crypto may fall, and therefore the cashout value of the tokens could drop below the initial buy-in cost. But as long as the people behind the tokens don’t take the assets in the pool and run, there is at least a way for investors to get off the merry-go-round.

Unfortunately, there are several ways things can go awry if the people behind the liquidity pool are unethical—or flat-out criminal. There is no regulation of DeFi exchanges, and the only thing guaranteeing they’re on the up-and-up is the smart contract code built into the DeFi network’s (usually Ethereum-based) blockchain. But if the tokens get cancelled—or there was never really a pool backing them at all—that all goes out the window. There is ample opportunity for digital Ponzi schemes, fraudulent tokens, and flat-out theft.

Unfortunately for the crypto-curious, there are plenty of unethical and criminal “liquidity mining” schemes out there. Like the CryptoRom rings we’ve tracked, they use a variety of social media and messaging tools to approach potential victims (as well as spam emails). In some cases, they also use fake mobile applications and websites that emulate or fake connections to better-known organizations in blockchain-based trading.

Success has bred copycats in the crypto scam world, and each new variant of the schemes developed by those trying to expand on the CryptoRom/ sha zhu pan playbook tries to expand the pool of potential victims in different ways.

A lack of protections, regulation, reliable information on cryptocurrency investment and international cooperation by law enforcement in ending these schemes has created the perfect cover for well-run scams. With much of the world relying on social networking sites, WhatsApp and Telegram as a source for information, the scammers have turned to these platforms to lure victims and keep them engaged until as much money as possible is extracted from them—particularly targeting more vulnerable people who use these services in search of friends and companionship as well as ways to extend their wealth. To prevent even more widespread fraud, user education is vital. People need to be made aware that these scams exist, and how to spot them. Cryptocurrency exchanges, wallet providers, and others can move to rapidly block domains and wallets associated with scams.

Unfortunately, while law enforcement can take action in some cases, it is highly unlikely that these international scams can be shut down or interdicted by law enforcement alone. If you find yourself facing this problem, Donald Gallagher Consultants can help. Our Liquidity Mining Fraud recovery service offers something very different than other Liquidity Mining Fraud recovery services because of the partnership formed between the world’s elite computer specialists and one of the nation’s top cyber law experts. We are a trusted, nationally-renowned Investment Fraud recovery firm with a top rating across multiple countries, We are a team consisting of the best individuals offering digital security services in CyberSec to provide secure your lost Investments when called upon.

“Title insurance” is the best protection against this type of fraud. As well as protecting against title fraud, it also guards a new owner from against existing liens against a property’s title (such as unpaid debts from utilities, mortgages and unpaid property taxes), encroachment issues (a structure on a property needs to be removed because it is on your neighbour’s property) and errors in surveys and public records.

In addition to title fraud by strangers, there have been cases where fraud has been perpetrated by spouses and business partners. For instance, one spouse may mortgage a property for their own benefit by using an accomplice to impersonate their spouse. Fraud can also occur through breach of an undertaking, where the lawyer or notary fails to pay off and obtain a discharge of a mortgage, instead absconding with the funds that had been intended to be used to pay an existing mortgage.

Criminals and criminal enterprises can take advantage of property owners who find themselves in a cash crunch, being short on funds for liabilities such as mortgage payments or other purposes. Two common scams that exploit a victim’s need for cash are foreclosure fraud and home-equity fraud.oreclosure fraud occurs when a property owner who is having difficulty making mortgage payments is approached by a criminal offering a loan to cover expenses and consolidate loans, in exchange for upfront fees and an agreement to transfer the property title. However, in contrast to real debt consolidation programs, the criminal will keep all the payments made by the owner and ignore bills and taxes. The criminal then remortgages the property and absconds with the money, leaving the former property owner without the home but still in debt.

Cash-crunched property owners or investors seeking can be vulnerable to other scams or unscrupulous behaviour to tap equity. There is always risk when leveraging properties, but a legitimate bank, broker or private lender should be forthright when explaining risks. However, those looking to borrow on equity should be alert for less scrupulous lenders, such as those who invite owners to embellish their application by exaggerating income, down payment or property assessment value sources in order to secure a larger loan.

Organized crime groups often pretend they are buying or selling properties that are much larger, newer or more recently renovated than other homes in the area. These properties receive fraudulently inflated values through illicit property flipping from which a large mortgage is obtained. When the criminals deliberately default on the mortgage, financial institutions and end buyers are left with an overvalued mortgage (or worse, former property owners are without holdings, in debt and possibly implicated in the fraud).

In these scams, rental property is advertised (usually at low costs) on online classified sites like Craigslist or Kijiji. The ads use information and photos describing the property that has been “scraped” from legitimate ads, such as those on the MLS. A scammer will impersonate the landlord, property manager or estate agent and will respond to emails and calls from prospective tenants. The scammer indicates he or she is unable to meet a prospective renter at the property, and instead proposes a meeting off site to exchange keys, sign a tenancy agreement and collect rental deposits. Victims may only learn they’ve been duped when they show up at a property to discover that it is already occupied.

Provincial and regional Realtor and real estate associations have warned members to be alert for this type of fraud, which has been common in major markets, but there is little a property owner can do to prevent image or data scraping. Property owners can search for the addresses of their units on search engines and they can use services like Google Image Search to help discover if a scraped picture from MLS or another online source is being used illicitly. Property owners should also digitally watermark any photos they use in rental ads, including business contact details and website.

While rental scams are common, online classified advertising and social media have also been used for investment scams and property fraud. Things to be alert for in such listings include claims of urgency, such as “must sell now,” promises of high returns or “low-cost/no-cost” financing. These sort of claims are usually too good to be true, and they also can be prevalent in off-line scams.

Educating yourself about property investment can be essential for success, but prospective investors should be alert and do their research on seminar providers. There are legitimate speakers and seminars that provide beneficial information, others exist primarily to take money from the credulous … and there are some that are in between.

Prospective investors should be cautious when it comes to seminars or courses that offer investor education. The value of the information provided can vary wildly, as can the costs. Some may be free, with sponsorship by a company or association, others will charge money, ranging from nominal amounts to upwards of tens of thousands of dollars. Still, even if someone pays for a course that provides basic information that could be found through a simple Internet search, it does not mean that the seminar was a scam. A rip-off may charge excessive prices but be completely illegal, but a scam typically involves legal wrongdoing, misrepresentation or fraud.

One common type of seminar is designed to hook buyers into “sure-fire” investments that are promoted by the seminar hosts. Potential investors may be invited to these seminars through an ad in a newspaper or magazine, a phone call, an email or other method. These seminars may include a motivational speaker, an “investment expert” or a “self-made millionaire.”

As well as being cautious about big investments, property owners should be alert to smaller-level scams. The Canadian Council of Better Business Bureaus listed “rogue door-to-door contractors” as among their top 10 scams of 2013. These operators may come with unsolicited offers and deals that are too good to be true. Typical approaches include: offers to seal or repave a driveway, or a roofer who can work cheaply using leftover material from a previous job. BBB warns that fraudulent “contractors” will use high pressure sales tactics and offers of a one-time deal to entice consumers.

The BBB advises that property owners take the time to do due diligence. Property owners should get the company, name, address and ensure that all verbal promises are backed by a written contract. A scammer may ask for pay in cash or via a cheque and offer to come back at another time to finish the job. After cash changes hands, the BBB says, “you will probably never see them or your money again.” Generally, for the hiring of any contractor, it is advisable for a property owner to check references and ensure that the company or person has a reputation for fair dealing and quality work. This can be good sense when dealing with legitimate contractors, ensuring that you are likely to receive such as on-time and on-budget estimates.

If you’re considering paying for a program that promises to help you invest your money, stop and consider these things first:

Statistics and testimonials can be faked. Scammers want you to believe their program is always successful. They might show reviews or testimonials by people who’ve used their program and made lots of money. But those could be paid actors or made-up reviews. You have no way of confirming their stories.

Scammers exaggerate the significance of current events. Scammers follow the headlines and use current events to make their investment opportunity seem exciting, innovative, and timely. They want you to feel pressured to commit now without having fully researched the offer.

No one can guarantee a specific amount of return on an investment. Scammers might claim that you can make thousands of dollars per day or per month for life. But they don’t tell you the risks. No one can guarantee that an investment will be successful. And if you ask questions about the investment, they might give you vague answers and focus only on how much money you’ll supposedly make.

Scammers exaggerate the significance of current events. Scammers follow the headlines and use current events to make their investment opportunity seem exciting, innovative, and timely. They want you to feel pressured to commit now without having fully researched the offer.

Take time to research the offer. The promoters want you to think you’re one of the few lucky people who can get in on the program so they can rush you into making a decision. Don’t let them pressure you. Search online for the name of the company and words like “review,” “scam,” or “complaint.” Other people’s experience with the company can tip you off to possible problems.

Consider the risk. Be particularly suspicious of promoters who play down risk or make written risk disclosures sound like only routine formalities required by the government so you’d sign without thinking much about them. Later, when you try to recover the money you lost, dishonest promoters could use those same risk disclosures against you.

Independently verify claims. Never invest based solely on what you read in an online newsletter, bulletin board posting, or blog. Scammers often use news stories about the success of legitimate companies as bait. They’ll often claim that their “opportunity” is similar to a proven hot money-maker — when, really, it’s not. Make sure that you research the investment opportunity carefully before you commit.

Real investments demand time and careful consideration. Before you make an investment, it’s good to take time to consult someone you trust and who you know has your best interests in mind. It’s also important to do some research. Start by making sure your computer’s security software is up to date, and always practice basic computer security on any computer you use to access financial accounts. Then, once you’re ready to start researching the potential investments, here are some things to consider:

The company, its officials, and promoters might already have a reputation. Look for published information about the company. Do a search online with the name of the company, officials, or promoters plus words like “review,” “scam,” or “complaint.” Look through several pages of search results.

Many investment frauds involve offerings of unregistered securities. Generally, offers to sell securities must be registered with the SEC or be eligible for an exemption. To see whether an investment is registered, check the SEC’s EDGAR database and call your state securities regulator for more information about the company and the people promoting it.

Many securities frauds involve unlicensed individuals or unregistered firms. Check out the background, including registration or license status, of anyone recommending or selling an investment, using the free simple search tool on Investor.gov.

Find out where the company’s stock trades. Some companies can’t meet the listing requirements of a national securities exchange. The securities of these companies trade instead in the “over-the-counter” (OTC) market and are quoted either directly from a broker-dealer or on OTC trading systems, like the OTC Link ATS. Stocks that trade on the OTC market may have increased price volatility (drastic price changes in short periods of time), less publicly available information, and lack liquidity (the ability to buy and sell the stock quickly without substantially impacting its price). These factors make some OTC stocks more risky and susceptible to manipulation by scammers.