Before you try to avoid a crypto scam, you should know how to identify one. Read more about how to buy crypto online.
Here are some red flags:
Promises of guaranteed returns:
There is not a single financial investment where you have guaranteed returns since investments are subject to market risks and thus can fall in value. If any crypto offering guarantees that you are going to make money, you should take that with a pinch of salt. Also Read
A poor or non-existent whitepaper:
All cryptocurrencies need to have a white paper as it is one of the most important parts of an initial coin offering. The white paper provides an explanation of the design of a cryptocurrency and how it operates. In situations when the white paper appears bizarre or just does not exist, you should take that as a big white flag.
Every business would put some effort in promotions. However, crypto fraudsters would leave no stone unturned to gain the attention of a large number of people in a short span of time. They tend to make heavy investments in marketing through online advertising, paid influencers, offline promotion, etc. If you feel suspicious about the marketing and it seems like the claims are not backed up, it is wise to stop and conduct proper research.
Unnamed team members:
Any good investment business will be very vocal about the people behind them since it adds to their own credibility. The biographies of the people backing the investment will be easily available or they may be actively present online. Thus, if there is no clarity about the people operating a cryptocurrency, you should tread carefully.
An investment opportunity that offers you free money in the form of cash or cryptocurrency is probably fake.
Here are some common crypto scams that you should be aware of:
Scammers may create crypto trading platforms that are not genuine. They also come up with fake versions of some popular crypto wallets and many would not be able to tell the difference. These fake websites would have domain names that are similar to some genuine sites but there would be a slight difference that you should be able to spot.
Online wallet details are often the target of crypto phishing scams. They are attempts to get access to private keys of a crypto wallet that would eventually allow access to funds that lie inside the wallet. Their operations are similar to other phishing attempts and tend to also have fake websites to appear genuine. Often, they send a lucrative email that redirects people to a website they’ve created and asks them for their private key details.
Pump and dump schemes
A scheme like this will have a certain coin or token that is aggressively pushed by scamsters via email chains and through social networking sites. Traders might not be able to spot the scam immediately and thus, they end up buying the coins to avoid FOMO which catapults the prices. As the prices inflate, the fraudsters sell their assets and which leads to a downfall of value in just a matter of a few minutes!
Fake apps are yet another common method of luring cryptocurrency investors. There are many such apps that can be downloaded for both android and iOS platforms. Though these apps are identified rather quickly and removed from the platforms, in most cases, the damage is already done.
Fake celebrity endorsements
In some cases, crypto scammers may claim that they’re being endorsed by a top celebrity, business, or influencer. It may involve selling such ‘cryptocurrencies’ that do not exist in the first place to new investors. Often these types of scams are well polished with flashy websites and brochures.
In a giveaway scam, one may be promised to get a match or possibly multiply the cryptocurrency that is sent to them. This may appear like a one-in-a-million kind of an opportunity that’s often accompanied by clever messaging coming through a seemingly valid social media account.
Cloud mining scams
There are some companies that let you rent mining hardware they work with for a set fee and a part of the revenue that you eventually make. This is known as cloud mining. Though they reportedly allow people to mine crypto remotely, most if not all such cloud mining firms are not genuine.
Fraudulent initial coin offerings (ICOs)
An initial coin offering or ICO allows crypto companies, particularly startups to raise funds from potential future users. The process usually involves an offer of discounted rates on new crypto coins when they’re paid for using active cryptocurrencies such as Bitcoin, Ethereum, etc. However, all ICOs aren’t genuine and cybercriminals are going to great lengths to deceive customers.
Protect yourself from these scams
Crypto frauds may not always be easy to identify. Thus, you should consider the following steps to keep yourself protected.
Protect your wallet:
A cryptocurrency investment requires a digital wallet with private keys. If you’re being asked to share your private keys so you can get onto an investment opportunity, chances are that it’s an attempt to scam. Your private keys must remain private at all times.
Keep an eye on your wallet app:
When you transfer money for the first time, send only a small amount to verify the legitimacy of the crypto wallet app. If you notice some unusual and suspicious activity on the app while installing an update, stop the update and uninstall the app.
Only invest in things you understand:
Don’t understand how a certain cryptocurrency works? Take it easy and do your research to learn more about it before investing.
Take your time:
Scammers want more investment in a short time so they can accumulate funds and exit the market as soon as possible. Thus, they will try and pressurise you to invest right away. Take a step back and spend some time doing proper research before you start investing.
Be wary of social media adverts:
Crypto scammers tend to rely on social media to push their schemes. To appear genuine, they may use unauthorized images of celebrities or high-profile business people or promise giveaways and cash. Exercise caution and proceed only once you have researched well.