12 Tips for Avoiding a Crypto Scam

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People get ripped off online all the time. They especially get ripped off in the world of cryptocurrency. You may even know a person whos had their savings wiped out by a phony alt-coin. To keep you out of a similar situation, heres a list (by no means exhaustive) of a few suggestions on how to avoid all that.

#1: Dont Invest in Crypto Photo: Michael M. Santiago, Getty Images

Lets get this out of the way. At the risk of sounding like a high school health teacher, we all know that the surest way to avoid gonorrhea is to practice abstinence. Avoid drug addictions by not doing drugs, yadda yadda. But the point stands: the surest way to avoid losing your life savings in a cryptocurrency scam is to not invest in cryptocurrency at all.

Youve heard this from us before, but well say it again: Many people particularly those in the financial industry have warned that crypto itself is basically a big scam…or, at least, that its a vacuous bubble doomed to implode (someday).

Whether you choose to listen to the likes of Warren Buffet or to Peter Thiel is up to you, but I would personally advise a Web3-free lifestyle.

#2: If You Have To Invest, Do Your Research Photo: Jack Taylor, Getty Images

OK, ok, if you decide that you must invest in cryptocurrency, then the very least you can do is spend time researching the assets and platforms you plan to invest in. You should spend a lot of time, proportional to how much youre investing. Like, pretend youre buying a house.

A lot of the people who get scammed are newcomers to the crypto industry (though victims run the gamut in experience level), which makes a lot of sense, since crypto is pretty damn complicated. Its easy to get lost in the labyrinth of terms, assets, and traders. Organizational complexity broader money transfers is usually the perfect formula for fraud to take place, so heres a couple suggestions:

Research the company or platform that youre thinking about investing in. Who are the developers behind the project? How big is the team? How trusted are the people? Do they have LinkedIn profiles and socials? Do they have a proven track record of working on other crypto projects? Does the asset have any notable investors behind it that would lend it credibility? Carefully examine the websites connected to the platforms and applications that youre using. Make sure that they aren’t lookalike apps designed to fool you. Vet them for professionalism and authenticity. Consider asking someone who works in the cryptocurrency industry and whom you trust for advice on whether to invest in a particular project or not. Assess whether there is a real community around the platform or coin that youre considering putting money into, or whether its just one creep on the internet making big promises to you.

In short: do your homework!

#3: Start Small and Stay Small Photo: JUSTIN TALLIS/AFP, Getty Images

According to a review of the evidence by Time, when investing in crypto, you should only ever invest the amount that youre willing to lose. Think of it like gambling. If that doesnt exactly inspire confidence, Im not sure what to tell you other than please review slide #1. Indeed, experts say that your crypto investments should never rise above 5 per cent of your overall portfolio. Many a sob story has been told about a green investor putting their life savings into a platform or coin, only to realize that it was a scam and lose everything.

#4: Secure Your Wallet Photo: GEOFFROY VAN DER HASSELT/AFP, Getty Images

Like your real wallet, your crypto wallet is where you store all your cash. Just like you wouldn’t want someone to pick your pocket, you dont want some digital miscreant to get inside your online one either. The security of your wallet depends on the kind that youre using, but suffice it to say: keep that thing locked down. Never give out permissions or personal information related to it to an internet rando. There are tons of how-to security guides, so check those out.

#5: Read a Coins White Paper, But Dont Take It Too Seriously Screenshot: Lucas Ropek/Ethereum white paper

Its always a good idea to give that white paper a read, even if a lot of crypto pitches, manifestos, and technical descriptions end up being half a crock. The white paper is supposed to be the bedrock of credibility upon which a Web3 platform rests. Its the business plan and the vision behind the company and its coin and it usually espouses the revolutionary technology being used to make all that happen. Yet an investigation by Decrypt not long ago showed that a lot of white papers are written by contractors with limited technical knowledge of the concepts theyre writing about and many contractors are called upon to fabricate and exaggerate facts, according to the review. Still, maybe worth a read. If a company can’t even hire people to write or proofread their big claims, that might be a red flag of a larger scam at work.

#6: Guarantees of Big Returns Are Bullshit Photo: LUIS ROBAYO/AFP, Getty Images

Hucksters have been promising free and easy money since before the dawn of the New York Stock Exchange, and Web3, transformative as its supposed to be, hasnt changed that.

While many scammers may promise big returns and tell you that you cant go wrong with their product, government regulators say that those promises are bunk. Nothing is certain in life especially not financial investments, and definitely not investments in a speculative digital coin that you just heard about two weeks ago. The FTC writes:

The value of a cryptocurrency can change rapidly, even changing by the hour. And the amount of the change can be significant. It depends on many factors, including supply and demand. Cryptocurrencies tend to be more volatile than more traditional investments, such as stocks and bonds. An investment thats worth thousands of dollars today might be worth only hundreds tomorrow. And, if the value goes down, there’s no guarantee it will go up again.

Wise words!

#7: Stay Away From Online Crypto Baes Photo: DENIS CHARLET/AFP, Getty Images

If someone reaches out to you on Tinder and suggests that you invest in their new DAO, best to un-match immediately. We recently wrote about the noxious trend known as pig butchering, wherein criminal-syndicate-backed fraudsters perpetrate romance scams on lonely web users and take them for all theyve got. A lot of these scams begin on popular dating apps (Tinder, Bumble, Hinge, and others) and then slowly transition into money-thieving nightmares. All the more reason not to date anybody who professes interest in Web3.

#8: Ignore Celebrity Endorsements Photo: ANGELA WEISS/AFP, Getty Images

A flood of celebrities have recently decided its a great idea to shill for crypto. It may seem strange at first, but the answer to Why? is that the celebs want money. But just because your favorite pop star has decided to endorse some newfangled alt-coin, that doesnt mean that its a worthy investment (it probably just means the pop star wanted a new yacht and Big Crypto was willing to pay for it).

Last year, Kim Kardashian got sued for promoting what turned out to be a pump and dump scheme, according to a lawsuit against the billionaire and others involved. Even if your favorite reality TV star gives you investment advice, you probably shouldn’t take it.

#9: Beware of Lookalike Scams Photo: Marco Bello, Getty Images

One of the most common types of cryptocurrency scam is the lookalike scam, wherein cybercriminals use phony apps and websites that look just like the websites of popular cryptocurrency platforms and products. In just one report published earlier this year, cybersecurity analysts found a total of 249 fake cryptocurrency wallet apps for iOS and Android that were being used to steal millions of dollars in crypto from unsuspecting users. Theres likely a whole lot more where that came from. The best way to make sure youre not being taken advantage of is to thoroughly investigate the platforms and applications youre using and vet them for signs of shadiness.

#10: Beware of Rug Pulls Photo: Marco Bello, Getty Images

Of all the crypto scams, the rug-pull is one of the most dramatic. It occurs when the developers of a particular crypto project suddenly pull out of the project and take all of the investors money with them. The thieves then typically abscond to some unknown country with the winnings and are never heard from again. Last year, approximately $US7.7 ($11) billion is estimated to have been lost to such scams.

How do you tell if a company is a rug-pull waiting to happen? You cant know for sure, obviously, but typically, these organizations are new startups, and sometimes the backers are unknown or do not give full information about themselves, according to CoinTelegraph. Over promotion can also be a sign of shadiness, as it may demonstrate an attempt to conceal a lack of substance. A lack of transparency around code audits is also a bad sign.

In general, you should vet an organization for how much it reveals about its developers which can be quite hard to do, given the crypto communitys love of anonymity and privacy.

#11: Beware of All This Shit

In the preceding slides, we highlighted some of the most common crypto scams (romance scams, fake apps, and rug pulls), but its worth noting that theres a whole helluva lot more out there. To name a few:

Ponzi schemes Impersonation scams Initial coin offering scams Fraudulent or inflated offerings

…And, of course, even if you keep your crypto at a reputable Web3 platform, theres always the possibility that cybercriminals will find some security deficiency in the platform and manage to hack your money right out of it. This has already happened quite a lot in this year alone. So watch out!

#12: Finally, Dont Invest in Crypto Photo: Marco Bello, Getty Images

Well, it looks like weve come full circle. If you dont have millions of dollars to pointlessly burn, I would, again, highly suggest that you not invest in cryptocurrency. Just dont do it. Use real money governed by a regulating body, not fake money made by strangers on the internet. Lets face it Bitcoin and its ilk are for the idle rich! Bitcoin is too expensive. Unless youre a millionaire with no concept of fiscal responsibility, Bitcoin is pretty much for bozos! You dont want to be a bozo, do you? If Seinfeld were still on TV, we all know that both Kramer and George would be investing in Bitcoin, and its clear that theyre the two most bozo-ish characters on the show. I think I’ve run out of ways to say the same thing, so I will say just goodbye. Don’t do it.

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