Investing and trading in cryptocurrencies offers plenty of exciting opportunities. On the same hand, it is rife with potential scams and its lack of consistent regulations makes it a favorite for grifters and thieves. It is all too easy in this day and age to fall victim to a good ol’ crypto scam.
Though current crypto news is filled with stories about scammers getting one over on innocent investors, it doesn’t have to be that way. With a little guidance, you can avoid the most common red flags and keep yourself protected from being the latest victim in a crypto scam.
The Five Biggest Signs That You are Dealing with a Crypto Scam
The key to avoiding a scam is to know how to spot one from a mile away. As scammers learn to be more creative and believable, it is up to investors to educate themselves against possible attacks. With that being said, let’s take a look at the biggest red flags that signal a cryptocurrency scam may be coming.
Honorable Mentions
There isn’t enough space for every red flag indicating a crypto scam. That said, just because something isn’t mentioned below doesn’t mean that it isn’t worth mentioning. That is why we compiled a short list of honorable mentions.
Fake websites. More often than not, fraudulent crypto trading platforms are presented in a way that they look like a legitimate site. For those who don’t know what to look for, it can be difficult to tell the difference. Do not share financial or personal information without being 100% certain that the site in question is legitimate. More often than not, these websites would have much in the way of contact info (because they don’t want you to be able to contact them).
“No experience needed.” When talking to someone or checking out a website regarding a potential cryptocurrency opportunity, you may hear that you don’t need to worry about a perceived lack of trading knowledge. More often than not, scammers will insist that everything is done for you, and you don’t need to know anything. Always arm yourself with more information, regardless of what it is.
Unsolicited calls or emails. It is one thing if you openly seek out a site with plans to invest. But when you keep getting phone calls or emails from out of the blue, it should be an immediate red flag that something is up. More often than not, these cold communications will request personal information, including banking and crypto wallet details; do not fall for it.
Pay more, get less. We all want to get in and make big money without having to make a huge investment. Most of the time, it’s simply not going to work that way. A common pitch is that you have to provide a certain amount of money before being able to make a withdrawal. By this point, you’re probably in too deep but don’t compound the issue by giving them more money.
1.) Celebrity Endorsements That Don’t Seem Right
A common mistake many of us make is trusting a product endorsed by a celebrity. The problem with that, especially in the age of AI, is that many fraudsters impersonate public figures. They do this to promote some kind of fake coin or other crypto investment. With Donald Trump’s election as president, there has been a litany of Trump-themed coins that have made it easy for scammers to get one by investors.
Even if a project looks legitimately linked to a celebrity figure, verify it through any number of official channels. Unfortunately, there is a litany of deepfake videos put out there, with the average American encountering roughly three per day.
2.) If It Sounds Too Good to Be True, It Probably Is
One of the most common tactics that scammers use in any walk of life is the promise of guaranteed returns or profits that sound impossibly high. If you are being presented with an investment that offers “risk-free” earnings or sounds like some kind of miracle, it is almost certainly a scam.
A natural part of investing is inherent risk. Even in the “safest” investments, there is always the chance of losing money. Crypto Ponzi schemes will offer guaranteed daily profits but then use the funds to pay early participants in the scheme until everything falls apart like a house of cards.
3.) Pressure Tactics
Scammers work best when their potential target feels a sense of urgency. In plenty of instances, they will push for potential targets to act quickly, keeping those targets from stopping to apply critical thinking to the situation.
Whether it be “secret investment opportunities”, a “limited time sale,” or some other time-based tactic, do not fall for it. Fear of missing out (FOMO) can be dangerous if it gets in the way of your judgment.
4.) Fake Exchanges and Wallets
Fraudulent crypto exchanges pop up all the time with scammers hoping to take advantage of unsuspecting investors. These wallet apps or exchanges are designed in a way that makes them look legitimate, but they work to steal your money.
These exchanges advertise special bonuses, exclusive access, low fees, and more in order to attract users. Stick with exchanges that have proven track records, look for HTTPS encryption, and research the platform in question to ensure that it is licensed.
5.) Upfront Payment Requests
There are a few ways to know that the crypto platform you are dealing with is legitimate. One of the things that a legitimate platform will never, ever do is ask you for a wallet seed phrase or private key, payments via wire transfers or gift cards, or an upfront fee required to withdraw funds.
This happens after signing up for a crypto scheme. They require you do provide private information that would not be required otherwise. If you’ve made a deposit of any kind, it may be too late to get that money back, but you can save yourself even further heartbreak.
How to Steer Clear of Crypto Scams
Knowing how to spot these schemes from afar is important. Though it is possible to get out of a sticky situation, avoiding them altogether is much easier. Here are a few quick tips to keep you out of trouble.
Check regulatory status. You can see whether a platform is licensed (SEC, DFPI, or other) with a cursory search. If it isn’t licensed, stay away.
Do your homework. It isn’t hard to do research. There is a lot of information out there about existing platforms, including reviews. A quick search will tell you if what you’re looking at is a scam or not.
Use cold storage. Keeping your assets in a hardware wallet can help insulate you against any potential attacks, even if your information has been compromised.
Verify the website/socials. Scammers created cryptocurrency websites that look legitimate. Look into the website, check URLs, and verify socials before going forward.
Avoiding scammers isn’t as hard as it seems. Exercise patience, critical thinking, and precaution, and you can stay safe in a world that can sometimes feel like the Wild West.
