The crypto-verse has been steadily becoming more and more widespread during the past few years now. And its notorious volatility is the least of your worries. With emerging markets come scams and bad actors. Crypto is no exception to this rule.
You need to know how to avoid these scammers and protect your money or confidential information from them. But before we get to that, let's just quickly go over what we mean by a 'fake exchange' to avoid any confusion.
What Exactly Is a 'Fake' Crypto Exchange?
Defining fake crypto exchanges is not all that hard.
- They imitate a popular exchange. For example, a fake exchange by the name of www.binance.com or www.binance.com is trying to imitate www.binance.com. These fakers will often use an identical website to the original one.
- They don't actually trade your coins. So if you "buy" Dogecoins with your existing funds, the exchange will show you have some Dogecoin in your account. But when you try to withdraw anything, you get stuck. So all you're left with is a screen that says you have coins, without the ability to ever actually use them.
- They steal your information. Whether it's through KYC form or sign-up information, these scams will take and use your private information for malicious purposes.
How Do These Scams Make Profits?
- Fund Transfers
Some scams involve 'initial fees' like registration or a principal investment you can expect returns on afterward.
Once the scammers get your funds, you can say goodbye to your money.
- Data Breaches
Your financial data is just as important as the funds themselves. If someone gets the private keys to your wallet, they have access to those funds.
So some scams collect your personal or financial data to take control of your funds.
How to Detect Fake Crypto Exchange Websites:
- Too Good to be True? It Probably Is.
Like most scams, crypto exchange scams offer you gold in return for dust. What's a few dollars of investment when you are getting hundreds back, right? Wrong. You won't be getting anything back. Maybe not even a reply.
Get-rich-quick, and 'it's free cryptocurrency' schemes are probably a trap and, by far, the biggest sign of a scam.
- Unsecure Connection
You do not need to know exactly what an SSL certificate does. But it basically establishes an encrypted connection between the site and your browser. This takes you out of harm's way in case some third party might come snooping and sweep your credentials.
When websites do not have an SSL certificate or the connection between you and the website is not secure, it will look something like this:
This is a red flag. No legitimate cryptocurrency exchange will lack a proper encrypted connection. In fact, this also applies to any other website you might visit. Whatever website you are on is unsafe if the address bar looks like the image above. This is why Google Chrome blocks access to this kind of site.
- Subtle Changes in the Site Address
According to a recent study, half of all online phishing websites use SSL certificates. So just making sure there's a padlock in the address is nowhere near enough security.
You need to make sure there are no subtle changes to the URL you might be missing. For example:
By simply adding some extra letters, fake URLs can seem quite convincing.
The hardest of these changes are , fancy-speak for weird letters like
This kind of change is very hard to catch, and we will suggest a solution in the next section.
- Dodgy Websites and Messages
One of the most common giveaways with any scam is the lack of an eye for detail. Things like spelling or grammar mistakes and blurry images on the homepage can indicate a potential scam.
That being said, successful scams are always smart. So do not consider every good-looking website a friend. Scammers will often use SSLs, professional-looking websites, and testimonials to prove they are legit. The trick is to always do background research on the exchange.
As a rule of thumb, never go with novel and obscure exchanges. There are plenty of extremely well-established exchanges out there with squeaky clean histories. If you want to trade cryptos, go to these sites.
However, if you are interested in a new exchange, make sure they are legit beforehand.
- Partnerships
Last but not least, before signing up on a new exchange site, take a good long look at the website's homepage. Usually, exchanges or any major website have their partnerships listed on the homepage. This helps attract investors and prove legitimacy.
So if a new exchange site does not have any solid partnerships or endorsements, you might want to steer clear of it.
4 Ways to Avoid These Scams
Now that you know the problem let's look at the solutions.
- Be Realistic
The crypto boom came with a lot of overnight millionaire stories. These stories might have created the notion of crypto being a get-rich-quick scheme. This is generally not accurate.
For every crypto millionaire, there are many more scam victims. So if somebody tells you that they can absolutely guarantee a 200% return on your "investment" in a day or two, the only person that will make money in that deal is them.
- Manually Entering URLs
URLs are a big deal if you want to avoid online scams. We know manually typing a URL is not the highlight of anyone's day. But if you want to avoid scams, going the extra mile is worth it.
Note that we do not mean entering a round-about URL on Google Search and going for the first result that comes up. Although Google's Safe Browsing should help fish out the phishers, you do not want to take any chances. So type the complete URL straight in the address bar, with .com (or whatever extension there is) at the end.
- Bookmarking
Once you are absolutely sure about an exchange website, bookmark it. This way, you take out any chances of fake websites and scammers. Bookmarks are also quick and convenient so you might as well get used to them.
- Verification Tools
Lastly, you can use tools and browser extensions to verify a crypto exchange.
For example, you can use the Cryptonite extension on Chrome. It should work well for most cases since you probably do not want anything to do with new exchanges anyway.
Bottom Line
Anything too good to be true probably is so. There are plenty of fishermen out there with their professional-looking websites and testimonials, waiting for you to fall prey.
Hopefully, you can avoid these traps and save yourself a big old chunk of misery and financial heartache with the steps listed here.
