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Scammers are always looking for new ways to steal your money, and the massive growth of cryptocurrency in recent years has created plenty of opportunities for fraud. Cryptocurrency crime had a record-breaking year in 2021 – according to a report by blockchain data firm Chainalysis, fraudsters stole $14 billion of crypto that year. If you’re interested in crypto, it’s important to be aware of the risks. Read on to find out more about common crypto scams, how to spot them, and how to avoid them. Here are crypto red flags you should totally avoid.
1. Suspicious Team Member
With most investment businesses, it should be possible to find out who the key people behind it are. Usually, this means easy-to-find biographies of the people who run the investment plus an active presence on social media. If you can’t find out who is running a cryptocurrency, be cautious.
2. Pore over the white paper
Every cryptocurrency should have a whitepaper since this is one of the most critical aspects of an initial coin offering. The whitepaper should explain how the cryptocurrency has been designed and how it will work. If the whitepaper doesn’t make sense – or worse, doesn’t exist. The whitepaper should lay out the background, goals, strategy, concerns, and timeline for implementation for any blockchain-related project. Whitepapers can be incredibly revealing: companies that have a flashy website may reveal they lack a fundamentally sound concept. White papers should always identify the members and developers behind the cryptocurrency. There are cases where an open-source crypto project might not have named developers—but this is typical for open-source. Most coding, comments, and discussions can be viewed on Github or GitLab. Some projects use forums and applications like Discord for discussion. If you can't find any of these and the white paper is full of errors, it is likely a scam. These people will try to contact you ,dm you on social media and pretend to be employees or traders.
3. To good to be true
Companies that promise guaranteed returns or to make you rich overnight are likely to be scams. If something seems too good to be true. Crypto industry experts have also said that if any crypto platform is giving very high yields, that's the first red flag. “Dubious and non-descript crypto platforms offer “too-good-to-be-true” returns on digital assets. No financial investment can guarantee future returns because investments can go down as well as up. If you spot a platform offering very high yields, that's the first red flag.
4. Heavy Marketing
All businesses promote themselves. But one way that crypto fraudsters attract people is by investing in heavy marketing – online advertising, paid influencers, offline promotion, and so on. This is designed to reach as many people as possible in the shortest time possible – to raise money fast. If you feel that the marketing for a crypto offering seems heavy-handed or makes extravagant claims without backing them up, pause and do further research.
