How to identify a Cryptocurrency Scam?

The cryptocurrency space is dominated by major names. For instance, everyone knows that Vitalik Buterin is synonymous with Ethereum, having been the most prominent person in the project. For that reason, it's increasingly common for scammers to invent fake founders and biographies for their projects. In addition, some of these scammers will also pretend to be Bitflex representatives or insiders to increase their credibility to scam you. 

The best protection against this fraudulent tactic is to thoroughly research the individual team members of a project before you invest. It's a bad sign, for example, if you're unable to find any information about a particular developer or founder on LinkedIn/ Facebook or if the social media accounts associated with the Bitflex representative do not look credible (ie. The accounts were newly created with no engagement with their followers or do not have sufficient content to justify it being a real person), then it is best to avoid communicating with these sources. 

In addition, do look for the following red flags:  

1. Lack of Credible and Historical Information 

Projects with no technical information, no white paper, or no information about the team.  The best way to check for a project's team members is on the LinkedIn platform. Real people will have more shared information posted to the public regarding their past projects and achievements, especially if they are in more senior positions. 

2. Illogical Investment Returns that Defy Logic 

Promises of high or guaranteed returns within short periods.  Just remember the adage: If something seems too good to be true, it probably is.

3. Phishing scams

Scammers target crypto wallet private keys, which are required to access funds within the wallet. Their method of working is similar to other phishing attempts and related to the fake websites described above. They send you an email to lure you to a specially created website where you will need to enter private key information. Once the hackers have acquired this information, they will steal the cryptocurrency in those wallets.

4 . Fake Websites

If you are unsure about a website, remember that even something as simple as clicking the wrong link could potentially put your assets at risk. Always cross-check the social media accounts linked to the website or the customer service number provided on the website to determine if they are credible.

5. Pump and Dump schemes

This involves a particular coin or token being hyped by fraudsters through an email blast or social media such as Twitter, Facebook, Discord, or Telegram. Due to the Fear of Missing Out (FOMO), traders rush to buy the coins, driving up the price. Having succeeded in inflating the price, the scammers then sell their holdings – which causes a crash as the asset's value sharply declines (rug-pull). This can happen within minutes.

6. Giveaway Scams

This is where scammers will promise to match or multiply the cryptocurrency that you are asked to send to them. They will usually employ clever messaging tactics on social media especially on Twitter and Facebook using multiple accounts that make it seems as though their proposed giveaways are legitimate as there will be several accounts communicating with each other positively to generate interest and a sense of urgency on a particular scheme. In reality, this supposed ‘once-in-a-lifetime’ opportunity can lead people to transfer funds quickly to scammers in the hope of an instant return.

7. Fake Celebrity Endorsements

Crypto scammers sometimes pose as or claim endorsements from celebrities, businesspeople, or influencers to capture the attention of potential targets. Usually, they would pretend to be well-known names in the crypto or entertainment world.  These scams can be sophisticated, involving well-built and aesthetic websites and brochures that appear to show celebrity endorsements from household names such as Elon Musk or Cristiano Ronaldo. Even the images or videos of the so-called celebrities that appear in these ads at the first glance seem legitimate but this was because they were potentially altered using the Deepfake AI technology.