Cryptocurrency is one of the most exciting investment opportunities available today. Unfortunately, like any other emerging market, it comes with its fair share of risks. Many fraudsters have started crypto scams to take advantage of eager investors.
New crypto businesses open every day, and with them, new cryptocurrency scams appear. You can’t expect to stay ahead of all fraudulent activity, but you can learn to recognize common signs. Here are five types of crypto scams you should watch out for and how to spot them.
1. Fraudulent Initial Coin Offerings
When a new cryptocurrency launches, they often provide an initial coin offering (ICO), like an IPO in a traditional startup. This exchange presents an ideal opportunity for fraudsters, who offer fake ICOs and take investors’ money without delivering the promised tokens. Thankfully, you can confirm whether a new cryptocurrency is legitimate in a few different ways.
First, look up the project’s members on sites like LinkedIn. If you can’t find their profiles, they seem inactive or their history doesn’t add up, then the project is likely fraudulent. Companies that don’t offer whitepapers are also usually untrustworthy.
2. Fake Crypto Investment Websites
You may choose to avoid investing in new cryptocurrencies, but some crypto scams target users of more established currencies. Many websites seem to offer an investment opportunity involving currencies like Bitcoin and Ethereum. These ask for a small crypto payment in exchange for substantial returns but don’t deliver on their end.
Before investing in any site, ask a crypto forum about it to see if anyone can confirm its legitimacy. If the site claims to have ties to a reliable third party like CoinDesk, ask that third party about it. If nothing else, remember that if a deal seems too good to be true, it probably is.
3. Email Scams
Emails offering attractive opportunities are a common type of scam, and they’ve made their way into the crypto space. Like website scams, these typically promise a substantial return on investment for a small payment. Unlike many fake websites, though, these emails often look like they’re from real, legitimate sources.
If you get a suspicious email claiming to be from a real authority like Coinbase or Binance, scrutinize it closely. Look for typos or any discrepancies in addresses or websites between the email and the source it claims to represent. Most importantly, never send money through a link you get in an email.
4. Malicious Crypto Apps
Crypto and mobile technologies seem to fit together naturally, and scammers take advantage of that. Many apps claim to be crypto exchanges or peer-to-peer lending apps but will steal from you or install malware instead. Since users tend to trust app stores, more than 10,000 people have downloaded these apps.
App store vetting processes don’t catch everything, so you can’t trust an app just because it’s on the official store. Look at the reviews of an app before downloading it and avoid anything with low ratings. Typos and off-looking “official” logos are also frequent signs of a fake.
5. Social Media Hacks
In July, many high-profile Twitter accounts asked followers to send cryptocurrency to an address to receive double the amount in return. Many users gave away their money willingly because these messages came from the real Twitter accounts of real celebrities. It turned out, though, that someone had hacked into their profiles.
Remember that no person or company is immune to a hack. If you see a message from a legitimate source that seems uncharacteristic, it may be fake. It’s better to be safe than sorry, so never send money through a link on social media, even if it’s from a trusted source.
Stay Aware of Crypto Scams to Stay Safe
There are countless crypto scams out there, but you don’t need to know them all. If you can recognize the common warning signs of a scam, you can stay safe. Any investment opportunity involves some risk, but these suspicious situations are not risks worth taking.
Learn to spot these scams so you can protect your hard-earned money. When you know about the common red flags, you can get involved with crypto without fear.
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