With the recent boom of the crypto industry, a great number of startup projects are being launched every day. Unfortunately, a huge number of these diminish in just a few days of operations. In November 2020, there were 1,730 startups that have failed according to a report by Coinopsy. Scam contributes to the closure of a huge number of these crypto startup projects. In a report by the Washington Post, the number of crypto scams has spiked to 1,000 percent, and victims were defrauded of $80M. As further stated in the report, the FTC has received almost 7,000 scam reports during the last quarter of 2020 until the first quarter of 2021. scams So if you are new in the crypto space and want to invest, how do you avoid becoming a victim of these fraudsters?

We have recently published an article that tackles the different kinds of scams used by bad actors to defraud their unwitting victims. Here are some of the famous schemes that scammers use to lure their victims.

  • Fake ICO (Initial Coin Offering)
  • Shade Exchanges
  • Ponzi Schemes

Among the biggest scams in crypto history, OneCoin is considered the mother of all scams. The unscrupulous people behind the scam have used the Ponzi scheme and defrauded their victims with a whopping $15 billion. But despite the horrendous history behind it, still a lot of investors today still fall for the same scheme. The promise of high profit with little or no risk seems like a magnet that attracts most victims to invest their money and fall into the traps of these swindlers.

Scam: How to Determine One

In this article, we are going to present a simple guide on how to spot a scam crypto project. 

  1. Before investing in a project, get to know the company behind it. The internet space is teeming with data so check all available information on its founders. Check if they are affiliated with other projects that have turned into a scam. If so, possibilities are high that their next project is also another scam.
  2. If it promises a high yield, sure profit with no risk, think again. Most cryptocurrency projects are high risk, which is why experts in the field often advise new investors in the industry to invest only what they can afford to lose.
  3. They put pressure on you to make a rushed decision. They are in a hurry to get a hand of your hard-earned money. There may be times that they namedrop big investors in the industry who have already invested in the project. Other projects have even used well-known celebrities in the past to defraud victims. Don’t ever fall for this. Centra Tech, a blockchain company founded in 2017 has tapped boxing champ Mayweather and DJ Khaled to endorse the project. Using the power of social media, these two endorsers have enticed their followers to invest in the project and have received compensation in return. Centra Tech became a $25M ICO scam and both were charged and later on fined by the US SEC.
  4. Beware of spams. Scammers use this scheme very often. You may receive an email out of nowhere or a call from a stranger. Do not fall for the sweet talk. These frauds are usually sweet talkers. 
  5. Whitepaper. This is a must. A crypto project before its launching should have one. Details on the genesis of the project, roadmap, information on its founders, and use cases can be read here. This could give you tell-tale signs if it will turn into an exit scam.

These things are just basic and a must for any investor planning to invest in any type of investment whether in the crypto or any other industry. But when we are presented with high profits without working so hard, the idea can be very enticing. In the end, we get blinded and fall victim to scammers because we tend to turn a blind eye to these basic things. Sometimes our greed becomes too excessive and we lose sight of the fundamentals of investing. We fall prey to their launched maneuvers like FOMO (fear of missing out). They make us feel that we are losing something big and regret it after. When it happens, we neglect the basic things and later on would regret losing our money to fraudsters. So, before investing in any crypto project in the future whether you’re a so-called expert or a newbie in the crypto world, be sure to follow these basic steps. If you have any doubts about any project, do not invest. There are a lot of legitimate crypto projects where you can invest. These may not promise high profits with no risk since investing in crypto is already a high-risk investment but these projects are sustainable with real use cases. They may not offer instant profits since growth cannot be obtained overnight but will eventually are here to stay. With blockchain, these projects will implement innovations and even revolutions in major industries in the real world.