Crypto Scams And How To Avoid Them

crypto scam
crypto scam

Attracted by the huge money in the market, the cryptocurrency market has now become a hub for scammers and hackers to carry out their fraudulent activities. However, it is important to learn how to protect yourself in this market especially if you’re a beginner in order not to fall a victim.

This guide attempt to uncover some of the scams you should be wary of in the crypto market and how to avoid them.

Fake ICOs

Initial coin offering offers start-ups the opportunity to raise a significant amount of money in a relatively short period. Due to this scammers claimed to be developers have found initial coin offering (ICO) as one of the areas they can easily exploit funds. The ICO market is currently seeing an influx of new projects claiming to solve one problem or the other.  According to a research study, 80% of the ICOs conducted in 2017 were scams.

Many of these fake ICOs often have false information, such as fake team members, advisor, bad website, vague roadmaps and some use multi-level marketing ‘referral’ to attract investors. To protect yourself from this kind of scam it is important that you do a due diligence on any project you intend to invest. Ensure you check every detail. One common practice of fake ICOs is their whitepaper are often plagiarised.

Fake Cryptocurrency Exchanges

Crypto exchanges provide individuals a platform to buy or sell or exchange their crypto coins for other cryptocurrencies or fiat currency. Just like ICOs, the numbers of crypto exchanges in the market is on the increase. Traditional exchanges like stocks, forex are guided by a regulatory framework which includes AML/KYC. However, most exchanges in the crypto sphere are not monitored by a regulatory body in their respective countries.

In June 2018 Ukraine cyber police uncover six fake cryptocurrency exchanges.  It is therefore important to be cautious of the crypto exchanges that promise unrealistic discounts. Pay attention to details such as the website ‘About us’ page, URL, ensure it includes ‘https’ this tells you if the traffic between your device and the website is encrypted.

In addition, ensure the exchange is listed on CoinMarketCap. Be wary of exchanges that are subjected to pump and dump, and fake volumes. According to a report published by Blockchain Transparency Institute (BTI) in August 2018 half of the daily volume on CoinMarketCap is fake.  CER platform is a good resource website that ranks crypto exchanges based on these factors.

Fake Crypto Wallets

Similar to fake crypto exchange, always watch out for fake bitcoin and altcoin wallets. There are many fake crypto wallets app created by scammers on Google play store, before installing any wallet ensure to do some research about it. Or it is best to use the wallet recommended by reputable exchanges like Binance.

Fake Buyers/Sellers on P2P Exchanges

While Peer to peer exchanges is one of the easier ways to buy and sell cryptocurrencies online, however, most of these exchanges are dominated by fake buyers and sellers.  To prevent dealing with scammers on these platforms ensure to use P2P platforms with inbuilt escrow, avoid buying or selling to unverified account. Most P2P exchanges do have customers review section for each seller, that’s a good place to check if the seller is real.

Other crypto-related scams in the market include; cloud mining scam, phishing attacks, malware scam, Ponzi scheme.

Bottom Line

As the cryptocurrency market continues to grow, there’s a constant need to get updated with the latest information about the space in order to stay out of any possible scam. Remember to always enable 2FA verification for all your exchange and wallet.

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Written By

Passionate about the fintech space in Africa, blockchain enthusiast, cryptourrency advocate, freelance writer, open to learning new innovations #InnovateAfrica