Spotting and Avoiding Crypto Scammers

How to spot a crypto scam

Cryptocurrency scams come in various forms, each designed to deceive and defraud investors. From fraudulent presales to Ponzi schemes and phishing attempts, the tactics employed by crypto scammers are diverse and continually evolving. The red flags and warning signs remain consistent, providing clues to those who know what to look for.

Key Takeaway

Both good and bad actors are highly skilled and motivated. The difference is bad actors have NO product and NO integrity.

Key indicators of crypto scams

You can often see a crypto scam a mile away – if you know what to look for. This is the good news even though some scams leave more clues than others.

Unrealistic promises

Beware of schemes promising guaranteed returns or unrealistic profits with little to no risk. Such promises often signal a Ponzi scheme where early investors are paid with the money of new investors, creating a facade of profitability until the scheme inevitably collapses.

EXAMPLE

SuperCoin is the best new project of 2024 with fixed returns starting at 2,337%. Turn just $1,000 into $23,370 with our cutting-edge, automated, proprietary AI trading technology. The more you invest the higher your returns. Get a 25% referral bonus for every friend you refer.

It’s essentially illegal to offer guaranteed returns by every financial regulator in the world. This is a classic tell-tale sign of fraud inside and outside of crypto.

Key Takeaway

There is NO such thing as guaranteed returns anywhere in life. As a Vault Wealth article puts it, “Unfortunately, the notion of 'guaranteed returns' is akin to believing in unicorns – both are nonexistent. The term 'guarantee' is essentially a myth.”

Lack of transparency

Legitimate cryptocurrency projects are transparent about their team, technology, and goals. Conversely, crypto scams often operate under a veil of anonymity, making it difficult to verify the identities and credentials of those behind the project. This is not an absolute rule because there are many legitimate projects with an anonymous team. Teams remain anonymous for many reasons including regulatory uncertainty and overreach. Always look for transparency and full disclosure of teams, but it’s not the only factor. If you excluded every project without transparency, you’d miss some good ones along the way.

Pressure to invest quickly

Scammers frequently employ high-pressure tactics, urging investors to act swiftly before an opportunity vanishes. Resist the urge to make impulsive investment decisions and take the time to conduct thorough research before committing funds. Time pressure is an age-old ruse to dupe investors by triggering the fear of missing out (FOMO). Crypto scams often play the FOMO card more than time pressure and want to keep their scam open for as long as possible to rake in millions. 

In many cases crypto opportunities are ephemeral (i.e. short shelf life) so you have to “ape” in if you don’t want to miss the opportunity. The meme coin craze is a good example where multi-thousand percent returns could happen in hours or days.

Key Takeaway

It’s time for an important repeat. NEVER invest more than you can afford to lose. Regardless of what crypto or NFTs you choose to invest in, make this your guiding light. If you tend to take riskier bets, then this rule will still save you in the long run.

Related: How to Help My Friend Who’s in a Crypto Scam

Unsolicited communication

Be wary of unsolicited text messages, emails, or social media posts promoting investment opportunities. Legitimate projects rarely engage in unsolicited outreach, and such communication is often a hallmark of phishing attempts or fraudulent schemes. This is classic pig butchering 101. The “text message by mistake” that turns into a friendship then a scam is one the most baffling psychological brainteasers of all time. Nonetheless, people continuously fall for this crypto scam - so don’t do that.

Poorly designed websites and whitepapers

Examine the quality of the project's website and whitepaper. Typos, grammatical errors, and poorly constructed documents are indicative of a lack of professionalism and may suggest a scam. Mistakes and lack of attention to detail provide a treasure trove of red flags. Where there is one typo, for example, there are many. This is hands down the best way to identify crypto scams.

Key Takeaway

Fraudsters and crypto scammers are motivated, but they are lazy and want to do the least amount of work for the highest returns. This laziness is the Achilles heel that manifests in all the typos, grammatical errors and poor graphics while providing a bread crumb trail of red flags.

Pump and dump schemes

In pump and dump schemes, scammers artificially inflate the price of a cryptocurrency through false or misleading statements, only to sell off their holdings once the price peaks, leaving unsuspecting investors with significant losses. Many crypto YouTube influencers are “trusted” by their followers yet paid by projects to promote the pump and dump. Anyone who receives paid promotion has a conflict of interest and MUST disclose the compensation. Beware this exists, even though it can be hard to identify.

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Why Crypto Bullseye?

While most crypto education focuses on what to do, Crypto Bullseye includes what not to do so you can avoid expensive crypto mistakes.