Safety practices to avoid investment scams

The number of investment opportunities in the cryptocurrency space can seem limitless, but many investments can be misleading, deceptive, or turn out to be fraudulent.  Consequently, it is  crucial to be aware of potential scams.

We provide a check list every investor should leverage when evaluating projects.

1. Beware of any project that guarantees returns or x% profit per day, week, or month. “Guaranteed” returns should always alarm you.
2. Just because a smart contract governs the investment opportunity does not mean this opportunity is safe. The developer may leave a hidden vulnerability to exploit later. The developer can lie about what the contract supposedly does. Finally, unintentional vulnerabilities can remain even if the contract has been audited (reviewed), leading to potential attacks.
3. Any opportunity that places limits on withdrawals should alarm you.
4. Beware of any project that allows withdrawals in an unpopular or uncommon cryptocurrency. Similarly, beware of any project that has just announced the launch of its cryptocurrency. The project team often tries to prevent users from withdrawing their funds - they will only let users convert their earnings into these effectively “worthless” currencies.
5. Even if other users seem to be getting real payouts, it does not prove that the investment is legitimate.
6. Creators of these projects will often allow some selected users to make actual profits., They will make actual payouts (but not profit) to a much more significant percentage. The goal is to entice others to join and lure them.
7. During Ponzi schemes, scammers give earlier investors money at the expense of newer investors to fake the profitability of the investment. Eventually, the money will run out, and you may lose all your investments.
8. You could see that you are making profits on a website when this is fake.
9. Check on-chain transactions to see if what the website displays reflect reality.
10. Many crypto investment schemes leverage fake platforms and spend a significant amount of time to make them look as authentic as possible and lie about how much money you have in your account. Despite what the platform displays, your funds might have already been stolen, and your balance could be $0.00. Always verify information on-chain using a block explorer.
11. Any investment project vague on how profits are generated or which provides little to no information about the company and its employees should alarm you.
12. Numerous entities claim they are registered or/and legally allowed to provide financial services when they are not. Scam entities often copy the name of legitimate companies to make it look like they are legitimately registered and/or regulated when you research them.
13. You can check company registration in the publicly available business registry of the country (or U.S. state) where a company claims it is registered.
14. If the company does provide a business or MSB license ID number, you can look it up in the appropriate registry to ensure that number matches the entity’s name.
15. Always check you are visiting the legitimate website before logging into your existing account or depositing funds into a new platform.
16. Scammers will impersonate legitimate websites to either steal login credentials or make users transfer funds to them.
17. Do not click on a link in the Ad section of the google results. We have received numerous reports of scammers leveraging those Ads and impersonating legitimate websites.
18. Even if a company is registered, it does not mean they have the authorization to provide financial services, such as serving as a broker-dealer.
19. You can check the registry of financial services regulators in the country or state the entity says they are registered in.
20. Check how long a website has been online - you can use open-source tools such as https://websiteage.org/.
21. Be aware of good reviews. They can be fake.
22. Reviews can often be purchased or created
23. Look for reviews that have similar phrases or language patterns
24. Even if the entity provides information about who supposedly works for the company, the information may not be true or legitimate.
25. Scammers often use real people’s pictures or work profiles without their knowledge.
26. Investors can, for example, look at the Linkedin profiles of the company and its employees to see if, i) any of those profiles mention the company they supposedly work for or ii) if those profiles appear to be real people.
27. As always, remain skeptical and never feel pressured to rush into anything. If it seems too good to be true, it probably is.

A warm thank you to Ian Schade for writing this article and contributing to making the space safer.

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The information provided on this website does not, and is not intended to, constitute legal advice; all information, content, and materials available on this site are for general informational purposes only.

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