How to spot a crypto scam
If you’re looking into investing in the crypto scene, whether it’s shitcoins or Bitcoin, it’d be wise to have a quick gloss over this guide.
Scams. Cunning evil bastards, aren’t they?
In the land of crypto, they’re almost as commonplace as the legit ventures. You won’t know until it’s too late and, unlike banks, there’s no way of tracing the transaction (that’s the whole point of crypto, isn’t it?). So there’s no refund. There’s even a set of lingo around crypto scams: from rug pulls to a pump and dump.
Whether it’s one of those, or other scams like clone websites and fake wallets, it’s fair to say there’s a whole world you could get conned into. So here’s a little guide on how to avoid them as much as possible, from what to look out for, what you shouldn’t touch with a digital barge pole, and more.
First things first. Classic signs of a scam apply here, too. Check the URL for https links (the “s” means it’s secure whereas http by itself is not), they’re good. Spelling mistakes in the domain are bad. Avoid plugging your money into those. Similarly, if you’ve been approached to buy stuff, do not. If someone has dropped “the next big thing that will bring you mega-profits in a week” under a post on Reddit, doubt it. Doubt it a whole lot.
Okay, down to the nitty-gritty of it all.
No, but seriously, a good way to minimise risk (and reward, but it’s surely better than getting left with nothing) is to not jump on a coin immediately unless you’re sure it’s legit. If you still want to chance it, do not put much money in at all. All coins start small, sure, but maybe hang on until it seems like more of a community is there. If people you know and/or websites you trust are talking about it, it’s been around for a while and isn’t popping off as hard as it previously did but is growing steady, then maybe it’s okay.
This is the textbook way to get rug pulled, for example. And you don’t want your rug being pulled. This happens when people jump on a small coin that’s promising a lot or being marketed in a savvy way. It’s tiny, but then it gains traction. People drop their coins in (usually by paying Ethereum for a token) and then, when it’s getting big returns, swoosh. It’s gone. They’ve closed up shop and taken the proceeds.
Wherever possible, look for evidence that the developers are being public about what they’re doing. If there’s a Twitter account with a decent following, people openly mention that they’re behind the site, there’s a website, all good things. Also, if there’s a contract involved, check for a green tick, that’s the verification symbol. Similarly, if it’s hard to find much data about the coin – its value, growth or anything else – that’s suspect.
Being asked about private keys
Crypto can be confusing. QR codes here, copy and paste digits there. Like The Matrix with all that green code on the walls. It means fuck all, but it’s secure. Crypto, innit. That’s the point. In your wallet and on some assets, you’ll have private keys. Don’t share these. Like your IT teacher told you with passwords and toothbrushes. It’s very much the same business. Don’t share passwords either. If you’re asked to share any of these, just assume it’s a scam.
Bonus point: pyramid schemes
Yup, those ones. They exist here too. If you’re ever asked to invite friends or other users in order to begin the process, you’re likely embarking on the crypto equivalent of a pyramid scheme. Naturally, affiliate links and voluntarily being able to spread the word can be all good.
Ultimately, as with most investments, things that sound too good to be true tend to be. You’re far better off getting a 10% rise on your money than 100% that suddenly becomes zero. Take caution, do not put much money into a moonshot (a small undiscovered gem that could rocket). Profits are a risk even when the investment is legit.
Speak to a Financial Conduct Authority registered financial adviser before taking financial advice, and think carefully before making any decision.