HOW TO IDENTIFY A CRYPTO SCAM PROJECT
Approximately $1 billion has been lost to cryptocurrency scams since 2021, according to a report released by the Federal Trade Commission (FTC).
Crypto investors, particularly newbies, are susceptible to being duped by a scam enterprise. Due to a lack of regulation, con artists continue to take advantage of investors, causing these persistent issues in the sector. Cryptocurrency scams are more prevalent than in past years as the industry expands.
Scams involving cryptocurrency are widespread, but they can be avoided. Before investing money in a project, it is crucial to conduct extensive research on it. Innovation is a hallmark of the cryptocurrency sector. Real-world problems are solved in many ways via projects. These solutions frequently reach a level of complexity that makes them difficult for the ordinary user to understand.
Cryptocurrency newcomers are most vulnerable to these fraud schemes. To prevent financial loss, it’s critical to keep up with the most recent fraud and manipulation techniques. Users can tell dubious projects from legitimate ones by following a few easy due diligence procedures.
WHAT ARE CRYPTO SCAMS?
Similar to other financial scams, crypto scams target your crypto assets rather than your fiat money.
The same techniques used in traditional financial crimes, such as pump-and-dump schemes that convince investors to buy a product by inflating its value or outright attempts to steal digital assets, are frequently used by cryptocurrency scammers.
Cryptocurrency crime peaked in 2021. A blockchain analytics company called Chainalysis claims that fraudsters stole digital currency worth $14 billion! That represents a 79% increase from the prior year when fraudsters “only” stole $7.8 billion. The most prevalent cryptocurrency-based crime was scamming (followed by theft).
Additionally, the Federal Trade Commission (FTC) reports that allegations of cryptocurrency-related fraud in the US have increased dramatically, with nearly 7,000 persons reporting losses totaling more than $80 million and an average loss of $1,900 per person. This was a 12x rise in reports compared to last year, and a nearly 1,000% increase in money lost!
You must be aware of the risks if you are interested in cryptocurrencies.
Don’t be the loser…
More advanced scams are also being developed by con artists to exploit the inexperienced, including traditional price manipulation and the insertion of vulnerabilities in software used to store and manage digital assets.
In the world of cryptocurrencies, the “rug pull” strategy, when con artists establish a new coin and aggressively push it using false or inflated claims, is a traditional method of deceiving customers.
By promising quick profits, the goal is to drive up the price of the token. A rug pull differs from a “pump and dump” because con artists take care to inflate trading volume over a predetermined length of time and create the appearance that the operation is viable in the long run.
The “team,” which is typically the biggest bag holder, front-runs the crowd when the project is large enough by selling everything, making substantial profits, and dumping investors with worthless tokens.
RED FLAGS TO LOOK OUT FOR IN CRYPTO SCAMS
A survey of 5000+ crypto scam victims conducted by Polygon Decipher Crypto Forensic Experts reveals some key signs to look out for when onboarding a crypto project. Whether it’s a scam from the start, or just doomed to fail and waste all your money, here are some tell-tale signs that investors in the crypto space should look out for, although not limited to these.
Reading the whitepaper is a major step in determining whether a project is a complete rip-off or just brand-new.
In a whitepaper, all the information regarding a project is covered in detail. This may cover a variety of topics, such as the project’s history, goals, and Tokenomics. Typically, a new project can be identified by an articulate whitepaper that fully addresses all pertinent issues.To describe the project and the technology behind it, developers will go into great detail. Information on any crowdfunding will also be included. Using this method, you can also tell whether a cryptocurrency project is brand-new or a hoax.
Accessibility is crucial for token sales and ICOs. Transparency is also required for any information provided regarding the sale’s status. Identifying the token sales data is necessary for potential investors. The sale must be trackable if it is ongoing, which is another crucial aspect. It is advised to steer clear of projects that are limiting access to this information in any way until that access is restored.
A roadmap is another significant indicator. It’s crucial for cryptocurrency initiatives to have a clear, well-organized roadmap that guarantees the project’s longevity and outlines its success strategy.
The key to spotting a fraudulent cryptocurrency project is transparency. A warning sign is when there are still more questions than answers.
Last but not least, trusting your instincts is crucial. Consider proceeding with care and returning to a project later if it appears to be a fraud from the start, there are conflicting reviews, or there is little to no information available.
Don’t believe everything you read…
Even the best news organizations can occasionally be overcome by fraudulent projects. Scam projects may appear to be an extremely safe cryptocurrency investment, only to vanish from the blockchain a few months later.
Analyzing the websites that publish about a cryptocurrency project is a key component in spotting a scam. Some crypto news websites exist only to promote particular coins. Ensure proper scrutiny of such website’s content so you can make a better judgment.
This is one of the many due diligence processes in place at Polygon Decipher, which opens a pathway to recover crypto losses.
Research is key to determining a scam crypto project
Research is essential for both novice and seasoned investors to prevent financial loss. In the cryptocurrency sector, scam initiatives are unavoidable, but they may be avoided. Watch out for warning signs including a new digital footprint and a lack of openness. Additionally, pay attention to your gut feeling.
A project’s whitepaper is a key predictor of its future success and reveals the developers’ intentions toward possible investors.
HOW TO REPORT CRYPTO SCAMS
Given that the majority of perpetrators of cryptocurrency scams typically operate in regions with little to no regulation, our law enforcement institutions are limited in what they can do. Nevertheless, any crime should be reported.
You can notify the following Financial Regulatory Authorities about cryptocurrency fraud:
- Federal Trade Commission
- Securities and Exchange Commission (SEC)
- Commodity Futures Trading Commission (CFTC)
- Internet Crime Complaint Center (IC3)
Meanwhile, there are blockchain investigation firms like Polygon Decipher-FINANCIAL ASSET RECLAIM that investigate crypto scams and collaborate with Law Enforcement to identify fraudulent actors and prevent potential victims from being scammed in the future.
By reporting the scam with Polygon Decipher, your stolen cryptocurrency will be deemed tainted, possibly leading to future apprehension of the scammer and recovery of your cryptocurrencies. Even if your report doesn’t lead to a resolution of your case, we’ll be able to alert other consumers of this scammer’s activity.
