As cryptocurrencies have hit the mainstream and caught media attention, online scams have inevitably started to crop up. If you fall for a cryptocurrency or Bitcoin scam and select the wrong investment opportunity, you’re guaranteed to lose your money. What’s more, your investment would not be protected as it would be if you used a protected financial service or bank.
Luckily, cryptocurrency investment scams display similar traits, so with a bit of information you can make sure you see them coming. Here’s what you should look out for:
A promise of guaranteed high returns
Don’t get carried away with promises of high returns. It’s vital to analyse the offer and work out whether it’s likely to be real. While making 1,000% on your investment in 12 months would indeed be fantastic, it’s unlikely to be the case with the offer you’re looking at.
A common way for scammers to attract investment is by lying about the returns. With no back-up strategy or information as to why the ICO (Initial Coin Offering) will rack up massive returns, it’s unlikely to be the real deal. An ICO is the term given to a brand-new cryptocurrency in its early stages, when people are given the opportunity to buy some early in the process.
Too much emphasis on marketing
Another way that cryptocurrency scammers attract investment is by splashing out on ostentatious marketing. If you see double-page spreads in newspapers, massive banners on websites and a suspicious number of paid bloggers then you can be sure it’s all designed to reach as many people in the shortest amount of time possible. They are looking to raise money fast on the promise of something that doesn’t exist.
Legitimate cryptocurrencies don’t need to promote themselves in this way and have such an emphasis on growing quickly, as they will develop more naturally.
Unnamed team members
In the same way as any other investment or business, you should be able to quickly find out who is running it. This includes every member of the team working on the cryptocurrency.
Before investing, you should do some research, including their social media profile. Look at how old their accounts are, how many followers they have, who their followers are and any other factor you can think of.
It is extra work for you, but if you can’t find some of the team members online or their followers seem paid for, then you know not to invest.
Every crypto has a whitepaper – check it
The cryptocurrency whitepaper is a fundamental part of an ICO. It has all the information you need, including how the project has been designed, how it is meant to grow, how it will bring a return and everything in between.
If the whitepaper doesn’t make any logical sense, it could be that the founders are deliberately being vague to confuse potential investors. If there is no whitepaper at all, then definitely don’t invest in it.
Check the code
The code makes the cryptocurrency work, and legitimate cryptos have ‘open source’ code. This essentially means you can find it easily, read it and check whether it’s what the founders are saying it is.
While you may not be able to interpret the code itself, that’s not the point. You need to be able to see it. If the team is hiding the code, then it’s likely they’re trying to hide something. Not every legitimate crypto will have open source code, but you can be sure that all fraudulent ones will hide it.
Unusual investment packages
If you see an offer that involves subscribing and investing some money, in order to get a weekly return, then it’s likely to be fake. Return offers like this are simply unsustainable and will not last. You must read the paperwork and find out how it works.
Look for fraudulent brokers and trading platforms
A cryptocurrency trading platform allows you to sell and buy currencies. You must do plenty of research, including checking reviews for the platforms. Some will suggest that can beat exchange rate fluctuations, or that they use tech to ensure you get a great deal. These are unlikely to be real.
Similarly, brokers can be fraudulent. If they are offering once-in-a-lifetime opportunities then it’s likely that they’re just after your money, and you will get nothing back.
Keep these tips in mind, and you won’t be caught out.