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What You Need To Know To Make Safe Cryptocurrency Investments


As a field that involves a lot of money transactions, cryptocurrency is exposed to the risk of numerous frauds and scams. With more ignorant people joining the world of cryptocurrency, it becomes easier to trick newbies by fake ICOs or Ponzi schemes. This problem is getting more widespread. For instance, in Australia, crypto trading scams are now the second most common type of all investment swindles. But how to avoid being caught on the scammers' hook? Read on to find out.


Research All the Time

Although cryptocurrencies are secure enough by virtue of their nature, services like trading platforms, wallets and exchanges that provide various crypto options are still the weak link. Crypto service providers are inventing new protection tools all the time, thus encouraging hackers and other criminals to explore new vulnerabilities. The crypto world requires constant research. To be up-to-date, subscribe to the news portals like CoinDesk or Cointelegraph, register on the largest crypto forum BitcoinTalk, track prices and rates.

how to avoid cryptocurrency fraud


Check the exchange website before registering or sending money. To know what exchange services to trust, read users' reviews and check the information on CoinMarketCap or CryptoCompare. There are also special-purpose websites offering comparisons of crypto platforms. Take a list of exchanges reviewed by Katie, for instance. You will easily find a lot of reviews about CEX.IO, Binance, Kraken, Coinbase, but nothing about unknown websites.

Do the same if you want to invest in ICO: check the reviews, read about the team members, examine the whitepaper. Don't hesitate to ask people and do your research to minimize possible risks.


Watch for the Red Flags

Most of scams use the same tools to attract users. Their principles rely on the basics of human psychology adapted to the digital era. These are the most popular features, also referred to as red flags:

  • Guarantees of high returns. Nobody can guarantee that investors will get their money back because cryptocurrencies' values are volatile. Promises of "fast 100% returns on investment" are a definite scam sign. Everything which sounds too good can't be true.
  • Hard-to-follow and vague whitepaper. Long documents are hard to read all the way through, especially for the investors outside the IT-world. They may seem credible, but read them very carefully and don't make any investment if some details are not clear. Surely, avoid projects that don't have whitepaper at all.
  • Team consisting of unknown people or celebrities. It looks suspicious when team members don't have any background to be found on the Internet. It's also questionable when a team includes famous people only.
  • SEC registration mentioned. The US-based Security and Exchange Commission doesn't verify ICOs and very rarely do this for large exchange services.
  • Check the information on the official page of SEC to be sure that the project is legit.
  • Countdowns and clocks. This is a traditional psychological trick to influence our minds. Countdowns force people who are afraid of missing out to send money without thinking it through.


Great example is HoweyCoins. SEC claims it a 100% fake ICO where all red flags are present. By clicking on any element on the website, you'll be redirected to the SEC page warning you about scamming.

cryptocurrency mining


Learn to Recognize Scams and Frauds

Fake ICOs


Initial Coin Offering (ICO) works like Initial Public Offering (IPO) but for crypto projects. When a startup company wants to attract investment, it launches an ICO and sells native tokens at a cheap price. Investors then can use these coins for buying various goods and services or exchange them at a higher price.

More than 1000 crypto projects were launched during the last year. While a lot of them were legit, there were hundreds of fake ICOs featuring nothing but catchy websites.

Fake projects don't intend to have real practical value, they force amateur investors to transfer money and then simply disappear.



Unregulated Exchanges


There are platforms for buying and selling cryptocurrencies, which are decentralized - they connect traders directly. Reliable platforms store users' money in cold wallets which aren't connected to the Internet and therefore are better protected from hackers.

However, similarly to ICOs, there are hundreds of fakes. Scam decentralized exchange platforms attract users by unbelievably low prices and discounts. Then they charge extremely high fees or keep the money and shut down servers.


Cloud Mining Services


Thanks to allowing people to use remote hardware for mining cryptocurrencies, cloud mining became extremely popular last year. Despite the benefits of a fast and simple mining process, cloud mining services can turn out to be untrustworthy.

A major part of these projects is based on Ponzi schemes. Only a few famous companies have the real equipment while others just create websites and pay new users from the previous transfers. Usually, scam cloud mining projects disappear in a month or two.


Other Risks


Apart from investment frauds, there are a lot of other swindles. Hackers may steal money from digital wallets and criminals may get sensitive data by using fake emails. That's why it's extremely important to double-check everything before buying or using cryptocurrency. Finally, don't invest more than you can afford to lose.


Cryptocurrency Investment Fraud: How To Report

Warn your family and friends know about the Cryptocurrency investments fraud by sharing this article using the buttons provided. You can also officially report the questionable cryptocurrency and Bitcoin activities to the Federal Trade Commission using the link below:

Report To The FTC Here

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