Guide For Cryptocurrency Scams | How To Find If A Company Is A Scam?

Tarulika  |  Apr 17, 2020

Cryptocurrency or Bitcoin was first time introduced in January 2009. Even after the ten years of its launch, the complicated nature of the crypto assets and the unusual computing jargon can turn around your head (even if you belong to the tech-inclined community). The absence of strict regulations and explicit guidelines further create the problems for the crypto enthusiasts who want to invest in cryptocurrencies. Nevertheless, the lucrative profits associated with digital currencies are increasing the number of investors in the crypto marketplace. Also, the market has created a conducive environment for predators and scammers to exploit the misinformed newbies and even experienced traders. But, don’t worry! This guide for cryptocurrency scams can help you identify cryptocurrency scams and the tricks to safeguard yourself from them.

Guide For Cryptocurrency Scams| Common Cryptocurrency Scams

Cryptocurrency scam simply refers to stealing the crypto assets from unsuspecting ill-informed users, dodging the law enforcement authorities, laundering the stolen money and most importantly exit from the marketplace to spend the money laundered in the real world. Like the traditional financial markets, the crypto marketplace is no short of scammers trying the phish the traders then and now. In this guide for cryptocurrency scams, let us a few of the common scams that take place in the crypto sphere:


Common cryptocurrency scams


  • Initial Coin Offerings (ICOs)

    One of the most popular scam technique is known as “ Initial Coin Offering”. An ICO is an approach by startups to raise money(fundraising mechanism) from potential future users. As per the guide to ICO, customers are promised an enticing discount on the new crypto coins in exchange for user’s active cryptocurrencies like BTC, ETH. Attracted by immense discounts, investors cumulatively end up in spending a huge amount of money, thinking that it might earn them huge profits. However, many of the ICOs are legitimate in the crypto marketplace but the fact cannot be ignored that a massive amount of ICOs were planted to trap the funds and steal the currency. The cunning attractive plots were made by the scammers like publishing the whitepaper(even plagiarized documentation), renting fake offices and even launching fancy-looking marketing products. Regulators of various countries are continuously cautioning about the ICO scams like that of SEC of the US, authorities of China and even Wolves of Wall Street, but investors are still getting trapped. Nonetheless, you just have to diversify your research and be aware of a few of the facts (mentioned in the next section) before investing in any ICO (genuine ICOs are also available in the market!)


    • Unregulated Brokers & Exchanges 

      The majority of the scammers try to take advantage of the “FOMO or fear of missing out” of the traders by offering them dubious products and services. Unregulated online exchanges and brokerage firms approach the users with competitive products, highly low prices, and immediate returns. But, as soon as your money gets trapped in their accounts, the firms will ask you to pay a huge amount of commissions or make it extremely difficult for you to withdraw your funds and in the worst-case scenario did not turn up to customer support as per the guide for cryptocurrency scams.

      • Fraudulent Wallets

        One of the crypto scams which is becoming trendy in the current scenario is that of fraudulent wallet where you end up in losing your private keys, and ultimately your bitcoins. Especially online wallets are being targeted, so double-check the security system before choosing the crypto wallet.

        Case Study: Bitcoin Gold Scam (

        The infamous Bitcoin Gold Scam of 2017 is related to fraudulent wallet only. tempted the naives with the promise of bitcoin gold and duped approximately $3.2 million from the number of investors. The website conspired and utilized the link of the legitimate websites and ask the users to share the private keys and seed phrases to use their wallets. And then! They all lost their funds who were dreaming about the Bitcoin gold in return. It was one of the popular scam as per Guide For Cryptocurrency Scams.

        • Automated And Shady Trading Symets/ Brokers

          Bitcoin is volatile and the advantage of this feature is not only utilized by the traders but also by the industry of automated and many a time shady trading systems. It is an indirect scam where automated exchanges advocate the plan to gain from arbitrage trading (difference in price of the same crypto asset on different exchanges). This hype of earning profits trap the user’s funds in terms of hefty transaction fees, expensive withdrawal process and ultimately not getting anything in hand as the arbitrage trading took few hours to complete.

          • Pump And Dump Online Groups

            In general terms, the scams associated with pump and dump group take place when a group decides to inflate the prices of a few commodities so they can buy at lower prices and sell at higher prices. The scammers usually with the help of social media platforms involve thousands of investors and convince them to drop their shares to plum the prices resulting in the loss of investments of users.

            • Phishing/Fake Emails

              Fake phone calls, emails, referral links and proxy sites manipulate the mind of the user and he/she ends up in revealing their username password and sometimes private keys also. In crypto markets, Punycode or fake Airdrops are widely used to dupe the investor. As mentioned in Guide For Cryptocurrency Scams, you should not fall into the trap of the lucrative offers made in airdrops.

              How To Identify A scammer/Scam?| How To Find If the Company Is A Scam?

              After reading about the number of scams in the crypto market place, you might be scared and feeling anxious about your already invested funds or the funds you are about to invest. Calm your nerves, we will try to help in responding- how to identify a scammer? how to find out if a company is a scam.

              How to identify a scammer-scam


              Guide for ICO scams and Guide For Cryptocurrency Scams mention that if you research a bit more about the company, you will be saved from not only ICO scams but majorly from all the scams of the crypto marketplace. You must carefully read about the following points related to the company:


              1. Details of how the company works: 
                • Check the details by checking the whitepaper of the company for plagiarism.
                • Go through the website of the company thoroughly (notice if any incomplete pages or text inconsistencies).
                • Make sure the codebase of the company exists (prefer the open-source code; if you find close code then cross-check the codes on Github).
                  1. Look for the information of team members (especially founders and developing team) and make sure there won’t be any inconsistency like incomplete descriptions, stock photos or weird contact details.
                  2. Cross-check the support team by asking them the legitimate questions related to their projects and requirements.
                  3. If a company is offering any referral or affiliate schemes (like that of Coinmama) for the promotion of their products, do verify the validity of schemes from the various review sites.
                  4. If any new exchange or even the old one is guaranteeing the high profits and interest rates on the cryptocurrencies, think twice before investing your money.
                  5. Make sure whichever exchange you choose for trading have an easy and quick withdrawal process. You can check it by first trying with a small amount of funds.
                  6. Final Thoughts

                    Investing in bitcoins can be risky nonetheless huge profits are associated with cryptocurrencies due to its highly volatile nature. So, invest only what you afford to lose in the crypto marketplace. You should research the investment opportunities, exchange and also the products associated with crypto space carefully as you are the one who can safeguard your funds from any scam (if it is not the major one!). Make sure to boost your online security and read the Guide For Cryptocurrency Scams carefully. Thus, you should arm with the right knowledge to protect yourself from any scam.

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