Safeguard Yourself From Crypto Scams

Don’t be swindled by a shady swashbuckler

It’s too good to be true

Every now and then, I come across a tweet or other social media post that seems too good to be true. So, I check it out, and use my common sense to determine that it is, unfortunately, not true. It’s a scam. The most common one that I come across is the

“Send ETH to the address below, and I will send you 10X ETH in return.”

So, if I send you $50 worth of crypto, you will send me $500? Wow! Let me jump right on that… not! Many of these posts are easily identifiable as scams. Heed caution and never get too excited when reading posts on social media regarding crypto. Use your head — don’t make hasty decisions when it comes to your finances, ever.

Just block these posts and go about your day.

Impersonators, Imitators, & Impostors

There is also the infamous impersonation trick, like the one below. It only takes 2 seconds to check the username to realize that it’s NOT legit. This swindling trickster piggy-backed off of a post from Vitalik Buterin in hopes that people would not notice that it was a reply and not a first-hand post by the Ethereum network programmer himself.

Image: Twitter

Exit Scams & Fake ICOs

For anyone who has had only legitimate success with ICO investments I say: Congrats!

There is, however, an increasing trend in fake ICOs and exit scams. It’s inevitable that any market where money is exchanged will be targeted for exploitation and scams by crooks and frauds. With the increasing popularity of new blockchain and crypto projects coming on the scene, scammers are eager to take advantage of new investors, gullible targets, and people who don’t know any better.

Let’s crunch the numbers:


Average number of new ICOs each month in 2018: 420

Average number of these ICOs that succeed: About 20% or 84 per month

The rest are likely fake, scams, die out, or are just poorly developed and fail.

So, the odds of choosing a successful investment are about 1:5 if you do not DYOR.

Load a 5 shot revolver with 1 round and aim at the moon. (Don’t do this for real. It’s unsafe.)

This analogy is just to help you visualize how unrealistic it is to think that every ICO out there that is touting a revolutionary new product will moon. Most likely it won’t.

Some further statistical info on new ICOs with a Mcap over $50M was researched by Satis Group and they reported the following:

  • 81% are scams
  • 6% failed
  • 5% died off
  • 8% successfully went to an exchange

This lowers the odds of finding a successful ICO down from 1:5 to a meager 1:12 chance. Ugh.

Here are some things to look for when researching ICOs that you may want to invest in:

  1. Top-down transparency and communication. After conducting your initial investigations into a crypto project, you will likely have some questions for the upper management, developers, and team leaders. Jump into the chat group of the project and ask your questions. If you get run around or ignored, then you may have hit the chat at a bad time. Direct your questions to the team leaders and admins in a professional manner. Thoughtful and involved members of top management are willing to field questions in the chat because they are truly concerned that the community understands the project and the processes that surround the development. If there is no involvement by the decision makers in the community, then that is a sign that they are not very concerned with the “small stuff” and you may want to reconsider your investment.
  2. Read through the whitepaper. Is it overly complicated and full of confusing language? If so, it may be trying too hard to look like a smart project and gain your trust with their big, brainy concepts. The same goes for a skimpy, unprofessional whitepaper. Why place your trust in an organization that is unable to produce a quality paper that outlines their amazing product? If they have a failure of a whitepaper, then you can bet they are developing a failing project… or they aren’t doing anything and will just steal your money.
  3. Research the team behind the project. The ICO website will typically list their team members and give you a brief description of their experience, credentials and special skills. If they refuse to list their team because they wish to remain anonymous, then run away… for obvious reasons. If the site has their team listed, then look for them on legitimate social sites such as LinkedIn or Twitter. You can use your judgement to determine whether or not, their profiles are fake or not. Do a Google search for the team members and see what kind of results come up. You should be able to tell if they are legit or not based on these simple research practices.
  4. Roadtrip! Take a trip down the roadmap. Every project should have a roadmap which will give estimates of the timeframe of their project’s development. If the project has been in development for a while, are they aligned with the roadmap timeframe? Is the roadmap keeping pace with the whitepaper? Is it realistic? Is it too basic? Does it look like they know what they are doing? Maybe it looks to good to be true. If it does, then it probably is. If there is no roadmap at all, then pull a U-ey and drive away as fast as you can.
  5. Incompetent community managers. Most ICOs build their initial communities in Telegram, Discord, Twitter, and Facebook as well as many other platforms. Observe how the admins of these groups interact with the users. Are they answering most of the questions, or any at all? I have seen some ICO “chat groups” that have the ability to chat locked. If you experience this, then run away. It is an indicator that they do not wish to interact with the community and develop a relationship with the user base. If the chat group is active, then see if they are answering questions respectfully and professionally. If they are impatient, rude, and abrupt; or kick users for silly reasons, then they are probably not worth your time or money. Get out.
  6. Show me the money! Head on back to the whitepaper and check out the token distribution and funds allocations. Is the team expecting to take a substantial portion of the tokens? If they plan on keeping/using over half of the total token volume, then that is a sign that they are not utilizing their resources properly, or are just plain greedy. If they are modest and realistic with a plan of distributing about 10–20% to the team, then they are are probably a reasonable bunch of folks.
  7. Too much talk about purchasing. If an ICO is constantly pitching deals and bonuses and rewards for purchasing tokens, then they are probably not prepared, or don’t know what they are doing, or they are a scam. There should be a structured payment method available to the community and it should be the ONLY method for buying tokens. Never purchase tokens through a chat with an admin in Telegram or Discord or any other site. Only use the official portal payment site.
  8. Robo-ICO bot method. So, there is an understanding amongst the airdropper community that it is acceptable to receive an airdrop distribution via a bot (robot software) but eyebrows should raise when the project is initiating investment token sales with bots in chat channels and social media. This is a hands-off method of stealing your money and not having to deal with you when you have technical difficulties or questions. Domo arigato, but NO domo arigato, Mr. Robo-ICO.

Well, that was an exhausting bit of info to take in, and it was only the tip of the ICOberg. It is a lot of work to conduct proper research into new ICOs, which is why so many people fall victim to fake ICO scams… they don’t want to take the extra time to DYOR and protect their money.

Alas, there is more… A few more things that an investor should look into while approaching a crypto investment opportunity will require some vigilance and basic understanding of crypto processes and terms.

Smart contract vs. wallet transfers

Simply put: Be certain that your investment is being paid to a smart contract and not a wallet address. If you are paying into a wallet, you could very well be scammed. Always check the payment address on etherscan or ethplorer before sending any funds. Check for suspicious activity. Make sure it is connected to the project you are researching. If it is empty, then you have definitely been marked.

Hypervigilance is not paranoia

Check and double check that the project is transparent with their data and ledger transactions. These items may not be available during the early days of a startup project, but they should be in the roadmap, or at least explained in a forum or chat community. Keep an eye out for these fundamental requirements for transparency’s sake:

  1. A public ledger where all transactions are viewable to anyone at any time
  2. A GitHub open source code repository
  3. Wallet software in your personal account or portal
  4. The token is traded on a top 20 exchange within 1–6 months after launch

Gone phishing

If you have participated in ICOs or airdrops, then your email address has probably been sold to the crypto marketing world. So grab your rubber boots and your tackle and prepare for the phishing scams. In order to prevent yourself from being filleted by a phishing scam: Never click on a link in an email that you do not trust. How can you find out if it is trustworthy? Hover over the link and you will see the web address in the bottom corner of your web browser. You can then conduct a query on Google and conduct research on the project or offer in question. It is up to you to pursue it or chuck it into the chum bucket and wade on.

The key to keeping your money safe

Maintain your private key in a secure manner. NEVER give your private key to anyone. They have no reason to need it in order to send you crypto funds. It is highly recommended that you store your keys offline. Write them down on paper, or type then into a text file and save them on a USB drive or other offline media. Your public key is like the windows on your house: people can look in, but if they are locked, they can’t come inside. Your private key is what someone needs to open your front door, walk right in, and take whatever they want. Be smart about this.

Takeaways from this article:

  1. Always DYOR and be prepared to spend time reading whitepapers, roadmaps, smart contracts, reviews and blogs. Also check YouTube for any video reviews.
  2. Use common sense. If it seems too good to be true, then it most likely is.
  3. Learn how crypto and blockchain works. You might know it all, but there is always more to learn. This is an ever-changing and dynamic environment.
  4. Do not invest more than you can afford to lose.
  5. Be vigilant. Investigate website links, people, ledgers, and everything you can.
Good luck out there and happy investing!