The proliferation of scams and Ponzi schemes has long been an issue in the crypto space. Most illicit activities that you will find in the news are unregistered ICOs, token investment fraud and authorities’ crackdowns on illegal digital currency exchanges.
But despite this news, why do investors still fall into this scheme? Are fraudsters taking advantage of the bad economic situation the world is in? Or is it because people don’t know how to identify crypto scams?
According to this report, crypto-related crimes rose by 79 percent in 2021 from the year earlier.
“The IRS Criminal Investigations Agency said that it had taken over $3.5 billion worth of cryptocurrency in 2021 — all from non-tax investigations.”
With rising crypto-related scams, it is high time for us to be more vigilant when it comes to identifying crypto fraud. We’ve listed down key takeaways that can help you identify and avoid sketchy coins and tokens.
- Fraudulent ICOs and sketchy coins and tokens thrive more in jurisdictions with lax to no regulations; worth mentioning an economy that is on a downtrend.
- Do your own due diligence. The best way is to research the company and individual team members before embarking on a conversation or investment.
- It is important to get a hard or soft copy of cryptocurrency or ICOs whitepaper. This gives you a full picture of the project mission and vision, where the direction the company is going, and its future projects. Companies that don’t offer whitepapers should be avoided at all costs.
- Be extra cautious and always on the lookout for information or news about the ICO and cryptocurrency spaces. There are a lot of reliable online news articles where you can get crypto-related information.
- When an ICO company and cryptocurrency offers an investment opportunity that would double your return, this is a major red flag.
Overall, doing your own research and exerting a little effort into reaching out to people who have already made an investment could help you make a good decision. Also, spend time scrutinizing every detail, and assume that the absence of a piece of key information may be an attempt to hide an unsound model or concept.
There’s no bulletproof approach to any investment but what’s important is to lessen the negative impact in case something wrong happens. There’s some truth in the saying that “if it’s too good to be true, they likely aren’t.”