How to identify fake cryptocurrencies and websites in 2022

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How can investors find fake cryptocurrencies and websites in 2022?

The concept might be frightening for a cryptocurrency investor looking to take advantage of a profusion of new investment options while staying protected from fraudulent ICOs and dubious coins and tokens as frauds and scams are on the rise these days. Investors have to be careful before investing their capital in a cryptocurrency.

Even experienced investors may struggle to keep up with the language as blockchain and cryptocurrency technology develop rapidly. While there’s no assurance that any cryptocurrency or blockchain-related firm will be legitimate or successful, following the procedures mentioned below will help you be as specific as possible that you’re not being duped. This article will explain how you can identify a fake website and cryptocurrencies in 2022.

Types of Scams in Cryptocurrencies

The numbers and types of scams in cryptocurrency are rising every day. People are unaware and have no idea if they are getting scammed or not. Tracking someone in the cryptocurrency scams seems impossible as crypto is decentralized and leaves no trace behind.

According to the Federal Trade Commission, roughly 7,000 consumers suffered the loss of $80 million in crypto frauds between October 2020 and March 2021. (FTC). That’s a significant increase from the 570 bitcoin investment scams and $7.5 million in losses seen in the same months the previous year. 

Phishing Scams

This sort of fraud is as prevalent as the internet itself, but cryptocurrency has some additional consequences. In the same way that a “regular” phishing attack would operate, malicious actors send emails to entice recipients to click links and enter personal information – including crypto wallet key information. 

However, unlike most passwords and usernames, you only get one private key to your blockchain wallets. This is part of blockchain’s decentralized nature, which ensures that no single party can control your information but also creates a problem if you ever need to replace your key.

Pump and Dump Schemes

A pump-and-dump plan is a person or group’s attempt to artificially increase the price of an asset to benefit from the sale of their holdings.

The “pump” is where it all begins. Crypto scammers use social media, forums, and online groups to propagate incorrect or misleading information on minor traded currencies to persuade people to invest.

These articles frequently include inflated due diligence (or “DD”) and predict a rise shortly. They’ll utilize emojis like rocket ships, moons, and diamonds, as well as outstretched hands, to indicate that an investment is poised to pop and that investors should purchase and hold.

The dump follows. As the price rises, other investors pay in, driving up the price, while the schemers’ cash out, making a fast fortune. When the market understands the buzz was fabricated, investors scramble to limit their losses, and the coin’s value plummets.

The key to detecting a pump-and-dump strategy is believability. When tracking crypto movements on social media platforms such as Reddit and Twitter, keep an eye out for anonymous accounts with little posting history – or a history of spurious pumping. These people are almost certainly con artists.

Initial coin offering (ICO) scams

An exit scam, also known as an initial coin offering (ICO) scam, occurs when fraudsters appear to have launched a new form of digital coin that promises to be the next big thing and earn massive profits, only to vanish into thin air with the cash of investors.

A popular exit scam occurs when criminals build a new cryptocurrency platform and distribute attractive marketing materials to acquire investors’ funds, typically through an ICO.

Once a sufficient amount of money has been gathered, the thieves pocket the investment and flee with the investors’ finances. Because of the lighter listing requirements and the difficulty in tracing stolen cash, these frauds are increasingly common in the crypto realm.

Exit scams are not limited to ICOs and can occur after a currency has been in circulation for some time.

These scams are often a variation on a Ponzi scheme in which money earned from new members is utilized to create the appearance of a lucrative investment. This can go on for a long time, but with these sorts of frauds, the final result is always the same: the plan’s authors leave with the investor funds.

How to avoid these scams?

An easy technique to determine if a token is a scam or not is to determine whether the investment program promises ridiculous profits in a short period.

“Another method to spot a scam token is if scammers promising crypto giveaways require investors to transfer them a few coins for address validation.” Another method is to use stolen or faked social media handles of well-known people to promise fast double of bitcoin delivered,” Jha explained.

Furthermore, it is critical to invest only after conducting due diligence on a project, which includes researching their whitepapers (who adhere to know your customer and anti-money laundering guidelines), the background of the founders, and the quality and reputation of the exchange’s customer support infrastructure.

Check White paper

One of the most important key aspects of an initial coin offering is the cryptocurrency whitepaper (ICO). It will explain how the cryptocurrency project was developed, how it will grow, how it will earn money, and how the offering will generally function.

If you’re reading a whitepaper and thinking to yourself, “this doesn’t make any sense,” it’s possible that the founders are attempting to mislead their investors by concealing the fact that their product is a forgery. If there isn’t a whitepaper, it’s not worth investing in.

Final Thoughts

As the crypto ecosystem grows in size and complexity, it will remain a prime target for fraudsters. As previously stated, crypto scams mainly fall into two categories: socially engineered initiatives aiming at gaining account or security information and having a target transmit bitcoin to a compromised digital wallet. 

By knowing the typical methods fraudsters use to steal your information (and eventually your money), you should be able to detect a crypto-related scam early and prevent it from occurring to you.