How to Spot a Scam in Cripto world!

The internet, especially as we transition into the web3 era, sometimes feels like the wild west - there are so many bad actors out there, committing flagrant acts of fraud and taking advantage of ordinary people who are looking for ways to better their family’s lives.

In the crypto world we’ve seen lots of high profile scams, such as Bitconnect (check out the excellent Crypto Crooks podcast for the inside story on that soap opera), or more recently we’ve seen the collapses of Terra/Luna, Celsius & FTX. Beyond those big ones that grab the headlines, though, there are so, so many rug pulls and other types of scams that go unreported and largely under the radar. 

So, it’s super important to do thorough research before investing in any project, especially in an industry as nascent as the web3 space. Let’s take a look at some of the biggest red flags to watch out for, so you can spot a scam long before you fall victim to it:

5 Signs It Might Be a Scam!

1. It seems too good to be true.

Often scams offer unbelievable returns on investment, ensnaring victims with dreams of getting rich quick. Beware of any project that claims it will make outsized returns that are out of keeping with historical gains in the market - if it seems too good to be true, it probably is.

2. Someone you don’t know contacts you unexpectedly.

We’ve all received DMs on twitter or discord, claiming that we have won a lottery and they will pay us some amount of BTC or ETH if we just provide our wallet address or send some funds to cover gas fees. Don’t fall for this type of ‘cold call’ scam - in reality, nobody is going to reach out, out of the blue, to give you free money.

3. A project has little online presence.

Before you invest in any project you must first do your due diligence. Check out their website - make sure to look at all of the pages, not just the home page or landing screen (sometimes scammers just create a homepage to fool people that do the bare minimum of research, and don’t bother to create more pages for their scam websites). It’s always a good idea to research the team behind a project - find the founders on LinkedIn and see what their track record is. If the team are hiding their identities, there is probably a reason for it.

4. There is pressure to deposit funds or transfer money quickly.

Scammers will often set a short time limit to deposit funds, because they hope that victims will act quickly, before they think too deeply about what is happening. Don’t get caught out by this - if someone is pressuring you to deposit funds fast, this might be a tell-tale sign that they’re trying to scam you.

5. You’ve been asked to provide personal information or passwords.

No legitimate project should ever ask for private information or passwords. Be especially wary of anyone trying to get you to give them your private keys, or seed phrase. Under no circumstances should you ever give access to these keys to anyone - remember, not your keys, not your coins! If you give someone that access, they may be able to move your funds without your knowledge or permission.

Take Care of Yourselves 

The web3 space is rife with fantastic new projects and opportunities, but it’s also important to be on your guard and watchful for the bad actors in the space too. Hopefully these pointers will help you to stay safe online, and avoid becoming a victim. Personal responsibility for the security of our own funds is key to the ethos of self-custody, so you must take care of your own funds like you would hope a custodian (like a bank) would do if they were in charge of your money.

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Please note that this is an opinion piece, and no information or comment from this post should be taken as financial advice. Always do your own thorough research before making any investment decisions and note that cryptocurrency markets are volatile and sometimes subject to sudden and unpredictable moves.