As crypto scams surge, here’s how to protect yourself

crypto scams
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Investing in cryptocurrencies can be an effective way to make money, but high returns often come at a price. High returns also attract grifters and con artists, and with crypto still finding its feet in many parts of the world, it’s hard to know who is legit and who is trying to cheat you. That’s why it’s crucial to dig around on the companies you’re dealing with before investing.

Recently, a class-action lawsuit has been filed against Kim Kardashian and Floyd Mayweather, claiming they misled investors when promoting a cryptocurrency called EthereumMax to their social media followers.

Since early June, EthereumMax, now labeled a ‘crypto scam’, has lost about 97% of its value, prompting some investors to characterize it as a “pump and dump” scheme in which scammers seek to artificially inflate the price of an asset through fraudulent or deceptive claims.

Security regulators in the US now think that crypto scams are the top threat to investors, many of whom ‘bet big and lost big’ in the last year. According to blockchain analysis firm Chainalysis, crypto-linked crime surged in value in 2021 to a record $14 billion in digital currencies, up 79% from 2020.

In a nutshell, a crypto scam is a type of scam that attempts to trick people into investing their money in cryptocurrencies such as Bitcoin and Ethereum. In most cases, investors were promised fast returns or guaranteed profit with little to no risk.

If you’re unsure whether a crypto company or transaction is legitimate or not, here are a few considerations you need to make:

  1. If the company isn’t blockchain-based, think twice before investing. A blockchain is a secure public ledger that records all transactions in chronological order. So if the company or startup you’re considering does not use one or more of these characteristics, it’s best to reevaluate your decision carefully.
  2. Confirm that there are real people behind the company. This also includes checking if the company has a physical address and phone number, which you can use for verification purposes.
  3. Check the company’s whitepaper. A whitepaper is a document that thoroughly describes all aspects of the ICO, including details about the project, how it operates, and its vision. If the company fails to provide their whitepaper or any other related documents (e.g. ICO regulation, description of their native cryptocurrency), that’s a strong sign you should be wary.
  4. Avoid transactions with companies that don’t offer a secure website. In order to provide a high level of security, all crypto transactions require an environment that’s free from malware and other threats. Before making any transaction, make sure the website you’re on is secure and has the https protocol.
  5. Confirm that there are no signs of a ‘Ponzi scheme’. The company should have a team of professionals and advisors backing it up. The presence of such red flags is often an indication that you’re dealing with a crypto scam.
  6. Check the company’s authenticity on social media channels such as Facebook, Twitter, and LinkedIn. If there are no posts or pictures of people working in the company, that’s suspicious.

A few more tips: If you don’t understand the project’s goals, walk away. If you’re unsure about a company’s vision and objectives, it’s best to avoid investments altogether. When it comes to investing in cryptocurrencies, always do your own research. If you’re looking for advice or guidance, you can always talk to a financial consultant or lawyer.

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