Three Types of Crypto Scams and How to Avoid Them

For those of you who read my article “I Embraced Crypto Because of a Scam”, this is a follow up to that. I’ve observed a lot of crypto projects over the last three years and there seems to be some common threads that run through most of the projects that end up being scams. There are three types of crypto scams that I want to discuss today and I will show you some warning signs that you can look for to make sure you don’t get duped out of your hard-earned crypto...

One: The Exit Scam

This happens when the founders who have a majority stake in a cryptocurrecy project (usually an ICO) leave the project, sell all their worthless coins for Bitcoin or for another valuable crypto and then ghost themselves from the community that they created around their coin. Common signs of a project whose founders plan on doing this are…

1. The social media platform or medium that they use to communicate to their followers is full of bots and has almost no original content. If it does have a little bit of original content, usually it is people saying how great they think the project is and other such pablum.
   
   
2. They ban people who ask questions about the usefulness and progress of the project. They do this
   because they want newbs and less-experienced people to only see good comments about the
   project.
   
   
3. They slowly dribble out “updates” about their project and do live events and giveaways at odd
   times.
   
   
4. They hype up the amount and the importance of their “partnerships.” They will do this even if the
   person or company they are partnering with may not even have that much of clout in the crypto or
   business spaces. Sometimes, if they are really bold, they will even just flat-out lie about having
   partnerships with people that they really don’t have.
   
   
5. They will try to create a pump with some hyped event in their community, so that they can then
   convert as many of their worthless tokens to Bitcoin right before they dump it all. Usually, they
   will dump it all on a shady exchange... which is also usually the only place their coin will be listed.
   
   

Which leads me to the next scam...

Two: The Exchange Scam

There’s a lot of great exchanges out there, but there are probably even more that are scams. Personally, I like decentralized exchanges, but sometime you still have to use a centralized exchange. Some signs that an exchange is a scam are...

1. They will have fake trading volumes. This takes some due diligence, but you can sometimes see
   when an exchange is using bots to inflate their trading volume. This is also why I recommend
   people use https://www.nomics.com to look at coin data instead of Coinmarketcap, because at
   Nomics they try to spot the fake volumes that some exchanges report.
   
   
2. They will have very high withdraw and trading fees. One exchange I saw had a trading fee of 25%,
   while another one had a withdraw fee of 50%. Cryptocurriencies are cheap and easy to transfer. If
   you pay really high fees to trade and withdraw, then you are letting yourself be robbed. Before
   signing up and depositing on any exchange, scour the internet for any reports about what that
   exchange’s fees actually are. Reddit posters are usually really good about calling out exchanges
   that have egregious fees.
   
   
3. They will not post a physical business address on their website and they will have really poor
   customer support. Poor customer support is probably the biggest red flag of all. Good luck trying
   to get help if for some odd reason your wallet isn’t working- submit a ticket for the third time and
   try hounding them on their social media.
   
   
4. They will put wallets in “maintenance mode” or they will delist a bunch of cryptos without any
   prior warning to their customers. If they do this to a lot of wallets, especially their Bitcoin and
   Ethereum wallets, then this is a strong sign that they are about to pull off an exit scam with the
   most valuable cryptos and shutdown their whole operation. Never leave your coins on even the
   most trustworthy centralized exchanges.
   
   
5. They will launch their own “trading token” with an overinflated buy in price. They want their
   token to be at BNB prices on day one, even though they don’t have the reputation of Binance and
   their token hasn’t been proven to work at all yet.
   
   

In order to avoid this next scam, you must be involved in the communities of the cryptocurrencies that you own. That way you can anticipate upcoming forks and know how to properly respond to them.

Three: The Fork Scam

This happens when the main chain of a cryptocurrency develops a fork and people familiar with how the new fork works try to get other people to convert their original coins into the newly forked coin or try to fool people into thinking the forked coin is the original coin. The most common ways people get scammed into using a less valuable or maybe even worthless fork coin are...

1. A new wallet will magically appear a few days before the fork occurs that promises to provide
   “support” for the new fork coin. The “support” of course is dubious and as soon as you download
   the new wallet and deposit your valuable crypto, they will raid your wallet with a backdoor exploit
   and clean you out.
   
   
2. Websites (and even some exchanges) will pop up declaring that they can “convert” your old coins
   into the new and better forked coins in a 1 to 1 exchange. Never trust someone claiming to convert coins for you, especially at a 1 to 1 rate: newly forked coins are usually not as valuable as the original coin and there is no guarantee that they will send you your forked coins.
   
   
3. A “founder” of the new coin will appear out of nowhere saying that they have a brand new project
   that they are developing on the new chain and you can help them fund it by sending them some of
   the coins from the original chain. This is basically a blatant attempt to steal your crypto. Don’t fall
   for it.
   
   

I hope this information helps some of you avoid being scammed. This is the wild west when it comes to money and finance and it is up to you to protect it… with your own six-gun of intelligence and commonsense.

Keep on hodling,

Coffee w/ Crypto