People get ripped off online all the time. They especially get ripped off in the world of cryptocurrency. You may even know a person who’s had their savings wiped out by a phony alt-coin. To keep you out of a similar situation, here’s a list (by no means exhaustive) of a few suggestions on how to avoid all that.
#1: Don’t Invest in Crypto
Photo: Michael M. Santiago, Getty Images
Let’s get this out of the way. At the risk of sounding like a high school health teacher, we all know that the surest way to avoid gonorrhea is to practice abstinence. Avoid drug addictions by not doing drugs, yadda yadda. But the point stands: the surest way to avoid losing your life savings in a cryptocurrency scam is to not invest in cryptocurrency at all.
You’ve heard this from us before, but we’ll say it again: Many people — particularly those in the financial industry — have warned that crypto itself is basically a big scam…or, at least, that it’s a vacuous bubble doomed to implode (someday).
Whether you choose to listen to the likes of Warren Buffet or to Peter Thiel is up to you, but I would personally advise a Web3-free lifestyle.
#2: If You Have To Invest, Do Your Research
OK, ok, if you decide that you must invest in cryptocurrency, then the very least you can do is spend time researching the assets and platforms you plan to invest in. You should spend a lot of time, proportional to how much you’re investing. Like, pretend you’re buying a house.
A lot of the people who get scammed are newcomers to the crypto industry (though victims run the gamut in experience level), which makes a lot of sense, since crypto is pretty damn complicated. It’s easy to get lost in the labyrinth of terms, assets, and traders. Organizational complexity plus large money transfers is usually the perfect formula for fraud to take place, so here’s a couple suggestions:
— Research the company or platform that you’re thinking about investing in. Who are the developers behind the project? How big is the team? How trusted are the people? Do they have LinkedIn profiles and socials? Do they have a proven track record of working on other crypto projects? Does the asset have any notable investors behind it that would lend it credibility?
— Carefully examine the websites connected to the platforms and applications that you’re using. Make sure that they aren’t lookalike apps designed to fool you. Vet them for professionalism and authenticity.
— Consider asking someone who works in the cryptocurrency industry and whom you trust for advice on whether to invest in a particular project or not.
— Assess whether there is a real community around the platform or coin that you’re considering putting money into, or whether it’s just one creep on the internet making big promises to you.
In short: do your homework!
#3: Start Small and Stay Small
According to a review of the evidence by Time, when investing in crypto, you should only ever invest the amount that you’re willing to lose. Think of it like gambling. If that doesn’t exactly inspire confidence, I’m not sure what to tell you other than please review slide #1. Indeed, experts say that your crypto investments should never rise above 5 per cent of your overall portfolio. Many a sob story has been told about a green investor putting their life savings into a platform or coin, only to realise that it was a scam and lose everything.
#4: Secure Your Wallet
Like your real wallet, your crypto wallet is where you store all your cash. Just like you wouldn’t want someone to pick your pocket, you don’t want some digital miscreant to get inside your online one either. The security of your wallet depends on the kind that you’re using, but suffice it to say: keep that thing locked down. Never give out permissions or personal information related to it to an internet rando. There are tons of how-to security guides, so check those out.
#5: Read a Coin’s White Paper, But Don’t Take It Too Seriously
It’s always a good idea to give that “white paper” a read, even if a lot of crypto pitches, manifestos, and technical descriptions end up being half a crock. The “white paper” is supposed to be the bedrock of credibility upon which a Web3 platform rests. It’s the business plan and the vision behind the company and its coin — and it usually espouses the “revolutionary” technology being used to make all that happen. Yet an investigation by Decrypt not long ago showed that a lot of white papers are written by contractors with “limited technical knowledge” of the concepts they’re writing about — and many contractors are called upon to “fabricate and exaggerate facts,” according to the review. Still, maybe worth a read. If a company can’t even hire people to write or proofread their big claims, that might be a red flag of a larger scam at work.
#6: Guarantees of ‘Big Returns’ Are Bullshit
Hucksters have been promising “free” and “easy” money since before the dawn of the New York Stock Exchange, and Web3, transformative as it’s supposed to be, hasn’t changed that.
While many scammers may promise big returns and tell you that you can’t go wrong with their product, government regulators say that those promises are bunk. Nothing is certain in life — especially not financial investments, and definitely not investments in a speculative digital coin that you just heard about two weeks ago. The FTC writes:
The value of a cryptocurrency can change rapidly, even changing by the hour. And the amount of the change can be significant. It depends on many factors, including supply and demand. Cryptocurrencies tend to be more volatile than more traditional investments, such as stocks and bonds. An investment that’s worth thousands of dollars today might be worth only hundreds tomorrow. And, if the value goes down, there’s no guarantee it will go up again.
#7: Stay Away From Online Crypto Baes
If someone reaches out to you on Tinder and suggests that you invest in their new DAO, best to un-match immediately. We recently wrote about the noxious trend known as “pig butchering,” wherein criminal-syndicate-backed fraudsters perpetrate “romance scams” on lonely web users and take them for all they’ve got. A lot of these scams begin on popular dating apps (Tinder, Bumble, Hinge, and others) and then slowly transition into money-thieving nightmares. All the more reason not to date anybody who professes interest in Web3.
#8: Ignore Celebrity Endorsements
A flood of celebrities have recently decided it’s a great idea to shill for crypto. It may seem strange at first, but the answer to “Why?” is that the celebs want money. But just because your favourite pop star has decided to endorse some newfangled alt-coin, that doesn’t mean that it’s a worthy investment (it probably just means the pop star wanted a new yacht and Big Crypto was willing to pay for it).
Last year, Kim Kardashian got sued for promoting what turned out to be a “pump and dump” scheme, according to a lawsuit against the billionaire and others involved. Even if your favourite reality TV star gives you investment advice, you probably shouldn’t take it.
#9: Beware of Lookalike Scams
One of the most common types of cryptocurrency scam is the “lookalike scam,” wherein cybercriminals use phony apps and websites that look just like the websites of popular cryptocurrency platforms and products. In just one report published earlier this year, cybersecurity analysts found a total of 249 fake cryptocurrency wallet apps for iOS and Android that were being used to steal millions of dollars in crypto from unsuspecting users. There’s likely a whole lot more where that came from. The best way to make sure you’re not being taken advantage of is to thoroughly investigate the platforms and applications you’re using and vet them for signs of shadiness.
#10: Beware of Rug Pulls
Of all the crypto scams, the rug-pull is one of the most dramatic. It occurs when the developers of a particular crypto project suddenly pull out of the project and take all of the investors’ money with them. The thieves then typically abscond to some unknown country with the winnings and are never heard from again. Last year, approximately $US7.7 ($11) billion is estimated to have been lost to such scams.
How do you tell if a company is a rug-pull waiting to happen? You can’t know for sure, obviously, but typically, these organisations are new startups, and sometimes the backers are unknown or do not give full information about themselves, according to CoinTelegraph. “Over promotion” can also be a sign of shadiness, as it may demonstrate an attempt to conceal a lack of substance. A lack of transparency around code audits is also a bad sign.
In general, you should vet an organisation for how much it reveals about its developers — which can be quite hard to do, given the crypto community’s love of anonymity and privacy.
#11: Beware of All This Shit
In the preceding slides, we highlighted some of the most common crypto scams (romance scams, fake apps, and rug pulls), but it’s worth noting that there’s a whole helluva lot more out there. To name a few:
— Ponzi schemes
— Impersonation scams
— Initial coin offering scams
— Fraudulent or inflated offerings
…And, of course, even if you keep your crypto at a reputable Web3 platform, there’s always the possibility that cybercriminals will find some security deficiency in the platform and manage to hack your money right out of it. This has already happened quite a lot in this year alone. So watch out!
#12: Finally, Don’t Invest in Crypto
Well, it looks like we’ve come full circle. If you don’t have millions of dollars to pointlessly burn, I would, again, highly suggest that you not invest in cryptocurrency. Just don’t do it. Use “real” money governed by a regulating body, not fake money made by strangers on the internet. Let’s face it — Bitcoin and its ilk are for the idle rich! Bitcoin is too expensive. Unless you’re a millionaire with no concept of fiscal responsibility, Bitcoin is pretty much for bozos! You don’t want to be a bozo, do you? If Seinfeld were still on TV, we all know that both Kramer and George would be investing in Bitcoin, and it’s clear that they’re the two most bozo-ish characters on the show. I think I’ve run out of ways to say the same thing, so I will say just goodbye. Don’t do it.