How Not to Get Crypto Scammed

A particularly bad platform for fakes is Instagram. I’ve racked up quite a number of followers there, even though I rarely use it. That makes me a target. Someone can easily set up an account with my image and name, just using a slight variation, and then they can contact the people who follow me. They can block my own account so that I never know they exist.

This happened to me at some point last fall. I knew nothing about it. I rarely check in to that account, so when I did I found dozens of notes to me saying that they would like to follow up on my Bitcoin investment idea.

Ripoff!

Huh? I would never private message anyone with an investment idea. That’s completely nuts, and probably comes close to illegality. I would never do it. Utterly crazy. Why did people believe that I would? A certain degree of gullibility I suppose.

In any case, after months of exasperation with this nonsense I finally did what I should have done in the first place. I reported the fake account with proof that I am who I am and not the guy who is pretending to be me. After a week or so, they finally got rid of the fake. Good.

In the meantime, I do wonder how many people got scammed in my name. I do not know. What I find incredible is that anyone would go for it. And yet smart people do. They find someone they trust — not knowing it is a fake — and go for the promise of high earnings.

I do not know the nature of the scam, but I’m guessing that it followed the usual path. Send Bitcoins right away. They will be invested with people who need money. These investments will pay big returns. Then the company will send back my crypto with lots of new earnings.

I’m rich!

It never works. What happens is that you send your crypto to someone and they disappear. There is absolutely no legal way to get the money back. As I’ve explained repeatedly, the glory and the danger of crypto is the speed of settlement. When you move coins from your wallet to someone else’s wallet, the property is transferred. Period. You cannot get it back. In this way, crypto is very different from a trust-based system like banks and credit cards. The property moves without an intermediary (unless you are using an exchange).

Rules for Scam Avoidance

It seems more than obvious. I shouldn’t have to say it. But given the number of people who bought into this, I will say it. Never ever engage with anyone on social media concerning some crypto investment idea. It is a guaranteed scam. Even if you think you know the person. Do not answer and do not bite. Do not denounce the person. Just apply an immediate block or simply ignore it. Period. No exceptions.

That’s the first rule of avoiding scams.

There are others. I went to my old friend, a trusted source of all such matters, a man who runs TheBitcoinConsultancy, and a brilliant observer of the industry, and he offered a valuable look at some other tips for avoiding rackets. He puts this in the form of 5 solid questions to ask before getting involved.

1: Does this project have a legitimate profit model? There are plenty of ways to make money in crypto: mining, lending, holding, and trading. There are many illegitimate ways and they are rather obvious if you look carefully at them. Any legitimate Centralized Finance (CeFi) company will disclose its business model. A Decentralized Finance company will too but they are not as easy to check, and this is by design. But you should be able to verify its legitimacy with a white paper and other sources online that verify opportunities.

2: Is this project feasible and sustainable? My friend gives the example of many tokens out there that are designed for particular niches, such as buying prescriptions online or gaming. If the project is too niche, it has no possibility of scaling. It is very likely a pump and dump, just something to arouse naive interest before the coin disappears. It seems amazing to me that people are still falling for such nonsense, but that’s where we are.

3: Does this project have independent verification or third-party certification? There are very few legal ways in which crypto companies are allowed to trade your money. They must be registered if they do so, and this is an arduous process. Very few companies end up jumping through all the regulatory hoops. You can verify this with FINRA, SIPC, or the SEC. These companies are simply not allowed to advertise their services, via instant messaging or pushes on social media. No hedge fund is allowed to do that. If someone is, it is likely a scam. In addition, the crypto industry itself has its own verifications at Rugdoc.io

4: Can you independently verify this token or platform? Always check new tokens with coinmarketcap or some other services that watch crypto prices. If the token is not listed or cannot be verified, run away. There are no exceptions to this rule.

5: Check out the management structure. Any legitimate company will include the names of its officers and they should be judged according to their professional reputations. Many people in this industry have ruined their reputations by getting involved, however accidentally, in companies that are not legitimate. Their names are now mud. That sounds cruel but that’s the way it is .

My friend has looked at more than 2,000 cases of crypto scams and finds that 95% have these common problems. They offer “unrealistic returns, high-pressure tactics, sales pitches via messaging platforms, no mention of fees, and lack of reputation.” If you can avoid those problems, you will avoid most rackets in this industry.

It sounds boring, but the best and safest way to earn money in this world is not by leaping on the latest fad, much less buying some non-fungible token in the art world. The best path is to buy and hold. Nothing more to it than that. There are fancy things you can do later but avoiding rackets and scams is priority number one.

Jeffrey Tucker

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