10 tips for investors to avoid fraud in the investment industry

As long as currency has existed in the history of man, so has the idea and execution of fraud and scams. While fraud and scams may seem identical, there are some slight differences between the two. Fraud is defined as a deliberate deception technique used to secure an unfair or unlawful gain at the expense of another individual. A scam is defined as an attempt to defraud an individual by first gaining trust or confidence and then dishonestly swindling that individual. There have been tales dating back to the days of the Ancient Greeks and Romans with insurance fraud to more contemporary times where Ponzi Scheme coordinators such as Bernie Madoff ran off with millions of dollars.
In the Cryptocurrency investment space, scam and fraud are huge considering dishonest individuals can remain pseudo-anonymous and make off with large amounts of valuable cryptocurrencies. We have identified 10 tips (found in the bulleted list below) to help investors in the Cryptocurrency investment space remain in control of all of their digital assets. While this list is intended to be helpful and informative, it is not an exhaustive list of all the potential scams and fraudulent activity found in the ecosystem. Proper due diligence is recommended at all times when investing.
  • Be sure you are on the proper website
  • Avoid fraudulent accounts on social media
  • Never send cryptocurrency to an address you do not trust
  • Keep your Private Keys secure
  • Stay away from unknown exchanges
  • Pyramids and Ponzi Schemes
  • Pump and Dump
  • Be wary of projects that don’t pass a seeing eye test
  • Paid Advertisers
  • Use 2FA on all of your accounts

Be sure you are on the proper website. No matter the website you visit, you will always want to ensure your address bar has the proper website name and domain extension. It is not uncommon for popular exchanges or online wallet sites to have imposter websites that attempt to phish customer data including usernames, passwords and private keys. A suggestion here is to take an extra second when entering pertinent information to ensure your address bar reads as it should.
Avoid fraudulent accounts on social media. Across multiple cryptocurrency social media platforms, including twitter, reddit, telegram, etc., you are likely to come across fraudulent individuals impersonating CEOs, developers and popular personalities. Often, there will be ways for investors in the space to decipher between who is real and who is a fictitious actor. Using twitter as an example, the platform utilizes a blue checkmark system for users that have been verified as real by the twitter staff.
Never send cryptocurrency to an address you do not trust. Just as you would not send $10,000 to a Nigerian king who promises to offer you a portion of his riches, the same rule applies to your cryptocurrency. Under no circumstance should investors send their funds to an address they do not trust. As you should now know, it is just about impossible to have those funds returned to you. Building off our previous tip, scam accounts will ask for a small amount of cryptocurrency to be sent their way in exchange for a much larger amount. Once again, these accounts should be avoided at all costs.
Keep your private keys secure. In the world of cryptocurrency, you are your own bank and decide how strong your barriers are from thieves and scammers within the community. Investors should NEVER give their private keys away to anyone, regardless of their job title or status in the crypto/blockchain ecosystem. Having your private keys exposed opens your account up to thieves completely liquidating your wallet of everything it holds. If you believe your private keys have ever been exposed, it is advised to transfer your funds to a new wallet as soon as possible.
Stay away from unknown exchanges. Less than reputable cryptocurrency exchanges have been appearing left and right since the end of last year when the amount of generated revenue by exchanges was revealed. At this point in time, it is difficult to determine a foolproof method on which of the lower tier exchanges are legitimate. An exchange such as Binance, which has been offering full transparency, constant communication and above average customer support is trusted by many in the ecosystem and is recommended for trading of crypto assets. To further safeguard your assets, it is suggested investors only leave on an exchange what they are using for day trading purposes.
Pyramids and Ponzi Schemes. Simply put, any cryptocurrency that promises a specific percentage of profit or promises an increased profit percentage depending on the number of fellow investors you refer should be avoided at all costs. The recent rise and fall of the cryptocurrency Bitconnect is a perfect example of a ponzi scheme in the ecosystem. Once the Bitconnect platform ceased operation, the coin declined around 80% in a matter of 24 hours. Proper due diligence and caution should always be utilized when investing, no matter the type of asset you are investing your funds into. Pump and Dump. A pump and dump (or pnd for short) is a scheme where a group attempts to artificially raise the price of a coin and then sell that same coin when other investors buy the coin at the heightened price. It is advised to stay away from any groups or individuals promoting this type of event.


Be wary of projects that don’t pass a seeing eye test. When investing in a cryptocurrency project, whether it be a token offering or purchasing from an exchange, we recommend performing background research on the project. This includes the official website, white paper and social media accounts. Unrealistic proposals/expectations, unclear use cases and unreasonably large presale bonuses are just a few factors to strongly consider when researching the coin of your choice.
Paid advertisers. Paid advertisers are all too common in the cryptocurrency and blockchain ecosystem in 2018. Often times, companies will pay large sums of cryptocurrency and offer advisor roles to crypto influencers with a large following to continually promote (known in the community as shilling) a specific coin or business. While we would love to believe the coin our favorite crypto influencer is promoting is the next big thing, this doesn’t always end up being true.
Use 2FA on all of your accounts. 2 Factor Authentication is used as an extra layer of security which can be used to safeguard your cryptocurrency exchange accounts as well as your email address. With 2FA, users will be forced to enter a specific code that only they have access to following the username and password being correctly entered. This process ensures you are truly the only individual accessing your account and potential frauds and thieves are sent looking elsewhere.

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