How to recognize and avoid the most popular crypto scams

February 21, 2019   Bitcoin

When cryptocurrencies went big, back in 2017, many have recognized their potential to disrupt the traditional financial market, and bring a new era of decentralization. This is what lured thousands of new investors to the crypto market, but also countless new businesses which hoped to make a profit in the emerging crypto industry.

While this all seemed great at first glance, the crypto boom actually brought a lot of dangers as well. The market itself is very risky, as it remains unregulated and volatile to this day, meaning that any investment is a gamble. To make matters worse, the potential to get rich quickly also attracted scammers who were hoping that new, optimistic investors will be reckless enough to invest in fake projects without even noticing it.

For the most part, they were right, and millions of dollars were lost in various scams in the last two years.  Scammers were usually long gone by the time investors noticed that something was wrong, and a lot of people were left financially ruined as a result. In order to avoid this, it is imperative for investors to do their research and realize how to spot a scammy project. To help them out, we have prepared a list of three most popular scams, as well as details that might indicate that these projects are not what they seem to be.

Fake ICOs

ICO, or Initial Coin Offering, is a fancy name for token sales that new startups tend to hold in order to raise money for further development. To put it simply, companies would come up with a project which has one or more specific goals in mind, and they would create tokens which investors can buy with other cryptos or fiat currencies. If the project ends up being a success, the price of bought tokens will go up, or at least, that is the idea.

ICOs became very popular in 2017 as the price of pretty much every coin out there would surge as soon as the coins went live. This made investors obsessed with making early investments, hoping to make a profit by buying coins cheaply and selling them after the price went up. However, that's where scammers entered the picture, offering fake coins with no real plan in mind, using copied white papers, lying about who works on the project, and adding false professional experience to their supposed officials. Investors who were in a hurry to invest did not bother to check the information, which ended up costing them.

Not all ICOs are like this, however, and investors should not be discouraged from investing. However, they should always do their homework before investing in any unknown project. But, many still failed to do so, and ICO scams continued in 2018 as well, eventually causing various regulators to ban them completely in various countries, even if the country was previously quite crypto-friendly, like South Korea.

Shady exchanges

Cryptocurrencies are usually traded on crypto exchanges, as they make it easy for investors to sell or buy coins. However, a number of fake exchanges also emerged, and many of them disappeared overnight after a bunch of investors deposited their coins in the exchanges' wallets. As you might have expected, all the coins disappeared with them.

Others fell victim to hacking attacks, which may or may not have had inside help, depending on the case. Because of this, investors are advised to always trade on trusted exchanges, such as Kraken, Coinbase, Binance, Bittrex, BitMEX, or Cryptopia.


You may have heard about pump-and-dump schemes, which are typically focusing on price manipulation of smaller altcoins. This is where these schemes work best, as buying a large number of coins can be done with a lesser amount of money. The sudden purchase encourages investors to buy the coins themselves, believing that the coins' price is about to skyrocket, which does happen for a short while.

However, the scammers are usually the first to sell their coins at the higher value, and the oversale quickly crashes the price back down, leaving investors stranded with no money and a lot of worthless coins in their wallets. This is why investing in small altcoins is not recommended unless you are a professional trader, who knows the risks and can recognize which coins actually have potential.


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