Skip to main content

How to Spot a Cryptocurrency Scam?

By December 15, 2020March 29th, 20226 minute read

Ever since Bitcoin’s launch in 2009, cryptocurrency scams have been a fairly popular way for fraudsters to get traders to send money. If you have thought to buy Bitcoin in India in recent months – or any other crypto, for that matter – you have probably heard about the recent crypto wallet scam where an Indian businessman lost INR 28 crores. Indeed, there’s no denying that Bitcoin, and all the cryptocurrencies that came after, have enabled scammers to trick unsuspecting traders and investors. 

If you aim to buy cryptocurrency in India, you should probably approach crypto trading with quite a bit of skepticism. This post discusses how you can spot crypto scams and some tips to avoid them altogether. 

Some Common Types of Cryptocurrency Scams, and How You Can Spot Them: 

  1. Imposter Websites:

How Does It Work? 

Phishing attacks are the most common scams and can be quite difficult to detect. Fraudsters send you a link to the clone of a popular cryptocurrency exchange or any other website, where you would be prompted to enter your login credentials from the original website. 

Get WazirX News First

How to Spot This Scam?

A fraudster would usually send you the link to a cloned website through an email or a text message, so if you are urged to click on a link sent to you through any of those mediums, that’s usually your first clue that it’s a scam. 

Cloned websites usually have similar figures in the URL as the real website URL; for instance, it might have a ‘0’ instead of an ‘o’. So when you buy cryptocurrency in India, have a good look at a website URL before entering your login credentials. Plus, if there isn’t a small lock icon indicating security in the website URL bar, or no “https” in the site address, it’s most likely not a legit website.

  1. Fake Exchanges and Apps
Fake Exchanges and Apps
Source: Comodo

How Does It Work?

There are many shadow exchanges within the cryptocurrency space that trick you into depositing funds with attractive offers like zero transaction fees or no trading commissions. Scammers also commit fraud by developing fake apps in the name of popular exchanges that are made available on the Play Store, the App Store, and suchlike. 

How to Spot This Scam?

Before downloading an app, double-check the spelling of the app or the logo to see if it has a different color scheme or if it’s different in some other way. If you spot anything strange, it’s quite surely a scam. As for fake exchanges, always double-check the website URL to see if it’s secure before depositing funds. 

  1. Fraudulent ICOs
Fraudulent ICOs

How Does It Work?

Another of the more popular cryptocurrency scamming strategies include developing and marketing a fraudulent Initial Coin Offering project and arranging a fake sale of tokens. According to a 2017 Bloomberg study, 80% of ICOs turned out to be scams. Two very popular examples of fake ICOs are Confido and Centra. In both cases, the coins offered lost their values immediately after the sale was conducted, and the companies disappeared overnight. 

How to Spot This Scam?

Suppose the startup holding an ICO offers you a private bonus for buying a token (for example, suppose the bid for the general public is 1 BTC = 10,000 tokens, but you are being offered 25,000 tokens for 1 BTC). In that case, you can be positive that it’s a scam, especially if they ask you to send Bitcoin to a different address than the one advertised. Additionally, if a company makes it difficult for anyone to check the ICO’s progress, there’s something wrong. 

  1. Cloud Mining Scams
Cloud Mining Scams
Source: Jasmine Steve

How Does It Work?

Cloud mining services let users rent server space to mine altcoins. As cloud mining grows popular owing to the increasing cost of mining equipment, scammers might give you attractive offers on cloud mining services so they can get you to deposit funds. A well-known example is MiningMax, a fraudulent cloud mining service that deceived investors of $250 million.

How to Spot This Scam?

If you want to buy cryptocurrency in India but are not experienced enough to know how mining works, you could easily fall victim to a cloud mining scam. So if a mining service is asking you how much you know about mining or guaranteeing returns too good to be true, back away immediately.    

  1. Ponzi Schemes:

How Does It Work?

Ponzi schemes are investment frauds that promise extensive returns on investments to trick you into depositing money, much like cloud mining scams. The fraudster organization pays the anticipated returns to existing investors with the money invested by new investors through these schemes. The biggest Ponzi scheme till date has been Bitconnect

How to Spot This Scam?

If a platform offers you an immediate, astronomical return on your investment and asks for a great amount of money in one go, you can be sure it’s some sort of scamming scheme. With a Ponzi scheme, in particular, a platform would not disclose any information about their owners, which is another red flag you can look for. Plus, if the platform requires you to invite other users, you can be sure it’s a Ponzi scheme. This is unlike affiliate programs, however, where you participate voluntarily.

  1. Pump and Dump Schemes:

How Does It Work? 

There’s usually a whole group of scammers behind pump and dump schemes. They manipulate the price and volume of cryptocurrencies – usually new, less-known coins – by buying en masse. The crypto’s market price is ‘pump’ed within a short period and triggers FOMO (fear-of-missing-out) in traders. As other investors start investing in the coin and the prices go up higher still, the scammers sell their share by ‘dump’ing. 

How to Spot this Scam?

There’s really no definite method to spot a pump and dump scheme. If you notice a sudden surge in a particular crypto’s trading volume, consider waiting for a while instead of running to buy it. But it’d be best to avoid it entirely and choose to invest in the more trusted and stable cryptocurrencies. For instance, if you are a new trader, you’d want to buy Bitcoin in India, not any of the lesser-known altcoins. 

And there you have it!  Hopefully, if you are new to the crypto space, you now have an idea of what forms cryptocurrency scams can take. 

If you want to buy cryptocurrency in India, here’s a list of steps to follow to avoid cryptocurrency scams completely.  

Steps You Can Take to Avoid Cryptocurrency Scams: 

  1. Find out as much as you can about the team behind the cryptocurrency you are about to buy. Check their LinkedIn or other social profiles. See if their activity there matches up to the number of followers they have or likes they get. 
  2. Research, the team behind the exchange platform through which you want to buy cryptocurrency in India.
  3. Find out if the company behind crypto is a registered, legitimate company and if they can be held accountable if something goes wrong.
  4. Read through the project whitepaper to look for any inconsistencies, mistakes, or plagiarism. See if it answers your questions regarding the company’s background, objectives, projections, and the path ahead. 
  5. See if the crypto company gives investors real-time, detailed progress reports through its website or social media. 
  6. Contact the team with any of your questions regarding the project, and see if you get satisfying responses. 
  7. Never share your password with anyone. A legitimate exchange would not ask for your password or any other personal information for that matter. 
  8. This goes without saying: never click on unrecognized links.
  9. Check user feedback regarding an exchange platform/crypto agency on social media. 
  10. Find out if the project has ever been accused of scamming.

All these security measures are well and good. But in truth, you can never be 100% free of scam threats. So when you buy Bitcoin in India, or any altcoin, sticking to reputed, well-known exchanges is probably the best option. For example, WazirX ensures the highest protection of your personal information and funds! To find out more about how you can avoid any security threats while trading on WazirX, you can visit the website here!

Also you can download the app and Start Trading Now!

Android App – Cryptocurrency Exchange

iOS App – ‎Cryptocurrency Exchange

Frequently Asked Questions

Is Bitcoin And Cryptocurrency The Same Thing?

Bitcoin is a cryptocurrency that was designed to facilitate cross-border transactions, eliminate government control over transactions, and streamline the entire process without third-party intermediaries. The absence of intermediaries has resulted in a significant reduction in transaction costs. Satoshi Nakamoto, the creator of Bitcoin, created the first cryptocurrency in 2008. It began as open-source software for money transfers. Since then, plenty of cryptocurrencies have emerged, with some focusing on specific fields.

Is crypto legal?

Crypto is legal in most countries, including India. While nations like the U.S. and many in Europe have regulatory frameworks, others like China have strict bans.

Are Cryptocurrencies A Good Investment?

Cryptocurrency has the potential to make you extremely wealthy, and the potential to cause you to lose your money. Crypto assets, like any other investment, come with many risks and potential rewards. Fundamentally, cryptocurrency is an excellent investment, particularly if you want to gain direct exposure to the demand for digital currency.

How To Invest In Cryptocurrency In India?

There are two ways of investing in cryptocurrency, mining and via exchanges. Cryptocurrency mining is the process of verifying and adding transactions between users to the blockchain public ledger. Purchasing cryptocurrency in India is a straightforward procedure where investors simply participate by registering with a crypto exchange such as WazirX. After registering for an account, citizens can trade multiple cryptocurrencies, store cryptocurrency in wallets, and more.

What Are The Best Cryptocurrencies To Invest In?

The best cryptocurrencies to invest in would be the ones you study and analyze in detail. Some of the most popular cryptocurrencies include Bitcoin, Ethereum, and many altcoins such as Tron, Ripple, Litecoin, etc.

What Is The Safest Cryptocurrency To Invest In?

Bitcoin has had the highest market capitalization, has been around the longest, has the most experienced development team, and has enormous network impact and brand recognition. As a result, while trading cryptocurrencies, the rate of return on Bitcoin is commonly used as a benchmark. However, the risks associated with cryptocurrencies remain, and the safest cryptocurrency for you depends on your analysis.

What Is The Meaning Of Crypto?

A cryptocurrency is a digital currency that is secured by the process of cryptography, making counterfeiting and double-spending almost impossible to happen. Blockchain technology is used to produce cryptocurrencies ( a distributed ledger enforced by a distributed network of computers). Cryptocurrencies are distinct in that a centralized authority does not issue them.

Are Cryptocurrencies Legal In India?

In India, cryptocurrency is legal, and anyone can buy, sell, and trade it. Because India lacks a regulatory system to regulate its operations, it is presently uncontrolled. According to the Ministry of Corporate Affairs, companies must now document their crypto trading/investments inside the financial year.

Can I Invest In Cryptocurrency?

Yes, with exchanges like WazirX, you may invest in cryptocurrency in India. To begin, go to the WazirX website and register. After that, you will receive a verification email. The link received by verification mail will only be available for a few seconds, so make sure you click it as quickly as possible. This will successfully verify your email address. The following step is to set up security, so choose the best solution for you. After you've set up the security, you'll be given the option of continuing with or without completing the KYC process.

How Many Cryptocurrencies Are There?

There are over 5000 other digital currencies available on the internet in addition to Bitcoins. The only problem is that they haven't gotten the users' attention. Besides Bitcoins, a few other digital currencies have gained popularity among users. It's been more than ten years since Bitcoins were first released, and now they've achieved new heights thanks to their phenomenal success.

Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
Participate in the Indian Crypto Movement. Share:

Leave a Reply

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.