Erica Stanford is the author of “Crypto Wars: Faked Deaths, Missing Billions and Industry Disruption” and a recent guest on Client Server’s Talking Talk webinar series. She shares her top three tips for avoiding crypto scams:
- 1: Beware of Multilevel Marketing
The main thing that surprised me when you start investigating crypto scams is how often multilevel marketing comes up. It’s somehow legal, inexplicably, and it shouldn’t be. Almost 98% of people who get involved in multilevel marketing end up losing money. Like a pyramid scheme, there are those who get in early and make a lot of money, sometimes in the hundreds of millions of dollars, but everyone else has to pay to get in and end up losing money.
When you sell a product like crypto on the basis that if you invest in a certain coin you’ll get rich quick, or you’ll double your value, or you’ll get X amount more – and then get paid a commission for getting people to invest, it’s not only bad for people who fall for the scam, but it incentivises them to also spread the lie.
There’s a real grey area to it as well. Some investors will know it’s a scam and not care, some might think it’s a bit dodgy and not care, but some might actually think it’s good and try to reap the benefits of the commission. But even when a scam is labelled as a scam, there are those who don’t believe it or don’t want to.
- 2: Don't send your crypto to anyone
A major crypto scam trend is one that offers something good that encourages you to part with your crypto. They might be scams that say, “Hey, we've got this amazing new trading algorithm, and if you send us your Bitcoin, we'll trade it for you and you'll get returns”. If the best hedge funds in the world can’t guarantee a return, why would an otherwise unknown crypto start-up be able to? Anything that asks people to send their crypto, I’d suggest they be extra cautious. It’s not like you can press the undo button, crypto doesn’t work like that.
- 3: Don't click any links
Phishing scams are also rampant, and many of them are really quite sophisticated. They’re often made to look like a real crypto trading site, but with one or two letters in the URL changed. This isn’t just a crypto problem, it’s a tech problem. Hackers gonna hack, right? Sources of centralised information are very attractive to hackers. But the easiest way to avoid that is to never click a link that has been given to you. If it claims to be from a legitimate crypto trading site, then manually search for that platform on Google yourself.