How to Avoid Cryptocurrency Scams?

Josh Lehman
August 20, 2019

The largely unregulated nature of cryptocurrency has always attracted shady characters who are willing to scam and deceive investors to make a quick buck. According to Action Fraud and the Financial Conduct Authority (FCA), investors lost more than $33 million in 2018-19 to cryptocurrency scammers promising fake high returns from investments in cryptocurrencies and foreign exchange.

“These figures are startling and provide a stark warning that people need to be wary of fake investments on online trading platforms,” said Director of Action Fraud Pauline Smith. “It’s vital that people carry out the necessary checks to ensure that an investment they’re considering is legitimate.”

The purpose of this article is to teach you how to avoid cryptocurrency scams, whose complexity is growing at an alarming rate. The good news is that you don’t need to become a hacker to defeat hackers. All you need is common sense and the information provided in this article.

1. Research Investment Opportunities

“We’re warning the public to be suspicious of adverts which promise high returns from online trading platforms,” advises Mark Steward, executive director of enforcement and market oversight at FCA. “Scammers can be very convincing so always do your own research into any firm you are considering investing with, to make sure that they are the real deal.”

ICOs, which raised a total of $11.69 billion in the first half of 2018 alone, are an especially fertile breeding ground for scammers. Lacking financial disclosures, looming regulatory crackdown, and the systemic vulnerability of ICOs to fraud, money laundering, and terrorist financing are just some of many reasons why investors should be extremely careful before investing in an ICO.

But as long as ICOs remain the easiest option for the average person is to buy coins or tokens, the interest in them will remain high. To separate the good apples from the bad ones, investors must learn to recognize red flags, signs indicating that an ICO isn’t exactly what it would like to be seen as. Here are some of the most common ICO red flags to look for:

· Weak online presence: It’s understandable when a new cryptocurrency project doesn’t initially have a strong online presence, but you should be extremely careful before investing in it. The chances are that you’ve stumbled upon a project that exists only to scam unsuspecting investors out of their money, only to disappear before it gains too much media attention.

· Plagiarized whitepaper: These days, cryptocurrency scammers are so lazy and impudent that they couldn’t even be bothered to write original whitepapers for their fake projects. Instead, they plagiarize existing whitepapers and hope that nobody notices.

· Use case doesn’t require blockchain: There are many blockchain-based projects that have absolutely no reason to use blockchain in the first place. Such projects may not always be scams, but they are always destined to fail, so they should be avoided.

· Anonymous team with insufficient experience and skills: This isn’t the year 1999 anymore, and the internet isn’t the anonymous Wild West it once was. When developers go out of their way to keep their identities hidden, they either don’t have enough experience and skills, or they intend to scam their investors.

· No clear roadmap: Cryptocurrency projects should have a clear goal and a well-thought-out plan on how to achieve it. When you encounter a project that doesn’t seem to know where it’s going, it could be that the only real goal the project has is to scam those who invest in it.

These are some of the main red flags to watch out for, but there are far more signs of a cryptocurrency scam, including promised commissions for signing up others, obvious spelling and grammar mistakes, and anyone asking for access to your computer or private signing keys for any reason.

2. Avoid Fake Exchanges and Wallets

In addition to scammy ICOs, it’s also important to keep an eye out for fake cryptocurrency exchanges and wallets. Very recently, a study published by Bitwise, a cryptocurrency management firm, revealed that many exchanges practice something called wash exchanging, a term that depicts an individual at the same time selling and purchasing a similar stock, or cryptocurrency.

According to the study, only $273 million out of Bitcoin’s astonishing daily volume, which amounts to $6 billion, is legitimate. “It is surprising that exchange with almost 18 times the volume of Coinbase Pro would have a spread that is 1,500 times larger,” said the report.

In addition to bogus transactions, exchanges sometimes pressure users into creating an account and depositing funds, promising them various bonuses of questionable value, which hardly make up for the high deposit and transaction fees.

Fortunately, there are many reputable cryptocurrency exchanges that users can completely trust with their funds and personal information, such as Digital Surge, which is located in Brisbane, Australia and stores 98% of customer funds in cold storage.

3. Beware of Phishing

Phishing is a familiar technique that remains to be a favorite of cybercriminals because of how effective it is. You’ve probably received at least a few emails promising you free Bitcoins or some other cryptocurrency in exchange for downloading a certain mobile app, creating a user account, or following some other instructions.

You can be sure that such emails are all scams intended to trick you into disclosing your private information or downloading malware disguised as a legitimate file. Once you give scammers your private information, they have everything they need to log in to your real account and steal your funds.

To avoid cryptocurrency phishing, always double-check every URL you click on to make sure that it’s genuine, never open any suspicious links, and ALWAYS keep your private keys to yourself.


As unfortunate as it may be, cryptocurrency scams are not going away, which is why investors must learn how to avoid them. All advice given in this article boils down to one simple thing: always do your research and never take any cryptocurrency project at face value. Remember that anyone can create a fancy website and plagiarize a whitepaper to seem legitimate. A few minutes of research can save you a few thousand dollars, and that’s the best return on investment anyone can give you.

Josh Lehman

I’m the co-founder of Digital Surge - Australian Bitcoin Exchange. We provide a fast and easy way for Australians to access cryptocurrency. I’ve spent over 10 years working in the IT industry and know first hand that technology doesn't need to be complicated. It is our mission to simplify access to cryptocurrency and to educate and support our customers throughout their journey.