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Ruth Kise 23 Aug 2023 ◦ 8 min read

How to Recognize a Crypto Scam: 7 Warning Signs of Pump-And-Dumps And Other Fraud

How to Recognize a Crypto Scam: 7 Warning Signs of Pump-And-Dumps And Other Fraud

As you start using cryptocurrencies, you realize that, since crypto is a new financial mechanism, such transactions are associated with risk. Every month dozens of new tokens and apps launch. Blockchain technology is developing, and even experienced investors may find it hard to keep up with its rapid pace.

We are not talking about the unpredictability of markets. The crypto market opportunities grow the interest among a broad pool of investors and automatically pander to frauds. Among successful blockchain-related startups and legitimate cryptocurrencies, attackers still try to warm themselves into users' confidence.

We've talked about some scams before now it's time for a deeper look.

The Most Notable Scams of 2021

According to Chainalysis reports crypto scammers stole around $7.7 billion from people through various crypto frauds and pumps-and-dumps this year. Here are some of them:

Squid Coin

A cryptocurrency inspired by the popular show "Squid Game" created significant hype among investors reaching values of around $3,000 in a matter of few weeks. Even legacy media fell for this altcoin. But the developers abandoned the project and fled, robbing investors of $3.36 million. It was a rug pull a malicious method in the cryptocurrency world, where crypto developers abandon a project and escape with the funds they got initially.

SavetheKids Charity Token

The cryptocurrency was promoted by e-sport social media influencers as a token that redistributed the wealth of charities. Followers were scammed into buying the coins but later drawn into various pump-and-dump schemes that devalued the currency.

In this scheme, proponents typically artificially pump the crypto price up through false advertising and ruthless promotion to sell their tokens and pocket the profits, while investors watch their money going down the drain.


South African brothers Ameer and Raees Cajee created the cryptocurrency exchange service called Africript in 2019. Both vanished after announcing that $3.6 billion in bitcoins was stolen from their platform as a result of a hack. However, the story is still unclear, and investors pointed fingers at the Cajees, trying to compensate their funds.

Bored Ape Yacht Club NFTs

Crypto fraudsters tricked Calvin Becerra into sending over three NFT digital art pieces from the 'Bored Ape Yacht Club' collection under cover of technical support. It is counted that each of them was worth $225,000. But Beccera declared the three apes were together worth $1 million.

Poly Network

Poly Network is a decentralized finance platform that went through one of the biggest hacks of the year. A hacker found a fault in the protocols that let more than $600 million from users' accounts transfer to his wallet.

However, the hacker was a 'white hat hacker' (a nod to the term defining an ethical hacker that tries to expose security flaws so they can be fixed before a nefarious actor comes along).

In a few weeks, the hacker returned the complete sum of money and even got rewarded $500,000 by the Poly Network for exposing the vulnerability.

How To Recognize a Crypto Scam?

There are several methods fraudsters use to manipulate you. Some signs below can help you avoid crypto frauds and keep your funds safe.

1. Hurry. In most cases, scammers hurry their clients and try not to give them time to understand what is happening. Often they use manipulation and threats for this purpose. Do not go along with those who try to confuse and rush you, do not forget to get acquainted with all the available information. Do your research, find the project white paper, and read through it. The document should lay out the background, financial models, legal concerns, SWOT analysis, and a roadmap for implementation.

2. Social media promotion. If suddenly the people you follow (except for known financial experts) are talking about a cryptocurrency, stop and ask yourself, why is this media influencer doing this. It's best to check out whether the project has its website and social media presence. Go straight to the source instead of relying on information from third parties.

3. Exclusive information. To attract attention, fraudsters use a ruse about secret trapdoors in the system. On social networks, fraudsters often share information about an allegedly erroneous exchange rate or successful exchange chains. Both are the loss of money.

4. Low data verification requirements. If you got requirements to operate with tokens in payment systems with low data verification, such as QIWI, then you should take this very carefully. Fraudsters very often use the features of these systems in their favor. For cryptocurrencies, these are non-refundable transactions.

5. Too good to be true. Refuse if you see offers that promise outstanding gains such as free coins and NFTs – often extending into double or triple figures. Pump-and-dump schemes also fall into this category, where the costs of digital assets are bloated, provoking investors to get applied for fear of missing out. Then they’re left holding cryptocurrency that’s worthless when the price suddenly falls.

6. Cryptocurrency trades. Take a look at how it goes. If it's on a well-regarded exchange, it's more likely to be a safer asset. Legitimate companies and endeavors make the system itself and the progress of the token sale easy for probable investors to view. Look for the token sale figures as the ICO is going on. Better yet, monitor the token sale over time to see how it is moving.

7. Fake applications. Another common trick that cryptocurrency investors often fall for is fake applications placed on Google Play and the Apple App Store. Although such applications are usually quickly recognized and removed, some users may become a victim. Thousands of users make such a mistake and download fake applications for working with cryptocurrencies.

Investments are always risk-related. In addition to the currency crash due to economic or political movements, there is a risk of hacking the smart contract of improperly secured blockchains. Crypto exchanges also can be hacked. But where risk is high, there are more opportunities. To keep funds a far lesser degree of danger, learn how to properly manage your risks. And the last piece of advice: select and operate only with trusted exchanges with licenses verified by users such as those offering their services through SwapSpace.

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