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While fast moving and exciting, the world of cryptocurrency has its share of bad fruits. Traditional swindlers just found a new breeding ground for their illicit practicescryptocurrency fraud is thriving at alarming rates.

Recently, the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) warned about the growing cases of scams in the crypto space.

“Customers should not purchase virtual currencies, digital coins, or tokens based on social media tips or sudden price hikes,” the twin agencies warned. Identifying the fraud as “old scam, new technology,” the CFTC cautioned, “…same basic fraud is now occurring using little-known virtual currencies and digital coins or tokens.”

Considering such statements, both new and veteran investors should be on the lookout for anything sinister. While crypto adverts are everywhere online, it’s unfortunate that swindlers use such platforms to execute cryptocurrency fraud on unsuspecting investors. In addition to heeding the warnings by authority voices, the following are the 10 best ways of identifying cryptocurrency fraud.

Who is the team behind the project?

Don’t get involved in a crypto project before you know the team behind the project. Glean information from the ‘About Us’ page, Twitter handle, Github or LinkedIn profile. You should be able to find the list of founders, along with their pictures.

Some common signs of cryptocurrency fraud include:

  • Using nicknames on their profiles
  • No facial photographs
  • Scanty information

Successful crypto projects usually have a strong and reliable team behind them—people who are proud of their talents, knowledge, and experience. In a fraudulent scheme, the most important details will be missing. For instance, the official website of Litecoin Cash (LCC) contains the photos of the development team, but no information on their public profiles. This leaves more questions than answers.

Do they have a detailed whitepaper?

The whitepaper is the backbone of any crypto project, providing a clear roadmap into the future. A good whitepaper reveals the technical details and functions of a coin. If the paper is poor on technical information, it becomes suspicious—and displays the signs of a cryptocurrency fraud. Similarly, if a crypto project lacks a whitepaper, the level of suspicion rises, implying that the team behind the project was too incompetent to produce the technical paper.

Untrusted URL

As witnessed on Reddit, scammers have devised a way of making their own website addresses (URLs) that look nearly the same as the original URLs. They can use this technique to impersonate trusted exchanges like Bittrex and Binance. As a new trader, you can use your login credentials on such sites unknowingly, which can lead to identity theft. In the end, you can lose your crypto assets and even fiat money.

Usually, you can tell if a website isn't legitimate if it doesn't have the green "https" that comes before a website's URL.

To avoid this type of cryptocurrency fraud, traders should look for the green “https” tag that determines the authenticity of a website. The green tag precedes the URL of a website in the browser address bar. Next time you sign into your preferred cryptocurrency exchange, take a little more time to study the URL, as scammers get a little crafty. The ‘https’ tag is a sign that the website obtained a proper SSL certification and therefore, is trusted.

No listing on various exchanges

The growing popularity of crypto coins has seen many exchanges come up to deal with market demands. Different exchanges support various coins at different prices. In some exchanges, traders can only find a few tradable coins. If you cannot find your preferred coin on Coinbase, you need not worry. However, if the coin appears nowhere even after the end of the crowdsale and no exchange platform has plans to include it, then there’s a cause for alarm.

Availability of a coin on different exchanges not only reduces the chances of cryptocurrency fraud but also improves liquidity. If the coin is available on one exchange only, then it means selling it may be harder than when you can find it on various different exchanges.

For instance, Litecoin Cash is currently available on CryptoBridge, Yobit, TradeSatoshi, MercatoX and MeanXTrade. The same check should be done for other coins that are perceived to be scams.

Too good to be true

The popular adage states, ‘if it looks too good to be true, it probably is.’ The same is true in the crypto space, especially when it comes to cryptocurrency fraud. An exaggerated Initial Coin Offering (ICO) is the first warning sign. While it is normal for a company to focus on its positives instead of negatives, some companies promise returns that seem overly outlandish. A genuine crypto project makes cautious predictions for the future of its coin and its functions without exaggeration.


In addition, a genuine crypto project offers an opportunity for growth—over time, but not overnight riches. A company that offers get-rich-quick returns may only benefit the founders but not the investors, so they are more of a Ponzi scheme.

Overall, beware of companies that offer over-the-top promises. Before you make the final decision, you should ask practical questions and if you cannot find the right person to ask, then just let it pass.

Channels of communication

Slack and Telegram are popular channels of communication in the crypto space. Many projects use them for both internal and outside communication. As a trader, you can use Telegram to discover many things about a crypto project. Do they engage in serious communication with people? Do they delve into the details of their project?


If you can access their slack channel, proceed to study how their engage their prospects. Both Telegram and Slack channels can provide a good impression of a crypto project, simply by probing the flow of communications.

Besides, many companies use Telegram and Slack channels to promote their coins, especially at the pre-ICO and ICO stages. However, if it sounds too good to be true, think twice, because it probably is. Hyperbolic language jammed with superlatives without cautiousness provides a sufficient ground for cryptocurrency fraud.

How to avoid cryptocurrency fraud

According to Commodity Features Trading Commission (CFTC), the following are some of the key precautions to take against cryptocurrency fraud.

  • Never buy coins or tokens based on a single tip, especially when it is through the social media.
  • Shun websites or ads that promise riches by investing in a particular cryptocurrency or token. Do due diligence by researching various cryptocurrencies and digital coins. Find out the teams behind them, what they stand for, and glean any other vital information that you would like to know. This will help you separate myth from truth.
  • In crypto investment, there’s nothing like a trading strategy or guaranteed investment. The crypto space is such a volatile one that if someone tells you there is no risk of losing money, then simply do not invest.
  • If you have been a victim of cryptocurrency fraud, or you would lie to report a suspicious activity, you can contact CFTC on their official website for help.

In addition to the above measures, you can Google the name and add scam. This will provide more information about the site, which can eventually reveal if something is wrong in the background. Google trends and news also provide similar helpful information about cryptocurrency fraud.

Which other way do you know, which could help arrest cryptocurrency fraud? Join the conversation over at Telegram (https://t.me/coinstaker)

Featured Images from CoinStaker Library

Author info

Tony is a writer for the crypto space. He presents cryptocurrency and blockchain topics to the public in a way that he only can. While carefully researched, this article should not be taken as an express investment guide. Do your own research and consult a financial advisor before you invest in cryptocurrency.

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