According to the Federal Trade Commission (FTC) report, since 2021, digital currency fraud projects have cost people more than $1 billion.
New investors are more vulnerable to this unpleasant event than anyone else. To prevent it, we must keep ourselves up to date and learn about the latest forms of digital currency fraud. By using a series of experimental and routine tasks, it is possible to distinguish bad projects from legal and healthy ones.
Innovation and creation of innovative solutions in the crypto industry is not at all strange. By creating various projects, many of our problems in the real world are also solved, but sometimes the solutions presented after implementation reach a level of difficulty and complexity that confuses ordinary users, and some of them lead to digital currency fraud.
Scammers usually target inexperienced people and confuse them with their complicated schemes. They are trying to take advantage of their lack of experience; From manipulating prices to introducing bugs and problems in capital management and storage software!
An old and classic method!
In the market, there is a classic and common way of digital currency fraud, which is known as Rug Pull. In this method, criminals try to create a new currency and promote it fraudulently through false claims.
The purpose of this work is to increase the value and price of the new currency. Fraudsters are aware of the fact that they should produce currency in a targeted manner so that users assume that the currency has a stable future. This factor differentiates the cash outflow problem from the Pump and Dump problem.
After the project is big enough, the fraud team, who are the biggest holders of that token, sell everything and pocket the big profits, break all the bowls and jars on the users and leave them. In this case, investors have nothing but worthless tokens in their hands. With this work, the entry of a new population of investors is also prevented.
In the following, we would like to introduce some features of a digital currency fraud project. If you see a project with the following characteristics, it is probably promoting a worthless token, and there is a stronger possibility that you are dealing with a scam project:
documents (white paper)
The white paper describes the future technical and technological goal of the project. Instead of being skeptical of the important aspects of the project, such as the business model, the code description, and its economics, users should be skeptical of the white paper, which only talked about how the token price would increase. Projects with serious intentions usually conduct research before starting their activities and then present them and justify their purpose.
Team and collection
When a team makes its members’ personal information public, the credibility of the entire team increases. This information can include things such as the identity of individuals, the background of each activity and team relations. Publishing such information is called Doxing.
Be careful about partnership announcements that come out too quickly because big and reputable companies go through a long-term process to get to their desired position. Running large advertising campaigns, working with the media and collaborating with other businesses takes time and effort. If you come across a group that hasn’t been active for a long time and now starts promoting fast, you should be careful because it might be a cryptocurrency scam project.
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If you see dubious endorsements from various organizations or celebrities and famous people participating in advertising campaigns for that token, you should give the possibility that all these things want to make the token look more valuable and good than it is. The goal of the fraudster is the same and he wants to make something appear more important than it deserves. This later leads to positive price movements. One of the consequences of the positive movements of the chart is the “fear of losing capital” by investors, which is called FOMO.
A roadmap is a brief representation of what is expected to happen in the future; In addition, it shows future technology and protocols. A roadmap can be considered a condensed example of a white paper that very succinctly shows the long-term goals of the project. In addition to all these, we see the achievements and past honors of the project in the roadmap, which is also related to the scope of activity. If a roadmap fails to provide these things, is unrealistic, or has no roadmap at all, you are probably dealing with a fake project.
The amount of liquidity is the way to detect digital currency fraud
If an exchange offers few tokens for trading or cooperates with few exchanges, this is probably also a scam.
It is very important to know how much liquidity is behind a token. If we can understand this issue, we can distinguish real projects from fake ones. Liquidity refers to the total amount of assets in the pool or market. If this amount is low, it means that currently that currency is less favored than others. This is possible in two ways; First, that token is emerging, and second, that currency is very little used.
The DEXTools website is a great tool for finding liquidity. Using this site, you can obtain liquidity and other valuable information such as the number of active addresses and the volume of transactions. Users can also apply filters while using. You are able to search by blockchain type or currency conversion.
Website and social network activity
It is not a good sign to come across a site that has an unprofessional design and as if it was made using a ready-made template. A very good way to find out is to use Whois. From a judicial point of view, some domains are known as fraudulent websites. In this way, you can identify the criminals.
If the site does not have any problems in terms of appearance and looks good, visiting the blog section of the site can be helpful. If the external links on the blog were irrelevant or broken, the articles were not related to the project topic and were old, it can be guessed how much the project implementation team cares about its future and has a plan for it.
False references to reputable sites such as Yahoo Finance, Crypto Briefing and CNBC are also suspicious. If they said that our content on such sites has similar content, it should be said that it is not and their statements are fake, exaggerated and false.
If the team in the virtual space did not respond to the complaints and complaints of users regarding the breakdowns and defects of the token, stay away from such a project because there is a risk of being caught in the digital currency fraud process. To find out what people really think about a project, taking help from Twitter and forums like Reddit can be very useful.
The crypto market has always offered good returns to new investors, which makes scammers prey on inexperienced people with the goal of making them greedy and then fueling their criminal activities with promises like 10x returns. If you want to be safe from the effects of cash outflow, it is necessary to research and search carefully about the projects. In the crypto industry, where the technology is constantly changing and innovating, it is not always easy to detect new forms of fraud.