How to avoid crypto?scams

As cryptocurrencies become more mainstream, and their creators can stay largely anonymous, there are bound to be more scams. How can you protect yourself from the dirty rotten scoundrels?

All you need is four bullets (or four bullet points?) to take down 90% of the scammers

Infamous cons and pyramid schemes like #BitConnect suckered many people, based on greed and na?veté. Other crypto scams were just flashy marketing without substance (otherwise known as “mutton dressed as lamb”, or “polishing a turd”, depending on which side of the pond you live.)

Lesson 1: if something sounds too good to be true, it can still be true, but do a LOT of research into it first. Sure, most investments may offer “bank interest” of under 5%, but it is possible for an investment to return 1000% and still be a legitimate investment. Anyone who has planted a grain of corn or wheat, or sprouted a tomato seed can tell you that returns of 3000+% are possible in agriculture, not unlikely in tech stocks, but still not impossible. The next big tech breakthrough, like next year’s corn crop is not guaranteed, because, you know, weather and markets are unpredictable… Do Your Own Research (DYOR).

BitConnect/ USI-tech etc: Anything which promises a return of 1% per day (or even promises 1% per month) is to be treated with suspicion. Markets move in unpredictable ways, and even Warren Buffett, the greatest investor of the 20th century, will not promise numbers going forward. Nobody knows where interest rates will be in a year, or where the stock market will be in a year, so nobody can promise you a guaranteed return. If they guarantee the future, run. If they ask you to recruit other people into the scheme, run further and faster.

Lesson 2: if your favourite celebrity is marketing something, check their credentials, and their understanding of the concept. Celebrities are just human, and celebrities can be misinformed, or deliberately scammed with large amounts of money (remember Charles Ponzi and Bernie Madoff tricked multi-millionaires and celebrities out of fortunes; nobody is immune).

Floyd Mayweather, former celebrity boxer endorsed an ICO in August 2017 (Stox). By May 2018, the founders were indicted for fraud.

American rapper ‘The Game’ teamed up with former Miss America contestant Jess VerSteeg in 2017 to promote Paragon, a coin that promised a ‘cannabis revolution.’ Many companies are working in the hemp space, but this particular one is now the subject of a 2018 class action suit.

Wannabe celebrity Paris Hilton endorsed Lydian coin in 2017, before discovering that the founder was convicted of domestic violence.

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Google is your best friend

Googling some of these people would have saved a lot of pain. If there is fraud or misdealings in the crypto space, you will often find these same people have done bad things previously.

Look for the sticky stuff beneath the fluff

Consider each token or coin in the same way you would consider investing into the stock market, or buying a small business. No rational person would buy a stock or a small business without first understanding exactly what the underlying business does. Buying something based on projections, hype or rumour is just asking to be swindled.

It’s not an “outstanding business opportunity” if the person won’t tell you what business they are in, or advise you of what they are selling *upfront*. Given the chance, you may be wiser to invest into a mobile coffee van, lawn-mowing, or window-washing business, rather than the promise of “work-from-home, global market, no selling required”. If a business (or a token) doesn’t really sell anything or solve any problems, but instead requires you to recruit others into recruiting others, you may be in Herbalife, BitConnect, or a giant Ponzi scheme (pyramid scam).

Do Your Own Research into the token offering

At Cryllionaire Crypto Chat and at Boston Trading Co., we use the proprietary four-pillar “C.O.I.N.” system to check out legitimate investment opportunities.

C — Check to see if the C-suite is sweet.

Google to check if the CEO, CFO, CMO and other people in the organisation are real. Do they have active LinkedIn profiles? Are they qualified for the role in the organisation? Do they have a history of successful projects behind them? Many scams use fake photos and fake social media profiles; this is the first red flag that many people miss, because they do not look behind the flashy marketing.

O — what is the Offering or the Objective?

What does the organisation do? What do they sell? What problems do they solve? Do they actually have a tangible product, working prototype or just an idea written on the back of a napkin? Will they change the world, solve the needs of the market, or do they just promise investors a great return without telling you *how*?

I — who are the early Investors?

Nobody wants to be the *last* person to buy stock in the greatest company in the world, and then again, there may be some stupidity in being the first one to dive in, in case of failure to launch. Is this ICO/IPO/STO being endorsed by a paid celebrity, or has a legitimate investor put their money into the project? Previously unknown Aussie startup PowerLedger boasted Richard Branson as one of their first investors; he was not paid to speak, he actually put his own money into the project, and you can bet that he did a lot of research and due diligence first.

N — Notice the Network.

Is there a strong community of early adopters? Are people discussing the project on social media? Are other people asking questions, doing research and discussing the implications of the new project, product or solution? If everyone is talking about Tesla cars and nobody is talking about Crypto Critters, then that could be an indication that the market either does not exist, or is not interested in the project.

That’s it: those four points are your first line of defence against $h^tcoins, scams, flams and other dodgy crypto projects. Whilst they will help you to sort the cream from the crap in around 95% of situations, nothing is 100% guaranteed. This is why we always suggest that you Do Your Own Research and be alert to any red flags. It’s nice to make 1000% in a month on your next crypto pick, but it is very easy to lose 100% of your gains in a millisecond, with zero chance of getting your money back.

Investopedia stated that in 2017, “between 82% and 90% of ICO’s were scams”. #BostonCoin used the 4-pillar COIN process and successfully navigated the crypto minefield, choosing 30+ coins or tokens without a single scam. Find out more about the process on the Cryllionaire Crypto Chat channel on Youtube and Do It Yourself, or invest with #BostonCoin and let them do it for you.