how to identify fake cryptocurrency

Once they have enough investors, they will disappear with all of the “invested” funds, leaving investors with nothing. Either the rental will never earn you any money, or the criminal will use it to mine cryptocurrency for themselves. For safe measure, double-check with the source through a different communication channel and verify a website’s security before completing a transaction. Get Norton 360 with LifeLock Select to help safeguard your personal information and protect against identity theft and scams.

Jobs and Making Money

Because cryptocurrency exists only online, there are important differences between cryptocurrency and traditional currency, like U.S. dollars. The first step toward analyzing a whitepaper is to read it very thoroughly. Check to see if the whitepaper has complimentary resources as well, including financial models, legal concerns, SWOT analysis, and a roadmap for implementation.

While there’s no guarantee that any cryptocurrency or blockchain-related startup will be legitimate or successful, the steps outlined below can help you to be as sure as possible that you’re not falling for a scam. In the case of phishing cryptocurrency scams, the false request for payment is in the form of cryptocurrency. The messages might even be from a cybercriminal posing as a cryptocurrency company touting an initial coin offering (ICO) gyen crypto suspended to appear authentic.

What to do if you have been scammed

  1. Legitimate companies and endeavors make the system itself and the progress of the token sale easy for potential investors to view.
  2. One of the biggest warning signs of a Ponzi scheme is “guaranteed” returns of double-digit percentages, a promise no legitimate investment can keep.
  3. In the case of phishing cryptocurrency scams, the false request for payment is in the form of cryptocurrency.
  4. Romance cryptocurrency scams follow the same approach, but the funds are requested in cryptocurrency and are much more difficult to reverse.
  5. Learning how to identify fake cryptocurrency is crucial to proactively avoid falling prey to fraud.

From properly installing crypto wallets and transferring tokens to avoiding threats like cryptojacking and pump and dump schemes, we have dozens of easy-to-understand crypto tutorials. At that point, the scammer cuts ties and makes off with the money after weeks or even months of stringing the target along. In the NFT space, scammers will create entire collections that copy or knock off a well-known collection to entice susceptible buyers. Mutant Ape Planet, a fake play on the legitimate Mutant Ape Yacht Club NFT collection, defrauded buyers out of nearly $3 million, promising them rewards, access and other perks before making off with all their money.

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how to identify fake cryptocurrency

Follow the steps to thoroughly evaluate any new cryptocurrency or NFT project, especially reading the white paper and looking into who are the founders. Here are some answers to some common crypto scam and cryptocurrency questions. For comparison, read the white papers of well-known cryptocurrencies, such as Ethereum and Bitcoin. To avoid such scams, gambling with digital and virtual currencies stick with reputable exchanges and wallets with long user history. Anyone can fall prey to a phishing scam and any digital asset can be the target of such a scam, as actor and film producer Seth Green realized earlier this year when four of his Bored Ape NFTs were stolen. When you buy, the price rises, at which point the scammer dumps their holdings at the new higher valuation, which causes the price to collapse, leaving you and any other victims underwater.

Pore Over the Whitepaper

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. As of the date this article was written, the author does not own cryptocurrency. For trade bitcoin cash in uk many people, the mad rush into cryptocurrencies has evoked a sense of the Wild West or Gold Rush eras, when limitless possibilities for enriching themselves were possible. Yet, anyone who’s studied these periods knows that many speculators lost it all while trying to get rich. Casey Murphy has fanned his passion for finance through years of writing about active trading, technical analysis, market commentary, exchange-traded funds (ETFs), commodities, futures, options, and forex (FX).

There are many scams, and more are being created—they are becoming increasingly sophisticated and realistic. Make sure to keep yourself up-to-date on all of the current scam tactics being used by reading about them on official channels. There are many ways these scams work, but most involve getting you to give your cryptocurrency private keys to someone in exchange for something else, like good returns or in an attempt to blackmail you.

For example, the State of California’s Department of Financial Protection and Innovation has a fantastic list of complaints it has received that can raise your awareness. You can find your state’s consumer protection offices by visiting USA.gov’s state consumer protection office search page. According to the FBI, more than 300,000 people fell victim to phishing scams in 2022 and 298,000 in 2023. Collectively, those people turned over $52.1 million to scammers in 2022 and more than $18.7 million in 2023.

Of all cryptos it is the one with the most name recognition and the broadest adoption – even traditional finance firms such as Fidelity have bitcoin as part of their offerings! Because of this, bitcoin feels “safe” to many new investors and is often the entry point to crypto. Before you invest in crypto, search online for the name of the company or person and the cryptocurrency name, plus words like “review,” “scam,” or “complaint.” See what others are saying. Cryptocurrency is stored in a digital wallet, which can be online, on your computer, or on an external hard drive.