Crypto Exchange Scams are common. Beginners in the crypto market are often scared to invest because of the fear of these scams. It is understandable as the crypto-sphere has been a part of many huge scams and this calls for extra vigilance.
There are scams in every industry but that doesn’t mean that every other industry in the world is a scam. However, it is relatively easier to get scammed in cryptocurrency therefore, we are here to make you aware of the most common crypto exchange scams and their signs that you should never ignore.
1. Questionable New Crypto Exchanges
New crypto exchanges, from time to time, pop up overnight and start with huge cryptocurrency giveaways to lure innocent investors and traders. New traders and investors need to be careful of such exchanges as once you deposit your coins or money there, you will have no way to withdraw them if the exchanges have a fraudulent intention.
2. Phishing Scam
This is a relatively old way to scam people, and yet one of the most popular scams taking place in the crypto ecosphere where the scammer tries to get your username, password, and seed keys by fooling you.
3. Impersonation
Here, scammers create a fake social media account or purchase verified accounts and then change the username to the people behind a project. They often impersonate the people behind successful crypto exchanges like Binance, Coinbase, and BitMex and announce airdrops that are never true. They also act as support staff from various crypto exchanges and then scam people of their crypto funds.
4. Replicated Websites
Mostly, scammers copy the user interface and design of legit crypto exchanges to attack traders and investors. Therefore, it is always advised to double-check the website URL. You can also bookmark the website and cross-check with it. Most of the time replicated websites use similar letters in the URL which makes it difficult to detect the difference. This can also be described as a form of phishing scam described earlier.
5. Yield Farming Incentives
It is a decentralized finance innovation that makes it possible to earn rewards from staking cryptocurrencies. It rewards people by paying them interest for providing liquidity. Some exchanges also provide this service by copying the source code of legit projects and then inserting their malicious code to steal the funds.
6. Hack Attacks
The problem begins when fraudulent ICO and crypto exchange join hands together wherein after an ICO generates funds they vanish into the thin air without any trace and then the exchange reports losing funds due to a bug in the system and then afterwards files for bankruptcy. Then, they shut down their social media platforms and leave no method of communication between the exchange and the investors. Doing thorough research helps to prevent these crypto exchange scams.
7. Single Wallet for Most of the Cryptocurrencies
Another red flag that an exchange is vulnerable to scams is that the exchange is holding the majority of the funds of the investors in a single wallet. These types of setups are mostly done to manipulate the exchange volume.
8. Providing Services which are not Practically Possible
Sometimes some exchanges provide services that are too good to be true, if any exchange promises to make you a crypto millionaire overnight then it is surely best to stay away from it as there is a high probability that it is a scam.
9. Small Team or no Information about the Team
A general rule of thumb in the crypto industry is that nothing can be done alone here, especially while creating a crypto exchange. It takes a team of highly motivated individuals to create a safe and secure crypto exchange.
10. Low Team Engagement
It is quite possible that after the launch of the crypto exchange the founders and other team members go inactive or silent on other fronts with no development and improvements in the exchange. Without the engagement from the team, it is signalling that they are soon running out of momentum and this becomes one of the red flags.
Conclusion
These 10 signs of crypto exchange scams will arm you with the right information from now on and help you never to fall a victim to these bad actors. You may also understand some common mistakes you can make while trading crypto.