The crypto industry is sometimes decried as being a haven for fraud, but since the dawn of business and industry, there have always been those who are willing to take advantage of others to get ahead. The difference in crypto may be the sophisticated methods available to and regularly leveraged by tech-savvy fraudsters.

A strength of crypto over earlier industries is its enthusiastic digital community. This makes it possible for both newcomers to crypto and those with expertise in the industry to steer clear of fraud — but it requires a blend of healthy skepticism with careful research. Here, eight members of Cointelegraph Innovation Circle share strategies everyone who is or is becoming active in crypto should leverage to avoid fraud.

Tap into multiple credible sources

We encourage all market participants to take a rigorous approach to conducting research with multiple credible sources before undertaking an activity. For example, study the project when planning to buy a digital asset. When placing funds into a protocol, verify it does what’s promised. And when working with an exchange, understand its regulatory approach and policies for safeguarding funds. - Oleksandr Lutskevych, CEX.IO

Avoid projects offering big promises with no track record

Be wary of projects where they make a lot of promises without a track record. If you see a project that promises a lot without having achieved anything yet, then that project should be traded at a discount. Projects with a track record of performance are the only projects that should be traded at a premium market cap. - Tim Haldorsson, Lunar Strategy

Look at a project’s revenue model and real-world applicability

Vet the revenue model of any project. If there are big promises without an understandable revenue model, it’s most likely a scam. Do your research by reading the white paper and reviewing the team’s LinkedIn profiles. Look for organic media coverage, a doxed team, interest from legit whales and a robust community with meaningful community engagement. And don’t forget the real-world applicability of the project — make sure it has utility and use cases. If it doesn’t, it may just be a fad. - Dev Sharma, Blockwiz Solutions Limited

Be careful about investing in new tokens

Be aware of “rug pulls,” especially for recently launched tokens. There have been cases where scammers have launched a new project with malicious smart contract code that allows them to steal funds from investors. One mitigation for this threat is to avoid new tokens. Or, if you choose to move ahead, only invest in tokens whose smart contacts have been audited by reputable companies. - Willy Ogorzaly, FOX Foundation

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Be open to centralized exchanges and increased regulation, and check all available information

While centralized exchanges and regulation go against the ethos of crypto assets, they are important since they generate customer confidence. There are also other boxes to check. For example, take a look at the white paper to make sure it is properly written. Check the credentials of the people behind the project. Make sure the website is properly written. - Shiran Herzberg, eToro

Carefully vet NFT marketplaces (or stick with those on centralized exchanges)

People can usually avoid fraud by purchasing nonfungible tokens only in a reputable marketplace. The team behind it should be completely doxed; it should have a large, active community; and it should provide validation for every contract of an NFT collection that is posted on it. In addition, newcomers can easily rely on centralized exchanges that have an NFT marketplace, as these screen all listed projects. - Tomer Warschauer Nuni, Kryptomon

Be cautious of unsolicited outreach

Avoid clicking links sent from unknown third parties. Review the URL of the email and/or the website the message originates from. In Google, directly search the email URL, company website, the name of the sending party and so on, but don’t click on any links that come up in a Google search until you’re sure they’re safe. Search the party name or company name and add keywords — such as “scam,” “fraud” and so on — to see what comes up. - J.D. Salbego, gDEX Metaverse

Look for business experience (and not just in crypto)

For me, an essential step is looking at the team’s background to see if they have operator experience. This doesn’t even mean just experience in crypto; rather, I’m looking to see if they have a track record of legitimate business experience. People with a reputation to uphold rarely go the route of purposely defrauding individuals. - Charles Adkins, Admix


This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.

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